Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-252 March 30, 1946

TRANQUILINO CALO and DOROTEO SAN JOSE, petitioners,

vs.
ARSENIO C. ROLDAN, Judge of First Instance of Laguna, REGINO RELOVA and
TEODULA BARTOLOME,respondents.

Zosimo D. Tanalega for petitioners.

Estanislao A. Fernandez for respondents Relova and Bartolome.
No appearance for respondent Judge.

FERIA, J.:

This is a petition for writ of certiorari against the respondent Judge Arsenio C. Roldan of
the Court First Instance of Laguna, on the ground that the latter has exceeded his
jurisdiction or acted with grave abuse of discretion in appointing a receiver of certain
lands and their fruits which, according to the complainant filed by the other respondents,
as plaintiffs, against petitioners, as defendants, in case No. 7951, were in the actual
possession of and belong to said plaintiffs.

The complaint filed by plaintiffs and respondents against defendants and petitioners in
the Court of First Instance of Laguna reads as follows:

1. That the plaintiffs and the defendants are all of legal age, Filipino citizens, and
residents of Pila, Laguna; the plaintiffs are husband and wife..

2. That the plaintiff spouses are the owners and the possessors of the following
described parcels of land, to wit:.

xxx xxx xxx

3. That parcel No. (a) described above is now an unplanted rice land and parcel
No. (b) described in the complaint is a coconut land, both under the possession
of the plaintiffs..

4. That the defendants, without any legal right whatsoever and in connivance with
each other, through the use of force, stealth, threats and intimidation, intend or
are intending to enter and work or harvest whatever existing fruits may now be
found in the lands above-mentioned in violation of plaintiff's in this case
ineffectual..

5. That unless defendants are barred, restrained, enjoined, and prohibited from
entering or harvesting the lands or working therein through ex-parte injunction,
the plaintiffs will suffer injustice, damages and irreparable injury to their great
prejudice..

6. That the plaintiffs are offering a bond in their application for ex-parte injunction
in the amount of P2,000, subject to the approval of this Hon. Court, which bond is
attached hereto marked as Annex A and made an integral part of this complaint..
 7. That on or about June 26, 1945, the defendants, through force, destroyed and
took away the madre-cacao fencer, and barbed wires built on the northwestern
portion of the land designated as parcel No. (b) of this complaint to the damage
and prejudice of the plaintiffs in the amount of at least P200..

Wherefore, it is respectfully prayed:.

(a) That the accompanying bond in the amount of P2,000 be approved;

(b) That a writ of preliminary injunction be issued ex-parte immediately

restraining, enjoining and prohibiting the defendants, their agents, servants,
representatives, attorneys, and, (or) other persons acting for and in their behalf,
from entering in, interfering with and/or in any wise taking any participation in the
harvest of the lands belonging to the plaintiffs; or in any wise working the lands
above-described;

(c) That judgment be rendered, after due hearing, declaring the preliminary
injunction final;.

(d) That the defendants be condemned jointly and severally to pay the plaintiffs
the sum of P200 as damages; and.

(e) That plaintiffs be given such other and further relief just and equitable with
costs of suit to the defendants.

The defendants filed an opposition dated August 8, 1945, to the issuance of the writ of
preliminary injunction prayed for in the above-quoted complaint, on the ground that they
are owners of the lands and have been in actual possession thereof since the year 1925;
and their answer to the complaint filed on August 14, 1945, they reiterate that they are
the owners and were then in actual possession of said property, and that the plaintiffs
have never been in possession thereof.

The hearing of the petition for preliminary injunction was held on August 9, 1945, at
which evidence was introduced by both parties. After the hearing, Judge Rilloraza, then
presiding over the Court of First Instance of Laguna, denied the petition on the ground
that the defendants were in actual possession of said lands. A motion for reconsideration
was filed by plaintiffs on August 20, 1945, but said motion had not yet, up to the hearing
of the present case, been decided either by Judge Rilloraza, who was assigned to
another court, or by the respondent judge.

The plaintiffs (respondents) filed on September 4, 1945, a reply to defendants' answer in

which, among others, they reiterate their allegation in the complaint that they are
possessors in good faith of the properties in question.

And on December 17, plaintiffs filed an urgent petition ex-parte praying that plaintiffs'
motion for reconsideration of the order denying their petition for preliminary injunction be
granted and or for the appointment of a receiver of the properties described in the
complaint, on the ground that (a) the plaintiffs have an interest in the properties in
question, and the fruits thereof were in danger of being lost unless a receiver was
appointed; and that (b) the appointment of a receiver was the most convenient and
feasible means of preserving, administering and or disposing of the properties in litigation
which included their fruits. Respondents Judge Roldan, on the same date, December 17,
1945, decided that the court would consider the motion for reconsideration in due time,
and granted the petition for appointment of and appointed a receiver in the case.
The question to be determined in the present special civil action of certiorari is, whether
or not the respondent judge acted in excess of his jurisdiction or with grave abuse of
discretion in issuing the order appointing a receiver in the case No. 7951 of the Court of
First Instance of Laguna; for it is evident that there is no appeal or any other plain,
speedy, and adequate remedy in the ordinary course of the law against the said order,
which is an incidental or interlocutory one.

It is a truism in legal procedure that what determines the nature of an action filed in the
courts are the facts alleged in the complaint as constituting the cause of the action. The
facts averred as a defense in the defendant's answer do not and can not determine or
change the nature of the plaintiff's action. The theory adopted by the plaintiff in his
complaint is one thing, and that of the defendant in his answer is another. The plaintiff
has to establish or prove his theory or cause of action in order to obtain the remedy he
prays for; and the defendant his theory, if necessary, in order to defeat the claim or action
of the plaintiff..

According to the complaint filed in the said case No. 7951, the plaintiff's action is one of
ordinary injunction, for the plaintiffs allege that they are the owners of the lands therein
described, and were in actual possession thereof, and that "the defendants without any
legal right whatever and in connivance with each other, through the use of force, stealth,
threat and intimidation, intend or are intending to enter and work or harvest whatever
existing fruits may be found in the lands above mentioned in violation of plaintiffs'
proprietary rights thereto;" and prays "that the defendants, their agents, servants,
representatives, and other persons acting for or in their behalf, be restrained, enjoined
and prohibited from entering in, interfering with, or in any way taking any participation in
the harvest of the lands above describe belonging to the plaintiffs."

That this is the nature of plaintiffs' action corroborated by the fact that they petitioned in
the same complaint for a preliminary prohibitory injunction, which was denied by the court
in its order dated August 17, 1945, and that the plaintiffs, in their motion for
reconsideration of said order filed on August 20 of the same year, and in their urgent
petition dated December 17, moving the court to grant said motion for reconsideration,
reiterated that they were actual possessors of the land in question.

The fact that plaintiffs, in their reply dated September 4, after reiterating their allegation or
claim that they are the owners in fee simple and possessors in good faith of the
properties in question, pray that they be declared the owners in fee simple, has not
changed the nature of the action alleged in the complaint or added a new cause of action
thereto; because the allegations in plaintiffs' reply were in answer to defendants'
defenses, and the nature of plaintiffs' cause of action, as set forth in their complaint, was
not and could not be amended or changed by the reply, which plaintiffs had the right to
present as a matter of course. A plaintiff can not, after defendant's answer, amend his
complaint by changing the cause of action or adding a new one without previously
obtaining leave of court (section 2, Rule 17)..

Respondents' contention in paragraph I of their answer that the action filed by them
against petitioners in the case No. 7951 of the Court of First Instance of Laguna is not
only for injunction, but also to quiet title over the two parcels of land described in the
complaint, is untenable for the reasons stated in the previous paragraph. Besides, an
equitable action to quiet title, in order to prevent harrassment by continued assertion of
adverse title, or to protect the plaintiff's legal title and possession, may be filed in courts
of equity (and our courts are also of equity), only where no other remedy at law exists or
where the legal remedy invokable would not afford adequate remedy (32 Cyc., 1306,
1307). In the present case wherein plaintiffs alleged that they are the owners and were in
actual possession of the lands described in the complaint and their fruits, the action of
injunction filed by them is the proper and adequate remedy in law, for a judgment in favor
of plaintiffs would quiet their title to said lands..
The provisional remedies denominated attachment, preliminary injunction, receivership,
and delivery of personal property, provided in Rules 59, 60, 61, and 62 of the Rules of
Court, respectively, are remedies to which parties litigant may resort for the preservation
or protection of their rights or interest, and for no other purpose, during the pendency of
the principal action. If an action, by its nature, does not require such protection or
preservation, said remedies can not be applied for and granted. To each kind of action or
actions a proper provisional remedy is provided for by law. The Rules of Court clearly
specify the case in which they may be properly granted. .

Attachment may be issued only in the case or actions specifically stated in section 1,
Rule 59, in order that the defendant may not dispose of his property attached, and thus
secure the satisfaction of any judgment that may be recovered by plaintiff from
defendant. For that reason a property subject of litigation between the parties, or claimed
by plaintiff as his, can not be attached upon motion of the same plaintiff..

The special remedy of preliminary prohibitory injunction lies when the plaintiff's principal
action is an ordinary action of injunction, that is, when the relief demanded in the
plaintiff's complaint consists in restraining the commission or continuance of the act
complained of, either perpetually or for a limited period, and the other conditions required
by section 3 of Rule 60 are present. The purpose of this provisional remedy is to
preserve the status quo of the things subject of the action or the relation between the
parties, in order to protect the rights of the plaintiff respecting the subject of the action
during the pendency of the suit. Because, otherwise or if no preliminary prohibition
injunction were issued, the defendant may, before final judgment, do or continue the
doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual
the final judgment rendered afterwards granting the relief sought by the plaintiff. But, as
this court has repeatedly held, a writ of preliminary injunction should not be granted to
take the property out of the possession of one party to place it in the hands of another
whose title has not been clearly established..

A receiver may be appointed to take charge of personal or real property which is the
subject of an ordinary civil action, when it appears that the party applying for the
appointment of a receiver has an interest in the property or fund which is the subject of
the action or litigation, and that such property or fund is in danger of being lost, removed
or materially injured unless a receiver is appointed to guard and preserve it (section 1 [b],
Rule 61); or when it appears that the appointment of a receiver is the most convenient
and feasible means of preserving, administering or disposing of the property in litigation
(section 1 [e] of said Rule). The property or fund must, therefore be in litigation according
to the allegations of the complaint, and the object of appointing a receiver is to secure
and preserve the property or thing in controversy pending the litigation. Of course, if it is
not in litigation and is in actual possession of the plaintiff, the latter can not apply for and
obtain the appointment of a receiver thereof, for there would be no reason for such
appointment.

Delivery of personal property as a provisional remedy consists in the delivery, by order of

the court, of a personal property by the defendant to the plaintiff, who shall give a bond to
assure the return thereof or the payment of damages to the defendant in the plaintiff's
action to recover possession of the same property fails, in order to protect the plaintiff's
right of possession of said property, or prevent the defendant from damaging, destroying
or disposing of the same during the pendency of the suit.

Undoubtedly, according to law, the provisional remedy proper to plaintiffs' action of

injunction is a preliminary prohibitory injunction, if plaintiff's theory, as set forth in the
complaint, that he is the owner and in actual possession of the premises is correct. But
as the lower court found at the hearing of the said petition for preliminary injunction that
the defendants were in possession of the lands, the lower court acted in accordance with
law in denying the petition, although their motion for reconsideration, which was still
pending at the time the petition in the present case was heard in this court, plaintiffs insist
that they are in actual possession of the lands and, therefore, of the fruits thereof.

From the foregoing it appears evident that the respondent judge acted in excess of his
jurisdiction in appointing a receiver in case No. 7951 of the Court of First Instance of
Laguna. Appointment of a receiver is not proper or does not lie in an action of injunction
such as the one filed by the plaintiff. The petition for appointment of a receiver filed by the
plaintiffs (Exhibit I of the petition) is based on the ground that it is the most convenient
and feasible means of preserving, administering and disposing of the properties in
litigation; and according to plaintiffs' theory or allegations in their complaint, neither the
lands nor the palay harvested therein, are in litigation. The litigation or issue raised by
plaintiffs in their complaint is not the ownership or possession of the lands and their fruits.
It is whether or not defendants intend or were intending to enter or work or harvest
whatever existing fruits could then be found in the lands described in the complaint,
alleged to be the exclusive property and in the actual possession of the plaintiffs. It is a
matter not only of law but of plain common sense that a plaintiff will not and legally can
not ask for the appointment or receiver of property which he alleges to belong to him and
to be actually in his possession. For the owner and possessor of a property is more
interested than persons in preserving and administering it.

Besides, even if the plaintiffs had amended their complaint and alleged that the lands
and palay harvested therein are being claimed by the defendants, and consequently the
ownership and possession thereof were in litigation, it appearing that the defendants
(now petitioners) were in possession of the lands and had planted the crop or palay
harvested therein, as alleged in paragraph 6 (a) and (b) of the petition filed in this court
and not denied by the respondent in paragraph 2 of his answer, the respondent judge
would have acted in excess of his jurisdiction or with a grave abuse of discretion in
appointing a receiver thereof. Because relief by way of receivership is equitable in nature,
and a court of equity will not ordinarily appoint a receiver where the rights of the parties
depend on the determination of adverse claims of legal title to real property and one
party is in possession (53 C. J., p. 26). The present case falls within this rule..

In the case of Mendoza vs. Arellano and B. de Arellano, this court said:

Appointments of receivers of real estate in cases of this kind lie largely in the
sound discretion of the court, and where the effect of such an appointment is to
take real estate out of the possession of the defendant before the final
adjudication of the rights of the parties, the appointment should be made only in
extreme cases and on a clear showing of necessity therefor in order to save the
plaintiff from grave and irremediable loss or damage. (34 Cyc., 51, and cases
there cited.) No such showing has been made in this case as would justify us in
interfering with the exercise by trial judge of his discretion in denying the
application for receiver. (36 Phil., 59, 63, 64.).

Although the petition is silent on the matter, as the respondents in their answer allege
that the Court of First Instance of Laguna has appointed a receiver in another case No.
7989 of said court, instituted by the respondents Relova against Roberto Calo and his
brothers and sisters, children of Sofia de Oca and Tranquilino Calo (petitioner in this
case), and submitted copy of the complaint filed by the plaintiffs (now respondents) in
case No. 7989 (Exhibit 9 of the respondents' answer), we may properly express and do
hereby express here our opinion, in order to avoid multiplicity of suits, that as the cause
of action alleged in the in the complaint filed by the respondents Relova in the other case
is substantially the same as the cause of action averred in the complaint filed in the
present case, the order of the Court of First Instance of Laguna appointing a receiver in
said case No. 7989 was issued in excess of its jurisdiction, and is therefore null and void.
In view of all the foregoing, we hold that the respondent Judge Arsenio C. Roldan of the
Court of First Instance of Laguna has exceeded his jurisdiction in appointing a receiver in
the present case, and therefore the order of said respondent judge appointing the
receiver, as well as all other orders and proceedings of the court presided over by said
judge in connection with the receivership, are null and void.

As to the petitioners' petition that respondents Relova be punished for contempt of court
for having disobeyed the injunction issued by this court against the respondents requiring
them to desist and refrain from enforcing the order of receivership and entering the palay
therein, it appearing from the evidence in the record that the palay was harvested by the
receiver and not by said respondents, the petition for contempt of court is denied. So
ordered, with costs against the respondents.

Moran, C. J., Ozaeta, Jaranilla, De Joya, Pablo, Perfecto, Hilado, and Bengzon,
JJ., concur.

Separate Opinions

BRIONES, con quien esta conforme PARAS, M., conforme:

Estoy conforme con la parte dispositiva por la unica razon, breve pero lucidamente
expuesta en la ponencia, de que cuando hay controversia sobre el titulo de propiedad
noo debe utilizarse el nombramiento de depositario para pertubar el status quo
transladando la posesion del terreno litigioso de una parte a otra. Solamente cuando el
dominio es indisputable verbigracia, hay de por medio un titulo Torrens cabe
nombrar un depositario para los fines espicificos senalados por la ley, entre ellos
principalmente la preservacion del objeto litigioso cuando corre el peligro de danarse o
echarse a perder.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 185595 January 9, 2013

MA. CARMINIA C. CALDERON represented by her Attorney-In-Fact, Marycris V.

Baldevia, Petitioner,
vs.
JOSE ANTONIO F. ROXAS and COURT OF APPEALS, Respondents.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 assailing the Decision1 dated
September 9, 2008 and Resolution2 dated December 15, 2008 of the Court of Appeals
(CA) in CA-G.R. CV No. 85384. The CA affirmed the Orders dated March 7, 2005 and
May 4, 2005 of the Regional Trial Court (RTC) of Paraaque City, Branch 260 in Civil
Case No. 97-0608.

Petitioner Ma. Carminia C. Calderon and private respondent Jose Antonio F. Roxas,
were married on December 4, 1985 and their union produced four children. On January
16, 1998, petitioner filed an Amended Complaint3 for the declaration of nullity of their
marriage on the ground of psychological incapacity under Art. 36 of the Family Code of
the Philippines.

On May 19, 1998, the trial court issued an Order4 granting petitioners application for
support pendente lite. Said order states in part:

Accordingly, the defendant is hereby ordered to contribute to the support of the above-
named minors, (aside from 50% of their school tuition fees which the defendant has
agreed to defray, plus expenses for books and other school supplies), the sum of
P42,292.50 per month, effective May 1, 1998, as his share in the monthly support of the
children, until further orders from this Court. The first monthly contribution, i.e., for the
month of May 1998, shall be given by the defendant to the plaintiff within five (5) days
from receipt of a copy of this Order. The succeeding monthly contributions of P42,292.50
shall be directly given by the defendant to the plaintiff without need of any demand, within
the first five (5) days of each month beginning June 1998. All expenses for books and
other school supplies shall be shouldered by the plaintiff and the defendant, share and
share alike. Finally, it is understood that any claim for support-in-arrears prior to May 1,
1998, may be taken up later in the course of the proceedings proper.

xxxx

SO ORDERED.5

The aforesaid order and subsequent orders for support pendente lite were the subject of
G.R. No. 139337 entitled "Ma. Carminia C. Roxas v. Court of Appeals and Jose Antonio
F. Roxas" decided by this Court on August 15, 2001.6The Decision in said case declared
that "the proceedings and orders issued by the trial court in the application for support
pendente lite (and the main complaint for annulment of marriage) in the re-filed case, that
is, in Civil Case No. 97-0608 were not rendered null and void by the omission of a
statement in the certificate of non-forum shopping regarding the prior filing and dismissal
without prejudice of Civil Case No. 97-0523 which involves the same parties." The
assailed orders for support pendente lite were thus reinstated and the trial court resumed
hearing the main case.

On motion of petitioners counsel, the trial court issued an Order dated October 11, 2002
directing private respondent to give support in the amount of P42,292.50 per month
starting April 1, 1999 pursuant to the May 19, 1998 Order.7

On February 11, 2003, private respondent filed a Motion to Reduce Support citing,
among other grounds, that the P42,292.50 monthly support for the children as fixed by
the court was even higher than his then P20,800.00 monthly salary as city councilor.8

After hearing, the trial court issued an Order9 dated March 7, 2005 granting the motion to
reduce support and denying petitioners motion for spousal support, increase of the
childrens monthly support pendente lite and support-in-arrears. The trial court
considered the following circumstances well-supported by documentary and testimonial
evidence: (1) the spouses eldest child, Jose Antonio, Jr. is a Sangguniang Kabataan
Chairman and is already earning a monthly salary; (2) all the children stay with private
respondent on weekends in their house in Pasay City; (3) private respondent has no
source of income except his salary and benefits as City Councilor; (4) the voluminous
documents consisting of official receipts in payment of various billings including school
tuition fees, private tutorials and purchases of childrens school supplies, personal checks
issued by private respondent, as well as his own testimony in court, all of which
substantiated his claim that he is fulfilling his obligation of supporting his minor children
during the pendency of the action; (5) there is no proof presented by petitioner that she is
not gainfully employed, the spouses being both medical doctors; (6) the unrebutted
allegation of private respondent that petitioner is already in the United States; and (7) the
alleged arrearages of private respondent was not substantiated by petitioner with any
evidence while private respondent had duly complied with his obligation as ordered by
the court through his overpayments in other aspects such as the childrens school tuition
fees, real estate taxes and other necessities.

Petitioners motion for partial reconsideration of the March 7, 2005 Order was denied on
May 4, 2005.10

On May 16, 2005, the trial court rendered its Decision11 in Civil Case No. 97-0608
decreeing thus:

WHEREFORE, judgment is hereby rendered declaring (sic):

1. Declaring null and void the marriage between plaintiff Ma.Carmina C. Roxas and
defendant Jose Antonio Roxas solemnized on December 4, 1985 at San Agustin
Convent, in Manila. The Local Civil Registrar of Manila is hereby ordered to cancel the
marriage contract of the parties as appearing in the Registry of Marriage as the same is
void;

2. Awarding the custody of the parties minor children Maria Antoinette Roxas, Julian
Roxas and Richard Roxas to their mother herein petitioner, with the respondent hereby
given his visitorial and or custodial rights at [sic] the express conformity of petitioner.

3. Ordering the respondent Jose Antonio Roxas to provide support to the children in the
amount of P30,000.00 a month, which support shall be given directly to petitioner
whenever the children are in her custody, otherwise, if the children are in the provisional
custody of respondent, said amount of support shall be recorded properly as the amounts
are being spent. For that purpose the respondent shall then render a periodic report to
petitioner and to the Court to show compliance and for monitoring. In addition, the
respondent is ordered to support the proper schooling of the children providing for the
payment of the tuition fees and other school fees and charges including transportation
expenses and allowances needed by the children for their studies.

4. Dissolving the community property or conjugal partnership property of the parties as

the case may be, in accordance with law.

Let copies of this decision be furnished the Office of the Solicitor General, the Office of
the City Prosecutor, Paranaque City, and the City Civil Registrar of Paranaque City and
Manila.

SO ORDERED.12

On June 14, 2005, petitioner through counsel filed a Notice of Appeal from the Orders
dated March 7, 2005 and May 4, 2005.

In her appeal brief, petitioner emphasized that she is not appealing the Decision dated
May 16, 2005 which had become final as no appeal therefrom had been brought by the
parties or the City Prosecutor or the Solicitor General. Petitioner pointed out that her
appeal is "from the RTC Order dated March 7, 2005, issued prior to the rendition of the
decision in the main case", as well as the May 4, 2005 Order denying her motion for
partial reconsideration.13

By Decision dated September 9, 2008, the CA dismissed the appeal on the ground that
granting the appeal would disturb the RTC Decision of May 16, 2005 which had long
become final and executory. The CA further noted that petitioner failed to avail of the
proper remedy to question an interlocutory order.

Petitioners motion for reconsideration was likewise denied by the CA.

Hence, this petition raising the following issues:

A. DID THE CA COMMIT A GRAVE ABUSE OF DISCRETION and/or

REVERSIBLE ERROR WHEN IT RULED THAT THE RTC ORDERS DATED
MARCH 7, 2005 AND MAY 4, 2005 ARE MERELY INTERLOCUTORY?

B. DID THE CA COMMIT A GRAVE ABUSE OF DISCRETION and/or

REVERSIBLE ERROR WHEN IT DISMISSED OUTRIGHT THE APPEAL FROM
SAID RTC ORDERS, WHEN IT SHOULD HAVE DECIDED THE APPEAL ON
THE MERITS?14

The core issue presented is whether the March 7, 2005 and May 4, 2005 Orders on the
matter of support pendente lite are interlocutory or final.

This Court has laid down the distinction between interlocutory and final orders, as
follows:

x x x A "final" judgment or order is one that finally disposes of a case, leaving nothing
more to be done by the Court in respect thereto, e.g., an adjudication on the merits
which, on the basis of the evidence presented at the trial, declares categorically what the
rights and obligations of the parties are and which party is in the right; or a judgment or
order that dismisses an action on the ground, for instance, of res judicata or prescription.
Once rendered, the task of the Court is ended, as far as deciding the controversy or
determining the rights and liabilities of the litigants is concerned. Nothing more remains to
be done by the Court except to await the parties next move (which among others, may
consist of the filing of a motion for new trial or reconsideration, or the taking of an appeal)
and ultimately, of course, to cause the execution of the judgment once it becomes "final"
or, to use the established and more distinctive term, "final and executory."

xxxx

Conversely, an order that does not finally dispose of the case, and does not end the
Courts task of adjudicating the parties contentions and determining their rights and
liabilities as regards each other, but obviously indicates that other things remain to be
done by the Court, is "interlocutory" e.g., an order denying a motion to dismiss under
Rule 16 of the Rules, or granting a motion for extension of time to file a pleading, or
authorizing amendment thereof, or granting or denying applications for postponement, or
production or inspection of documents or things, etc. Unlike a "final" judgment or order,
which is appealable, as above pointed out, an "interlocutory" order may not be
questioned on appeal except only as part of an appeal that may eventually be taken from
the final judgment rendered in the case.15 [Emphasis supplied]

The assailed orders relative to the incident of support pendente lite and support in
arrears, as the term suggests, were issued pending the rendition of the decision on the
main action for declaration of nullity of marriage, and are therefore interlocutory. They did
not finally dispose of the case nor did they consist of a final adjudication of the merits of
petitioners claims as to the ground of psychological incapacity and other incidents as
child custody, support and conjugal assets.

The Rules of Court provide for the provisional remedy of support pendente lite which may
be availed of at the commencement of the proper action or proceeding, or at any time
prior to the judgment or final order.16 On March 4, 2003, this Court promulgated the Rule
on Provisional Orders17 which shall govern the issuance of provisional orders during the
pendency of cases for the declaration of nullity of marriage, annulment of voidable
marriage and legal separation. These include orders for spousal support, child support,
child custody, visitation rights, hold departure, protection and administration of common
property.

Petitioner contends that the CA failed to recognize that the interlocutory aspect of the
assailed orders pertains only to private respondents motion to reduce support which was
granted, and to her own motion to increase support, which was denied. Petitioner points
out that the ruling on support in arrears which have remained unpaid, as well as her
prayer for reimbursement/payment under the May 19, 1998 Order and related orders
were in the nature of final orders assailable by ordinary appeal considering that the
orders referred to under Sections 1 and 4 of Rule 61 of the Rules of Court can apply only
prospectively. Thus, from the moment the accrued amounts became due and
demandable, the orders under which the amounts were made payable by private
respondent have ceased to be provisional and have become final.

We disagree.

The word interlocutory refers to something intervening between the commencement and
the end of the suit which decides some point or matter but is not a final decision of the
whole controversy.18 An interlocutory order merely resolves incidental matters and leaves
something more to be done to resolve the merits of the case. In contrast, a judgment or
order is considered final if the order disposes of the action or proceeding completely, or
terminates a particular stage of the same action.19 Clearly, whether an order or resolution
is final or interlocutory is not dependent on compliance or non-compliance by a party to
its directive, as what petitioner suggests. It is also important to emphasize the temporary
or provisional nature of the assailed orders.
Provisional remedies are writs and processes available during the pendency of the action
which may be resorted to by a litigant to preserve and protect certain rights and interests
therein pending rendition, and for purposes of the ultimate effects, of a final judgment in
the case. They are provisional because they constitute temporary measures availed of
during the pendency of the action, and they are ancillary because they are mere
incidents in and are dependent upon the result of the main action.20 The subject orders
on the matter of support pendente lite are but an incident to the main action for
declaration of nullity of marriage.

Moreover, private respondents obligation to give monthly support in the amount fixed by
the RTC in the assailed orders may be enforced by the court itself, as what transpired in
the early stage of the proceedings when the court cited the private respondent in
contempt of court and ordered him arrested for his refusal/failure to comply with the order
granting support pendente lite.21 A few years later, private respondent filed a motion to
reduce support while petitioner filed her own motion to increase the same, and in addition
sought spousal support and support in arrears. This fact underscores the provisional
character of the order granting support pendente lite. Petitioners theory that the assailed
orders have ceased to be provisional due to the arrearages incurred by private
respondent is therefore untenable. 1wphi1

Under Section 1, Rule 41 of the 1997 Revised Rules of Civil Procedure, as amended,
appeal from interlocutory orders is not allowed. Said provision reads:

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:

(a) An order denying a motion for new trial or reconsideration;

(b) An order denying a petition for relief or any similar motion seeking relief from
judgment;

(c) An interlocutory order;

(d) An order disallowing or dismissing an appeal;

(e) An order denying a motion to set aside a judgment by consent, confession or

compromise on the ground of fraud, mistake or duress, or any other ground
vitiating consent;

(f) An order of execution;

(g) A judgment or final order for or against one or more of several parties or in
separate claims, counterclaims, cross-claims and third-party complaints, while
the main case is pending, unless the court allows an appeal therefrom; and

(h) An order dismissing an action without prejudice;

In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65. (Emphasis
supplied.)
The remedy against an interlocutory order not subject of an appeal is an appropriate
special civil action under Rule 65 provided that the interlocutory order is rendered without
or in excess of jurisdiction or with grave abuse of discretion. Having chosen the wrong
remedy in questioning the subject interlocutory orders of the RTC, petitioner's appeal
was correctly dismissed by the CA.

WHEREFORE, the petition for review on certiorari is DENIED, for lack of merit. The
Decision dated September 9, 2008 and Resolution dated December 15, 2008 of the
Court of Appeals in CA-G.R. CV No. 85384 are AFFIRMED.

With costs against the petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 177486 December 21, 2009

PURISIMO BUYCO, Petitioner,

vs.
NELSON BARAQUIA, Respondent.

DECISION

CARPIO MORALES, J.:

Nelson Baraquia (respondent) filed before the Regional Trial Court (RTC) of Iloilo City a
complaint1 against Dominico Buyco and Clemente Buyco (Buycos), for the establishment
of a permanent right of way, injunction and damages with preliminary injunction and
temporary restraining order, to enjoin the Buycos from closing off a private road within
their property which he has been using to go to and from the public highway to access
his poultry farm.

The Buycos died during the pendency of the case, and were substituted by Purisimo
Buyco (petitioner) and his brother Gonzalo.

Branch 39 of the Iloilo RTC granted respondents application for preliminary injunction.

By Decision2 of February 14, 2007, the trial court dismissed respondents complaint for
failure to establish the concurrence of the essential requisites for the establishment of an
easement of right of way under Articles 649 and 650 of the Civil Code. 3 It accordingly
lifted the writ of preliminary injunction.

Respondent filed a notice of appeal of the trial courts decision. Petitioner filed too a
notice of partial appeal bearing on to the non-award of prayer for damages.

Respondent later filed with the trial court a motion to cite petitioner and his brother
Gonzalo in contempt, alleging that they had closed off the subject road, thus violating the
writ of preliminary injunction. The trial court, by Resolution of March 13, 2007,4 noting that
respondent received on March 5, 2007 his copy of its decision while petitioner received
his on February 21, 2007, held that the February 14, 2007 decision had not yet become
final and executory, hence, the writ of preliminary injunction remained to be valid,
efficacious and obligatory, rendering petitioners act of closing the road on March 1, 2007
an indirect contempt of court. It thus declared petitioner and his brother in contempt of
court.

Petitioner moved for reconsideration of the trial courts March 13, 2007 Resolution,
contending that a preliminary injunction, once quashed, ceases to exist, and that he and
his brother cannot be held guilty of indirect contempt by mere motion.

By Resolution5 of April 18, 2007, the trial court set aside the March 13, 2007 Resolution
and granted petitioners motion for reconsideration, ruling that petitioner and his brother
cannot be held in contempt of court by mere motion and not by verified petition.
On the lifetime of the writ of preliminary injunction, the trial court held that it is its
"illumined opinion that the matter of whether a writ of preliminary injunction remains valid
until the decision annulling the same attains finality is not firmly entrenched in
jurisprudence, contrary to the position of the defendants." It thereupon quoted a portion
of the ruling in the 2006 case of Lee v. Court of Appeals,6 to wit:

Furthermore, notwithstanding the stand of both parties, the fact remains that the Decision
of the Court of Appeals annulling the grant of preliminary injunction in favor of petitioners
has not yet become final on 14 December 2000. In fact, such Decision has not yet
become final and executory even on the very date of this Decision, in view of petitioners
appeal with us under Rule 45 of the 1997 Rules of Civil Procedure. The preliminary
injunction, therefore, issued by the trial court remains valid until the Decision of the Court
of Appeals annulling the same attains finality, and violation thereof constitutes indirect
contempt which, however, requires either a formal charge or a verified
petition.7 (underscoring in the original decision)

Hence, this petition for review, raising a question of law whether the lifting of a writ of
preliminary injunction due to the dismissal of the complaint is immediately executory,
even if the dismissal of the complaint is pending appeal.

The petition is meritorious.

A writ of preliminary injunction is an order granted at any stage of an action or proceeding

prior to the judgment or final order, requiring a party or a court, agency or a person to
refrain from a particular act or acts.8 It is merely a provisional remedy, adjunct to the main
case subject to the latters outcome.9 It is not a cause of action in itself.10Being an
ancillary or auxiliary remedy, it is available during the pendency of the action which may
be resorted to by a litigant to preserve and protect certain rights and interests therein
pending rendition, and for purposes of the ultimate effects, of a final judgment in the
case.

The writ is provisional because it constitutes a temporary measure availed of during the
pendency of the action and it is ancillary because it is a mere incident in and is
dependent upon the result of the main action.11

It is well-settled that the sole object of a preliminary injunction, whether prohibitory or

mandatory, is to preserve thestatus quo until the merits of the case can be heard. It is
usually granted when it is made to appear that there is a substantial controversy between
the parties and one of them is committing an act or threatening the immediate
commission of an act that will cause irreparable injury or destroy the status quo of the
controversy before a full hearing can be had on the merits of the case.12

Indubitably, in the case at bar, the writ of preliminary injunction was granted by the lower
court upon respondents showing that he and his poultry business would be injured by
the closure of the subject road. After trial, however, the lower court found that respondent
was not entitled to the easement of right of way prayed for, having failed to prove the
essential requisites for such entitlement, hence, the writ was lifted.
1avv phi1

The present case having been heard and found dismissible as it was in fact dismissed,
the writ of preliminary injunction is deemed lifted, its purpose as a provisional remedy
having been served, the appeal therefrom notwithstanding.

Unionbank v. Court of Appeals13 enlightens:

"x x x a dismissal, discontinuance or non-suit of an action in which a restraining order or

temporary injunction has been granted operates as a dissolution of the restraining order
or temporary injunction," regardless of whether the period for filing a motion for
reconsideration of the order dismissing the case or appeal therefrom has expired. The
rationale therefor is that even in cases where an appeal is taken from a judgment
dismissing an action on the merits,the appeal does not suspend the judgment, hence the
general rule applies that a temporary injunction terminates automatically on the dismissal
of the action." (italics, emphasis and underscoring supplied)

The lower courts citation of Lee v. Court of Appeals14 is misplaced. In Lee, unlike in the
present case, the original complaint for specific performance and cancellation of real
estate mortgage was not yet decided on the merits by the lower court. Thus, the
preliminary injunction therein issued subsisted pending appeal of an incident.

There being no indication that the appellate court issued an injunction in respondents
favor, the writ of preliminary injunction issued on December 1, 1999 by the trial court was
automatically dissolved upon the dismissal of Civil Case No. 26015.

WHEREFORE, the petition is GRANTED. The Resolution dated April 18, 2007 of the trial
court is REVERSED. The writ of preliminary injunction which Branch 39 of the Iloilo
Regional Trial Court issued on December 1, 1999 was automatically dissolved upon its
dismissal by Decision of February 14, 2007 of Civil Case No. 26015.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 171624 December 6, 2010

BF HOMES, INC. and the PHILIPPINE WATERWORKS AND CONSTRUCTION

CORP., Petitioners,
vs.
MANILA ELECTRIC COMPANY, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision1 dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826,
nullifying and setting aside (1) the Order2 dated November 21, 2003 of the Regional Trial
Court (RTC), Branch 202 of Las Pias City, in Civil Case No. 03-0151, thereby dissolving
the writ of injunction against respondent Manila Electric Company (MERALCO); and (2)
the Resolution3dated February 7, 2006 of the Court of Appeals denying the Motion for
Reconsideration of petitioners BF Homes, Inc. (BF Homes) and Philippine Waterworks
and Construction Corporation (PWCC).

MERALCO is a corporation duly organized and existing under Philippine laws engaged in
the distribution and sale of electric power in Metro Manila. On the other hand, BF Homes
and PWCC are owners and operators of waterworks systems delivering water to over
12,000 households and commercial buildings in BF Homes subdivisions in Paraaque
City, Las Pias City, Caloocan City, and Quezon City. The water distributed in the
waterworks systems owned and operated by BF Homes and PWCC is drawn from deep
wells using pumps run by electricity supplied by MERALCO.

On June 23, 2003, BF Homes and PWCC filed a Petition [With Prayer for the Issuance of
Writ of Preliminary Injunction and for the Immediate Issuance of Restraining Order]
against MERALCO before the RTC, docketed as Civil Case No. 03-0151.

In their Petition before the RTC, BF Homes and PWCC invoked their right to refund
based on the ruling of this Court in Republic v. Manila Electric Company4:

7. It is of judicial notice that on November 15, 2002, in G.R. No. 141314, entitled
Republic of the Philippines vs. Manila Electric Company, and G.R. No. 141369,
entitled Lawyers Against Monopoly and Poverty (LAMP) et al. vs. Manila Electric
Compnay (MERALCO), (both cases shall hereafter be referred to as "MERALCO
Refund cases," for brevity), the Supreme Court ordered MERALCO to refund its
customers, which shall be credited against the customers future consumption,
the excess average amount of P0.167 per kilowatt hour starting with the
customers billing cycles beginning February 1998. The dispositive portion of the
Supreme Court Decision in the MERALCO Refund cases reads:

WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and
the decision of the Court of Appeals in C.A. G.R. SP No. 46888 is REVERSED.
Respondent MERALCO is authorized to adopt a rate adjustment in the amount
of P0.017 kilowatthour, effective with respect to MERALCOs billing cycles
beginning February 1994. Further, in accordance with the decision of the ERB
dated February 16, 1998, the excess average amount of P0.167 per kilowatt hour
starting with the applicants billing cycles beginning February 1998 is ordered to
be refunded to MERALCOs customers or correspondingly credited in their favor
for future consumption.

x x x x.

8. The Motion for Reconsideration filed by MERALCO in the MERALCO Refund

cases was DENIED WITH FINALITY (the uppercase letters were used by the
Supreme Court) in the Resolution of the Supreme Court dated April 9, 2003.

9. The amount that MERALCO was mandated to refund to [BF Homes and
PWCC] pursuant to the MERALCO Refund cases is in the amount
of P11,834,570.91.5

BF Homes and PWCC then alleged in their RTC Petition that:

10. On May 20, 2003, without giving any notice whatsoever, MERALCO
disconnected electric supply to [BF Homes and PWCCs] sixteen (16) water
pumps located in BF Homes in Paraaque, Caloocan, and Quezon City, which
thus disrupted water supply in those areas.

11. On June 4, 2003, [BF Homes and PWCC] received by facsimile transmission
a letter from MERALCO, x x x, in which MERALCO demanded to [BF Homes and
PWCC] the payment of electric bills amounting toP4,717,768.15.

12. [MERALCO] replied in a letter dated June 11, 2003, x x x, requesting

MERALCO to apply theP4,717,768.15 electric bill against the P11,834,570.91
that MERALCO was ordered to refund to [BF Homes and PWCC] pursuant to the
MERALCO Refund cases. x x x

13. Displaying the arrogance that has become its distinction, MERALCO, in its
letter dated June 16, 2003, x x x, denied [BF Homes and PWCCs] request
alleging that it has not yet come up with the schedule for the refund of large
amounts, such as those of [BF Homes and PWCC].

14. Even while MERALCO was serving its reply-letter to [BF Homes and PWCC],
MERALCO, again, without giving any notice, cut off power supply to [BF Homes
and PWCCs] five (5) water pumps located in BF Homes Paraaque and BF
Resort Village, in Pamplona, Las Pias City.

15. In its letter dated June 4, 2003 (Annex A), MERALCO threatened to cut off
electric power connections to all of [BF Homes and PWCCs] water pumps if [BF
Homes and PWCC] failed to pay their bills demanded by MERALCO by June 20,
2003.6

BF Homes and PWCC thus cited the following causes of action for their RTC
Petition:

16. In refusing to apply [MERALCOs] electric bills against the amounts that it
was ordered to refund to [BF Homes and PWCC] pursuant to the MERALCO
Refund cases and in making the implementation of the refund ordered by the
Supreme Court dependent upon its own will and caprice, MERALCO acted with
utmost bad faith.
 17. [BF Homes and PWCC] are clearly entitled to the remedies under the law to
compel MERALCO to consider [BF Homes and PWCCs] electric bills fully paid
by the amounts which MERALCO was ordered to refund to [BF Homes and
PWCC] pursuant to the MERALCO Refund cases, to enjoin MERALCO to
reconnect electric power to all of [BF Homes and PWCCs] water pumps, and to
order MERALCO to desist from further cutting off power connection to [BF
Homes and PWCCs] water pumps.

18. MERALCOs unjust and oppressive acts have cast dishonor upon [BF Homes
and PWCCs] good name and besmirched their reputation for which [BF Homes
and PWCC] should be indemnified by way of moral damages in the amount of not
less than P1,000,000.00.

19. As an example for the public good, to dissuade others from emulating
MERALCOs unjust, oppressive and mercenary conduct, MERALCO should be
directed to pay [BF Homes and PWCC] exemplary damages of at
least P1,000,000.00.

20. MERALCOs oppressive and inequitable conduct forced [BF Homes and
PWCC] to engage the services of counsel to defend their rights and thereby incur
litigation expenses in the amount of at least P500,000.00 for which [BF Homes
and PWCC] should be indemnified.7

BF Homes and PWCC additionally prayed that the RTC issue a writ of
preliminary injunction and restraining order considering that:

21. As indicated in its letter dated June 4, 2003 (Annex A), unless seasonably
restrained, MERALCO will cut off electric power connections to all of [BF Homes
and PWCCs] water pumps on June 20, 2003.

22. Part of the reliefs herein prayed for is to restrain MERALCO from cutting off
electric power connections to [BF Homes and PWCCs] water pumps.

23. Unless MERALCOS announced intention to cut off electric power

connections to [BF Homes and PWCCs] water pumps is restrained, [BF Homes
and PWCC] will suffer great and irreparable injury because they would not [be]
able to supply water to their customers.

24. [BF Homes and PWCC] therefore pray that a writ for preliminary injunction be
issued upon posting of a bond in an amount as will be determined by this
Honorable Court.

25. [BF Homes and PWCC] further pray that, in the meantime and immediately
upon the filing of the above captioned Petition, a restraining order be issued
before the matter of preliminary injunction can be heard.8

On August 15, 2003, MERALCO filed before the RTC its Answer with Counterclaims and
Opposition to the Application for Writ of Preliminary Injunction9 of BF Homes and PWCC.

According to MERALCO:

2.2. Both petitioners BF Homes, Incorporated and Philippine Waterworks

Corporation are admittedly the registered customers of [MERALCO] by virtue of
the service contracts executed between them under which the latter undertook to
supply electric energy to the former for a fee. The following twenty-three (23)
 Service Identification Nos. (SINs) are registered under the name of BF Homes,
Incorporated: x x x. While the following twenty-one (21) Service Identification
Nos. (SINs) are registered under the name of Philippine Waterworks Construction
Corporation: x x x

xxxx

2.4. The service contracts as well as the terms and conditions of [MERALCOs]
service as approved by BOE [Board of Energy], now ERC [Energy Regulatory
Commission], provide in relevant parts, that [BF Homes and PWCC] agree as
follows:

DISCONTINUANCE OF SERVICE:

The Company reserves the right to discontinue service in case the customer is in arrears
in the payment of bills or for failure to pay the adjusted bills in those cases where the
meter stopped or failed to register the correct amount of energy consumed, or for failure
to comply with any of these terms and conditions, or in case of or to prevent fraud upon
the Company. Before disconnection is made in the case of, or to prevent fraud, the
Company may adjust the bill of said customer accordingly and if the adjusted bill is not
paid, the Company may disconnect the same." (Emphasis supplied)

2.5. This contractual right of [MERALCO] to discontinue electric service for

default in the payment of its regular bills is sanctioned and approved by the rules
and regulations of ERB (now the ERC). This right is necessary and reasonable
means to properly protect and enable [MERALCO] to perform and discharge its
legal and contractual obligation under its legislative franchise and the law. Cutting
off service for non-payment by the customers of the regular monthly electric bills
is the only practical way a public utility, such as [MERALCO], can ensure and
maintain efficient service in accordance with the terms and conditions of its
legislative franchise and the law.

xxxx

2.14. Instead of paying their unpaid electric bills and before [MERALCO] could
effect its legal and contractual right to disconnect [BF Homes and PWCCs]
electric services, [BF Homes and PWCC] filed the instant petition to avoid
payment of [MERALCOs] valid and legal claim for regular monthly electric bills.

2.15. [BF Homes and PWCCs] unpaid regular bills totaled P6,551,969.55
covering the May and June 2003 electric bills. x x x

xxxx

2.17. [BF Homes and PWCC] knew that [MERALCO] is already in the process of
implementing the decision of the Supreme Court as to the refund case. But this
refund has to be implemented in accordance with the guidelines and schedule to
be approved by the ERC. Thus [BF Homes and PWCCs] filing of the instant
petition is merely to evade payment of their unpaid electric bills to [MERALCO].10

Hence, MERALCO sought the dismissal of the RTC Petition of BF Homes and PWCC on
the following grounds:

3.1 The Honorable Court has no jurisdiction to award the relief prayed for by [BF Homes
and PWCC] because:
 a) The petition is in effect preempting or defeating the power of the ERC to
implement the decision of the Supreme Court.

b) [MERALCO] is a utility company whose business activity is wholly regulated by

the ERC. The latter, being the regulatory agency of the government having the
authority over the respondent, is the one tasked to approve the guidelines,
schedules and details of the refund.

c) The decision of the Supreme Court, dated November 15, 2002, clearly states
that respondent is directed to make the refund to its customers in accordance
with the decision of the ERC (formerly ERB) dated February 16, 1998. Hence,
[MERALCO] has to wait for the schedule and details of the refund to be approved
by the ERC before it can comply with the Supreme Court decision.

3.2. [MERALCO] has the right to disconnect the electric service to [BF Homes and
PWCC] in that:

a) The service contracts between [MERALCO] and [BF Homes and PWCC]
expressly authorize the former to discontinue and disconnect electric services of
the latter for their failure to pay the regular electric bills rendered.

b) It is [MERALCOs] legal duty as a public utility to furnish its service to the

general public without arbitrary discrimination and, consequently, [MERALCO] is
obligated to discontinue and disconnect electric services to [BF Homes and
PWCC] for their refusal or failure to pay the electric energy actually used by
them.11

For its compulsory counterclaims, MERALCO prayed that the RTC orders BF Homes and
PWCC to pay MERALCOP6,551,969.55 as actual damages (representing the unpaid
electric bills of BF Homes and PWCC for May and June 2003), P1,500,000.00 as
exemplary damages, P1,500,000.00 as moral damages, and P1,000,000.00 as
attorneys fees.

Lastly, MERALCO opposed the application for writ of preliminary injunction of BF Homes
and PWCC because:

[MERALCO] HAS THE LEGAL AND CONTRACTUAL RIGHT TO DEMAND

PAYMENT OF THE ELECTRIC BILLS AND, IN CASE OF NON-PAYMENT, TO
DISCONTINUE THE ELECTRIC SERVICES OF [BF HOMES and PWCC]

II

[BF HOMES and PWCC] HAVE NO CLEAR RIGHT WHICH WARRANTS

PROTECTION BY INJUNCTIVE PROCESS

After hearing,12 the RTC issued an Order on November 21, 2003 granting the application
of BF Homes and PWCC for the issuance of a writ of preliminary injunction. The RTC
found that the records showed that all requisites for the issuance of said writ were
sufficiently satisfied by BF Homes and PWCC. The RTC stated in its Order:

Albeit, this Court respects the right of a public utility company like MERALCO, being a
grantee of a legislative franchise under Republic Act No. 9029, to collect overdue
payments from its subscribers or customers for their respective consumption of electric
energy, such right must, however, succumb to the paramount substantial and
constitutional rights of the public to the usage and enjoyment of waters in their
community. Thus, there is an urgent need for the issuance of a writ of preliminary
injunction in order to prevent social unrest in the community for having been deprived of
the use and enjoyment of waters flowing through [BF Homes and PWCCs] water
pumps.13

The RTC decreed in the end:

WHEREFORE, in the light of the foregoing, [BF Homes and PWCCs] prayer for the
issuance of a writ of preliminary injunction is hereby GRANTED. Respondent Manila
Electric Company is permanently restrained from proceeding with its announced intention
to cut-off electric power connection to [BF Homes and PWCCs] water pumps unless
otherwise ordered by this Court. Further, [BF Homes and PWCC] are hereby ordered to
post a bond in the amount of P500,000 to answer for whatever injury or damage that may
be caused by reason of the preliminary injunction.14

The Motion for Reconsideration of MERALCO of the aforementioned Order was denied
by the RTC in another Order issued on January 9, 2004.15 The RTC reiterated its earlier
finding that all the requisites for the proper issuance of an injunction had been fully
complied with by BF Homes and PWCC, thus:

Records indubitably show that all the requisites for the proper issuance of an injunction
have been fully complied with in the instant case.

It should be noted that a disconnection of power supply would obviously cause

irreparable injury because the pumps that supply water to the BF community will be
without electricity, thereby rendering said community without water. Water is a basic and
endemic necessity of life. This is why its enjoyment and use has been constitutionally
safeguarded and protected. Likewise, a community without water might create social
unrest, which situation this Court has the mandate to prevent. There is an urgent and
paramount necessity for the issuance of the injunctive writ to prevent serious damage to
the guaranteed rights of [BF Homes and PWCC] and the residents of the community to
use and enjoy water.16

The RTC resolved the issue on jurisdiction raised by MERALCO, as follows:

As to the jurisdictional issue raised by respondent MERALCO, it can be gleaned from a

re-evaluation and re-assessment of the records that this Court has jurisdiction to delve
into the case. This Court gave both parties the opportunity to be heard as they introduced
evidence on the propriety of the issuance of the injunctive writ. It is well-settled that no
grave abuse of discretion could be attributed to its issuance where a party was not
deprived of its day in court as it was heard and had exhaustively presented all its
arguments and defenses. (National Mines and Allied Workers Union vs. Valero, 132
SCRA 578, 1984.)17

Aggrieved, MERALCO filed with the Court of Appeals a Petition for Certiorari under Rule
65 of the Rules of Court, docketed as CA-G.R. SP No. 82826. MERALCO sought the
reversal of the RTC Orders dated November 21, 2003 and January 9, 2004 granting a
writ of preliminary injunction in favor of BF Homes and PWCC. MERALCO asserted that
the RTC had no jurisdiction over the application of BF Homes and PWCC for issuance of
such a writ.

In its Decision dated October 27, 2005, the Court of Appeals agreed with MERALCO that
the RTC had no jurisdiction to issue a writ of preliminary injunction in Civil Case No. 03-
0151, as said trial court had no jurisdiction over the subject matter of the case to begin
with. It ratiocinated in this wise:

For one, it cannot be gainsaid that the ERC has original and exclusive jurisdiction over
the case. Explicitly, Section 43(u) of Republic Act No. 9136, otherwise known as the
"Electric Power Industry Reform Act," (RA 9136), states that the ERC shall have the
original and exclusive jurisdiction over all cases contesting rates, fees, fines and
penalties imposed by the ERC in the exercise of its powers, functions and responsibilities
and over all cases involving disputes between and among participants or players in the
energy sector. Section 4(o) of Rule 3 of the Implementing Rules and Regulations of RA
9136 likewise provides that the ERC shall also be empowered to issue such other rules
that are essential in the discharge of its functions as an independent quasi-judicial body.

For another, the respondent judge, instead of presiding over the case, should have
dismissed the same and yielded jurisdiction to the ERC pursuant to the doctrine of
primary jurisdiction. It is plain error on the part of the respondent judge to determine,
preliminary or otherwise, a controversy involving a question which is within the
jurisdiction of an administrative tribunal, especially so where the question demands the
exercise of sound administrative discretion.

Needless to state, the doctrine of primary jurisdiction applies where the administrative
agency, as in the case of ERC, exercises its quasi-judicial and adjudicatory function.
Thus, in cases involving specialized disputes, the practice has been to refer the same to
an administrative agency of special competence pursuant to the doctrine of primary
jurisdiction. The courts will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the resolution of that question
by the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and services of the
administrative tribunal to determine technical and intricate matters of fact, and a
uniformity of ruling is essential to comply with the premises of the regulatory statute
administered.

Verily, the cause of action of [BF Homes and PWCC] against [MERALCO] originates
from the Meralco Refund Decision as it involves the perceived right of the former to
compel the latter to set-off or apply their refund to their present electric bill. The issue
delves into the right of the private respondents to collect their refund without submitting to
the approved schedule of the ERC, and in effect give unto themselves preferential right
over other equally situated consumers of [MERALCO]. Perforce, the ERC, as can be
gleaned from the afore-stated legal provisions, has primary, original and exclusive
jurisdiction over the said controversy.

Indeed, the respondent judge glaringly erred in enjoining the right of [MERALCO] to
disconnect its services to [BF Homes and PWCC] on the premise that the court has
jurisdiction to apply the provisions on compensation or set-off in this case. Although
[MERALCO] recognizes the right of [BF Homes and PWCC] to the refund as provided in
the Meralco Refund Decision, it is the ERC which has the authority to implement the
same according to its approved schedule, it being a dispute arising from the exercise of
its jurisdiction.

Moreover, it bears to stress that the Meralco Refund Decision was brought into fore by
the Decision dated 16 February 1998 of the ERC (then Energy Regulatory Board)
granting refund to [MERALCOs] consumers. Being the agency of origin, the ERC has the
jurisdiction to execute the same. Besides, as stated, it is empowered to promulgate rules
that are essential in the discharge of its functions as an independent quasi-judicial
body.18
The dispositive portion of the judgment of the appellate court reads:

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and
the assailed Orders REVERSED and SET ASIDE. Accordingly, the writ of injunction
against [MERALCO] is hereby DISSOLVED. No costs.19

In a Resolution dated February 7, 2006, the Court of Appeals denied the Motion for
Reconsideration of BF Homes and PWCC for failing to raise new and persuasive and
meritorious arguments.

Now, BF Homes and PWCC come before this Court via the instant Petition, raising the
following assignment of errors:

1. The Court of Appeals ERRED in saying that the respondent judge committed
grave abuse of discretion by issuing the disputed writ of injunction pending the
merits of the case including the issue of subject matter jurisdiction.

2. The Court of Appeals ERRED in saying that the ERC under the doctrine of
primary jurisdiction has the original and EXCLUSIVE jurisdiction to take
cognizance of a petition for injunction to prevent electrical disconnection to a
customer entitled to a refund.

3. The Court of Appeals ERRED in NOT SAYING that the ERC as a quasi-judicial
body under RA 9136 has no power to issue any injunctive relief or remedy to
prevent disconnection.

4. The Court of Appeals ERRED in not resolving the issue as to the violation of
MERALCO of a standing injunction order while the case remains undecided.20

At the core of the Petition is the issue of whether jurisdiction over the subject matter of
Civil Case No. 03-0151 lies with the RTC or the Energy Regulatory Commission (ERC). If
it is with the RTC, then the said trial court also has jurisdiction to issue the writ of
preliminary injunction against MERALCO. If it is with the ERC, then the RTC also has no
jurisdiction to act on any incidents in Civil Case No. 03-0151, including the application for
issuance of a writ of preliminary injunction of BF Homes and PWCC therein.

BF Homes and PWCC argued that due to the threat of MERALCO to disconnect electric
services, BF Homes and PWCC had no other recourse but to seek an injunctive remedy
from the RTC under its general jurisdiction. The merits of Civil Case No. 03-0151 was not
yet in issue, only the propriety of issuing a writ of preliminary injunction to prevent an
irreparable injury. Even granting that the RTC has no jurisdiction over the subject matter
of Civil Case No. 03-0151, the ERC by enabling law has no injunctive power to prevent
the disconnection by MERALCO of electric services to BF Homes and PWCC.

The Petition has no merit.

Settled is the rule that jurisdiction is conferred only by the Constitution or the
law.21 Republic v. Court of Appeals22also enunciated that only a statute can confer
jurisdiction on courts and administrative agencies.

Related to the foregoing and equally well-settled is the rule that the nature of an action
and the subject matter thereof, as well as which court or agency of the government has
jurisdiction over the same, are determined by the material allegations of the complaint in
relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for relief is
not part of the petition of the cause of action; nor does it enlarge the cause of action
stated or change the legal effect of what is alleged. In determining which body has
jurisdiction over a case, the better policy is to consider not only the status or relationship
of the parties but also the nature of the action that is the subject of their controversy.23

In Manila Electric Company v. Energy Regulatory Board,24 the Court traced the legislative
history of the regulatory agencies which preceded the ERC, presenting a summary of
these agencies, the statutes or issuances that created them, and the extent of the
jurisdiction conferred upon them, viz:

1. The first regulatory body, the Board of Rate Regulation (BRR), was created by
virtue of Act No. 1779. Its regulatory mandate under Section 5 of the law was
limited to fixing or regulating rates of every public service corporation.

2. In 1913, Act No. 2307 created the Board of Public Utility Commissioners
(BPUC) to take over the functions of the BRR. By express provision of Act No.
2307, the BPUC was vested with jurisdiction, supervision and control over all
public utilities and their properties and franchises.

3. On November 7, 1936, Commonwealth Act (C.A.) No. 146, or the Public

Service Act (PSA), was passed creating the Public Service Commission (PSC) to
replace the BPUC. Like the BPUC, the PSC was expressly granted jurisdiction,
supervision and control over public services, with the concomitant authority of
calling on the public force to exercise its power, to wit:

"SEC. 13. Except as otherwise provided herein, the Commission shall have general
supervision and regulation of, jurisdiction and control over, all public utilities, and also
over their property, property rights, equipment, facilities and franchises so far as may be
necessary for the purpose of carrying out the provisions of this Act, and in the exercise of
its authority it shall have the necessary powers and the aid of the public force x x x."

Section 14 of C.A. No. 146 defines the term "public service" or "public utility" as including
"every individual, copartnership, association, corporation or joint-stock company, . . . that
now or hereafter may own, operate, manage or control within the Philippines, for hire or
compensation, any common carrier, x x x, electric light, heat, power, x x x, when owned,
operated and managed for public use or service within the Philippines x x x." Under the
succeeding Section 17(a), the PSC has the power even without prior hearing

(a) To investigate, upon its own initiative, or upon complaint in writing, any matter
concerning any public service as regards matters under its jurisdiction; to require any
public service to furnish safe, adequate and proper service as the public interest may
require and warrant, to enforce compliance with any standard, rule, regulation, order or
other requirement of this Act or of the Commission, x x x.

4. Then came Presidential Decree (P.D.) No. 1, reorganizing the national government
and implementing the Integrated Reorganization Plan. Under the reorganization plan,
jurisdiction, supervision and control over public services related to electric light, and
power heretofore vested in the PSC were transferred to the Board of Power and
Waterworks (BOPW).

Later, P.D. No. 1206 abolished the BOPW. Its powers and function relative to power
utilities, including its authority to grant provisional relief, were transferred to the newly-
created Board of Energy (BOE).

5. On May 8, 1987, then President Corazon C. Aquino issued E.O. No. 172 reconstituting
the BOE into the ERB, transferring the formers functions and powers under P.D. No.
1206 to the latter and consolidating in and entrusting on the ERB "all the regulatory and
adjudicatory functions covering the energy sector." Section 14 of E.O. No. 172 states that
"(T)he applicable provisions of [C.A.] No. 146, as amended, otherwise known as the
Public Service Act; x x x and [P.D.] No. 1206, as amended, creating the Department of
Energy, shall continue to have full force and effect, except insofar as inconsistent with
this Order."25

Thereafter, on June 8, 2001, Republic Act No. 9136, known as the Electric Power
Industry Reform Act of 2001 (EPIRA), was enacted, providing a framework for
restructuring the electric power industry. One of the avowed purposes of the EPIRA is to
establish a strong and purely independent regulatory body. The Energy Regulatory
Board (ERB) was abolished and its powers and functions not inconsistent with the
provision of the EPIRA were expressly transferred to the ERC.26

The powers and functions of the ERB not inconsistent with the EPIRA were transferred to
the ERC by virtue of Sections 44 and 80 of the EPIRA, which read:

Sec. 44. Transfer of Powers and Functions. The powers and functions of the Energy
Regulatory Board not inconsistent with the provisions of this Act are hereby transferred to
the ERC. The foregoing transfer of powers and functions shall include all applicable
funds and appropriations, records, equipment, property and personnel as may be
necessary.

Sec. 80. Applicability and Repealing Clause. The applicability provisions of

Commonwealth Act No. 146, as amended, otherwise known as the "Public Service Act."
Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree 269,
as amended, referred to as the National Electrification Decree; Republic Act 7638,
otherwise known as the "Department of Energy Act of 1992"; Executive Order 172, as
amended, creating the ERB; Republic Act 7832 otherwise known as the "Anti-Electricity
and Electric Transmission Lines/Materials Pilferage Act of 1994"; shall continue to have
full force and effect except insofar as they are inconsistent with this Act.

The provisions with respect to electric power of Section 11(c) of Republic Act 7916, as
amended, and Section 5(f) of Republic Act 7227, are hereby repealed or modified
accordingly.

Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions
thereof, inconsistent with this Act are hereby repealed or modified accordingly.

In addition to the foregoing, the EPIRA also conferred new powers upon the ERC under
Section 43, among which are:

SEC. 43. Functions of the ERC. The ERC shall promote competition, encourage
market development, ensure customer choice and penalize abuse of market power in the
restructured electricity industry. In appropriate cases, the ERC is authorized to issue
cease and desist order after due notice and hearing. Towards this end, it shall be
responsible for the following key functions in the restructured industry:

xxxx

(f) In the public interest, establish and enforce a methodology for setting transmission
and distribution wheeling rates and retail rates for the captive market of a distribution
utility, taking into account all relevant considerations, including the efficiency or
inefficiency of the regulated entities. The rates must be such as to allow the recovery of
just and reasonable costs and a reasonable return on rate base (RORB) to enable the
entity to operate viably. The ERC may adopt alternative forms of internationally-accepted
rate-setting methodology as it may deem appropriate. The rate-setting methodology so
adopted and applied must ensure a reasonable price of electricity. The rates prescribed
shall be non-discriminatory. To achieve this objective and to ensure the complete
removal of cross subsidies, the cap on the recoverable rate of system losses prescribed
in Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced by
caps which shall be determined by the ERC based on load density, sales mix, cost of
service, delivery voltage and other technical considerations it may promulgate. The ERC
shall determine such form of rate-setting methodology, which shall promote efficiency. x x
x.

xxxx

(u) The ERC shall have the original and exclusive jurisdiction over all cases contesting
rates, fees, fines and penalties imposed by the ERC in the exercise of the
abovementioned powers, functions and responsibilities and over all cases involving
disputes between and among participants or players in the energy sector.

All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees
shall be published at least twice for two successive weeks in two (2) newspapers of
nationwide circulation.

A careful review of the material allegations of BF Homes and PWCC in their Petition
before the RTC reveals that the very subject matter thereof is the off-setting of the
amount of refund they are supposed to receive from MERALCO against the electric bills
they are to pay to the same company. This is squarely within the primary jurisdiction of
the ERC.

The right of BF Homes and PWCC to refund, on which their claim for off-setting depends,
originated from the MERALCO Refund cases. In said cases, the Court (1) authorized
MERALCO to adopt a rate adjustment in the amount of P0.017 per kilowatthour, effective
with respect to its billing cycles beginning February 1994; and (2) ordered MERALCO to
refund to its customers or credit in said customers favor for future consumption P0.167
per kilowatthour, starting with the customers billing cycles that begin February 1998, in
accordance with the ERB Decision dated February 16, 1998.

It bears to stress that in the MERALCO Refund cases, this Court only affirmed the
February 16, 1998 Decision of the ERB (predecessor of the ERC) fixing the just and
reasonable rate for the electric services of MERALCO and granting refund to MERALCO
consumers of the amount they overpaid. Said Decision was rendered by the ERB in the
exercise of its jurisdiction to determine and fix the just and reasonable rate of power
utilities such as MERALCO.

Presently, the ERC has original and exclusive jurisdiction under Rule 43(u) of the EPIRA
over all cases contesting rates, fees, fines, and penalties imposed by the ERC in the
exercise of its powers, functions and responsibilities, and over all cases involving
disputes between and among participants or players in the energy sector. Section 4(o) of
the EPIRA Implementing Rules and Regulation provides that the ERC "shall also be
empowered to issue such other rules that are essential in the discharge of its functions
as in independent quasi-judicial body."

Indubitably, the ERC is the regulatory agency of the government having the authority and
supervision over MERALCO. Thus, the task to approve the guidelines, schedules, and
details of the refund by MERALCO to its consumers, to implement the judgment of this
Court in the MERALCO Refund cases, also falls upon the ERC. By filing their Petition
before the RTC, BF Homes and PWCC intend to collect their refund without submitting to
the approved schedule of the ERC, and in effect, enjoy preferential right over the other
equally situated MERALCO consumers.

Administrative agencies, like the ERC, are tribunals of limited jurisdiction and, as such,
could wield only such as are specifically granted to them by the enabling statutes. In
relation thereto is the doctrine of primary jurisdiction involving matters that demand the
special competence of administrative agencies even if the question involved is also
judicial in nature. Courts cannot and will not resolve a controversy involving a question
within the jurisdiction of an administrative tribunal, especially when the question demands
the sound exercise of administrative discretion requiring special knowledge, experience
and services of the administrative tribunal to determine technical and intricate matters of
fact. The court cannot arrogate into itself the authority to resolve a controversy, the
jurisdiction of which is initially lodged with the administrative body of special
competence.27

Since the RTC had no jurisdiction over the Petition of BF Homes and PWCC in Civil
Case No. 03-0151, then it was also devoid of any authority to act on the application of BF
Homes and PWCC for the issuance of a writ of preliminary injunction contained in the
same Petition. The ancillary and provisional remedy of preliminary injunction cannot exist
except only as an incident of an independent action or proceeding.28

Incidentally, BF Homes and PWCC seemed to have lost sight of Section 8 of Executive
Order No. 172 which explicitly vested on the ERB, as an incident of its principal function,
the authority to grant provisional relief, thus:

Section 8. Authority to Grant Provisional Relief. The Board may, upon the filing of an
application, petition or complaint or at any stage thereafter and without prior hearing, on
the basis of supporting papers duly verified or authenticated, grant provisional relief on
motion of a party in the case or on its own initiative, without prejudice to a final decision
after hearing, should the Board find that the pleadings, together with such affidavits,
documents and other evidence which may be submitted in support of the motion,
substantially support the provisional order:Provided, That the Board shall immediately
schedule and conduct a hearing thereon within thirty (30) days thereafter, upon
publication and notice to all affected parties.

The aforequoted provision is still applicable to the ERC as it succeeded the ERB, by
virtue of Section 80 of the EPIRA. A writ of preliminary injunction is one such provisional
relief which a party in a case before the ERC may move for.

Lastly, the Court herein already declared that the RTC not only lacked the jurisdiction to
issue the writ of preliminary injunction against MERALCO, but that the RTC actually had
no jurisdiction at all over the subject matter of the Petition of BF Homes and PWCC in
Civil Case No. 03-0151. Therefore, in addition to the dissolution of the writ of preliminary
injunction issued by the RTC, the Court also deems it appropriate to already order the
dismissal of the Petition of BF Homes and PWCC in Civil Case No. 03-0151 for lack of
jurisdiction of the RTC over the subject matter of the same. Although only the matter of
the writ of preliminary injunction was brought before this Court in the instant Petition, the
Court is already taking cognizance of the issue on the jurisdiction of the RTC over the
subject matter of the Petition. The Court may motu proprio consider the issue of
jurisdiction. The Court has discretion to determine whether the RTC validly acquired
jurisdiction over Civil Case No. 03-0151 since, to reiterate, jurisdiction over the subject
matter is conferred only by law. Jurisdiction over the subject matter cannot be acquired
through, or waived by, any act or omission of the parties. Neither would the active
participation of the parties nor estoppel operate to confer jurisdiction on the RTC where
the latter has none over a cause of action.29 Indeed, when a court has no jurisdiction over
the subject matter, the only power it has is to dismiss the action.30
WHEREFORE, the instant Petition for Review is DENIED. The Decision dated October
27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826 is AFFIRMED with the
MODIFICATION that the Regional Trial Court, Branch 202 of Las Pias City, is
ORDERED to dismiss the Petition [With Prayer for the Issuance of Writ of Preliminary
Injunction and for the Immediate Issuance of Restraining Order] of BF Homes, Inc. and
Philippine Waterworks and Construction Corporation in Civil Case No. 03-0151. Costs
against BF Homes, Inc. and Philippine Waterworks and Construction Corporation.

SO ORDERED.
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in civil cases. Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts shall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings,
testate and intestate, including the grant of provisional remedies in proper cases,
where the value of the personal property, estate, or amount of the demand does
not exceed One hundred thousand pesos (P100,000.00) or, in Metro Manila
where such personal property, estate, or amount of the demand does not exceed
Two hundred thousand pesos (P200,000.00) exclusive of interest damages of
whatever kind, attorney's fees, litigation expenses, and costs, the amount of
which must be specifically alleged: Provided, That where there are several claims
or causes of action between the same or different parties, embodied in the same
complaint, the amount of the demand shall be the totality of the claims in all the
causes of action, irrespective of whether the causes of action arose out of the
same or different transactions;
 RULE 127

Provisional Remedies in Criminal Cases

Section 1. Availability of provisional remedies. The provisional remedies in civil actions, insofar as
they are applicable, may be availed of in connection with the civil action deemed instituted with the
criminal action. (1a)

Section 2. Attachment. When the civil action is properly instituted in the criminal action as provided
in Rule 111, the offended party may have the property of the accused attached as security for the
satisfaction of any judgment that may be recovered from the accused in the following cases:

(a) When the accused is about to abscond from the Philippines;

(b) When the criminal action is based on a claim for money or property embezzled or
fraudulently misapplied or converted to the use of the accused who is a public officer, officer of
a corporation, attorney, factor, broker, agent, or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) When the accused has concealed, removed, or disposed of his property, or is about to do
so; and

a) When the accused resides outside the Philippines. (2a)

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 134241 August 11, 2003

DAVID REYES (Substituted by Victoria R. Fabella), petitioner,

vs.
JOSE LIM, CHUY CHENG KENG and HARRISON LUMBER, INC., respondents.

CARPIO, J.:

The Case

This is a petition for review on certiorari of the Decision1 dated 12 May 1998 of the Court
of Appeals in CA-G.R. SP No. 46224. The Court of Appeals dismissed the petition for
certiorari assailing the Orders dated 6 March 1997, 3 July 1997 and 3 October 1997 of
the Regional Trial Court of Paranaque, Branch 2602 ("trial court") in Civil Case No. 95-
032.

The Facts

On 23 March 1995, petitioner David Reyes ("Reyes") filed before the trial court a
complaint for annulment of contract and damages against respondents Jose Lim ("Lim"),
Chuy Cheng Keng ("Keng") and Harrison Lumber, Inc. ("Harrison Lumber").

The complaint3 alleged that on 7 November 1994, Reyes as seller and Lim as buyer
entered into a contract to sell ("Contract to Sell") a parcel of land ("Property") located
along F.B. Harrison Street, Pasay City. Harrison Lumber occupied the Property as lessee
with a monthly rental of P35,000. The Contract to Sell provided for the following terms
and conditions:

1. The total consideration for the purchase of the aforedescribed parcel of land
together with the perimeter walls found therein is TWENTY EIGHT MILLION
(P28,000,000.00) PESOS payable as follows:

(a) TEN MILLION (P10,000,000.00) PESOS upon signing of this Contract to Sell;

(b) The balance of EIGHTEEN MILLION (P18,000,000.00) PESOS shall be paid

on or before March 8, 1995 at 9:30 A.M. at a bank to be designated by the Buyer
but upon the complete vacation of all the tenants or occupants of the property
and execution of the Deed of Absolute Sale. However, if the tenants or occupants
have vacated the premises earlier than March 8, 1995, the VENDOR shall give
the VENDEE at least one week advance notice for the payment of the balance
and execution of the Deed of Absolute Sale.

2. That in the event, the tenants or occupants of the premises subject of this sale
shall not vacate the premises on March 8, 1995 as stated above, the VENDEE
shall withhold the payment of the balance of P18,000,000.00 and the VENDOR
agrees to pay a penalty of Four percent (4%) per month to the herein VENDEE
based on the amount of the downpayment of TEN MILLION (P10,000,000.00)
PESOS until the complete vacation of the premises by the tenants therein.4
The complaint claimed that Reyes had informed Harrison Lumber to vacate the Property
before the end of January 1995. Reyes also informed Keng5 and Harrison Lumber that if
they failed to vacate by 8 March 1995, he would hold them liable for the penalty of
P400,000 a month as provided in the Contract to Sell. The complaint further alleged that
Lim connived with Harrison Lumber not to vacate the Property until the P400,000 monthly
penalty would have accumulated and equaled the unpaid purchase price of P18,000,000.

On 3 May 1995, Keng and Harrison Lumber filed their Answer6 denying they connived
with Lim to defraud Reyes. Keng and Harrison Lumber alleged that Reyes approved their
request for an extension of time to vacate the Property due to their difficulty in finding a
new location for their business. Harrison Lumber claimed that as of March 1995, it had
already started transferring some of its merchandise to its new business location in
Malabon.7

On 31 May 1995, Lim filed his Answer8 stating that he was ready and willing to pay the
balance of the purchase price on or before 8 March 1995. Lim requested a meeting with
Reyes through the latters daughter on the signing of the Deed of Absolute Sale and the
payment of the balance but Reyes kept postponing their meeting. On 9 March 1995,
Reyes offered to return the P10 million down payment to Lim because Reyes was having
problems in removing the lessee from the Property. Lim rejected Reyes offer and
proceeded to verify the status of Reyes title to the Property. Lim learned that Reyes had
already sold the Property to Line One Foods Corporation ("Line One") on 1 March 1995
for P16,782,840. After the registration of the Deed of Absolute Sale, the Register of
Deeds issued to Line One TCT No. 134767 covering the Property. Lim denied conniving
with Keng and Harrison Lumber to defraud Reyes.

On 2 November 1995, Reyes filed a Motion for Leave to File Amended Complaint due to
supervening facts. These included the filing by Lim of a complaint for estafa against
Reyes as well as an action for specific performance and nullification of sale and title plus
damages before another trial court.9 The trial court granted the motion in an Order dated
23 November 1995.

In his Amended Answer dated 18 January 1996,10 Lim prayed for the cancellation of the
Contract to Sell and for the issuance of a writ of preliminary attachment against Reyes.
The trial court denied the prayer for a writ of preliminary attachment in an Order dated 7
October 1996.

On 6 March 1997, Lim requested in open court that Reyes be ordered to deposit the P10
million down payment with the cashier of the Regional Trial Court of Paraaque. The trial
court granted this motion.

On 25 March 1997, Reyes filed a Motion to Set Aside the Order dated 6 March 1997 on
the ground the Order practically granted the reliefs Lim prayed for in his Amended
Answer.11 The trial court denied Reyes motion in an Order12 dated 3 July 1997. Citing
Article 1385 of the Civil Code, the trial court ruled that an action for rescission could
prosper only if the party demanding rescission can return whatever he may be obliged to
restore should the court grant the rescission.

The trial court denied Reyes Motion for Reconsideration in its Order 13 dated 3 October
1997. In the same order, the trial court directed Reyes to deposit the P10 million down
payment with the Clerk of Court on or before 30 October 1997.

On 8 December 1997, Reyes14 filed a Petition for Certiorari15 with the Court of Appeals.
Reyes prayed that the Orders of the trial court dated 6 March 1997, 3 July 1997 and 3
October 1997 be set aside for having been issued with grave abuse of discretion
amounting to lack of jurisdiction. On 12 May 1998, the Court of Appeals dismissed the
petition for lack of merit.

Hence, this petition for review.

The Ruling of the Court of Appeals

The Court of Appeals ruled the trial court could validly issue the assailed orders in the
exercise of its equity jurisdiction. The court may grant equitable reliefs to breathe life and
force to substantive law such as Article 138516of the Civil Code since the provisional
remedies under the Rules of Court do not apply to this case.

The Court of Appeals held the assailed orders merely directed Reyes to deposit the P10
million to the custody of the trial court to protect the interest of Lim who paid the amount
to Reyes as down payment. This did not mean the money would be returned
automatically to Lim.

The Issues

Reyes raises the following issues:

1. Whether the Court of Appeals erred in holding the trial court could issue the
questioned Orders dated March 6, 1997, July 3, 1997 and October 3, 1997,
requiring petitioner David Reyes to deposit the amount of Ten Million Pesos
(P10,000,000.00) during the pendency of the action, when deposit is not among
the provisional remedies enumerated in Rule 57 to 61 of the 1997 Rules on Civil
Procedure.

2. Whether the Court of Appeals erred in finding the trial court could issue the
questioned Orders on grounds of equity when there is an applicable law on the
matter, that is, Rules 57 to 61 of the 1997 Rules on Civil Procedure.17

The Courts Ruling

Reyes contentions are without merit.

Reyes points out that deposit is not among the provisional remedies enumerated in the
1997 Rules of Civil Procedure. Reyes stresses the enumeration in the Rules is exclusive.
Not one of the provisional remedies in Rules 57 to 6118 applies to this case. Reyes
argues that a court cannot apply equity and require deposit if the law already prescribes
the specific provisional remedies which do not include deposit. Reyes invokes the
principle that equity is "applied only in the absence of, and never against, statutory law or
x x x judicial rules of procedure."19 Reyes adds the fact that the provisional remedies do
not include deposit is a matter of dura lex sed lex.20

The instant case, however, is precisely one where there is a hiatus in the law and in the
Rules of Court. If left alone, the hiatus will result in unjust enrichment to Reyes at the
expense of Lim. The hiatus may also imperil restitution, which is a precondition to the
rescission of the Contract to Sell that Reyes himself seeks. This is not a case of equity
overruling a positive provision of law or judicial rule for there is none that governs this
particular case. This is a case of silence or insufficiency of the law and the Rules of
Court. In this case, Article 9 of the Civil Code expressly mandates the courts to make a
ruling despite the "silence, obscurity or insufficiency of the laws."21 This calls for the
application of equity,22 which "fills the open spaces in the law."23
Thus, the trial court in the exercise of its equity jurisdiction may validly order the deposit
of the P10 million down payment in court. The purpose of the exercise of equity
jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Equity
jurisdiction aims to do complete justice in cases where a court of law is unable to adapt
its judgments to the special circumstances of a case because of the inflexibility of its
statutory or legal jurisdiction.24Equity is the principle by which substantial justice may be
attained in cases where the prescribed or customary forms of ordinary law are
inadequate.25

Reyes is seeking rescission of the Contract to Sell. In his amended answer, Lim is also
seeking cancellation of the Contract to Sell. The trial court then ordered Reyes to deposit
in court the P10 million down payment that Lim made under the Contract to Sell. Reyes
admits receipt of the P10 million down payment but opposes the order to deposit the
amount in court. Reyes contends that prior to a judgment annulling the Contract to Sell,
he has the "right to use, possess and enjoy"26 the P10 million as its "owner"27 unless the
court orders its preliminary attachment.28

To subscribe to Reyes contention will unjustly enrich Reyes at the expense of Lim.
Reyes sold to Line One the Property even before the balance of P18 million under the
Contract to Sell with Lim became due on 8 March 1995. On 1 March 1995, Reyes signed
a Deed of Absolute Sale29 in favor of Line One. On 3 March 1995, the Register of Deeds
issued TCT No. 13476730 in the name of Line One.31 Reyes cannot claim ownership of
the P10 million down payment because Reyes had already sold to another buyer the
Property for which Lim made the down payment. In fact, in his Comment32 dated 20
March 1996, Reyes reiterated his offer to return to Lim the P10 million down payment.

On balance, it is unreasonable and unjust for Reyes to object to the deposit of the P10
million down payment. The application of equity always involves a balancing of the
equities in a particular case, a matter addressed to the sound discretion of the court.
Here, we find the equities weigh heavily in favor of Lim, who paid the P10 million down
payment in good faith only to discover later that Reyes had subsequently sold the
Property to another buyer.

In Eternal Gardens Memorial Parks Corp. v. IAC,33 this Court held the plaintiff could
not continue to benefit from the property or funds in litigation during the pendency of the
suit at the expense of whomever the court might ultimately adjudge as the lawful owner.
The Court declared:

In the case at bar, a careful analysis of the records will show that petitioner admitted
among others in its complaint in Interpleader that it is still obligated to pay certain
amounts to private respondent; that it claims no interest in such amounts due and is
willing to pay whoever is declared entitled to said amounts. x x x

Under the circumstances, there appears to be no plausible reason for petitioners

objections to the deposit of the amounts in litigation after having asked for the assistance
of the lower court by filing a complaint for interpleader where the deposit of aforesaid
amounts is not only required by the nature of the action but is a contractual obligation of
the petitioner under the Land Development Program (Rollo, p. 252).

There is also no plausible or justifiable reason for Reyes to object to the deposit of the
P10 million down payment in court. The Contract to Sell can no longer be enforced
because Reyes himself subsequently sold the Property to Line One. Both Reyes and Lim
are now seeking rescission of the Contract to Sell. Under Article 1385 of the Civil Code,
rescission creates the obligation to return the things that are the object of the contract.
Rescission is possible only when the person demanding rescission can return whatever
he may be obliged to restore. A court of equity will not rescind a contract unless there is
restitution, that is, the parties are restored to the status quo ante.34

Thus, since Reyes is demanding to rescind the Contract to Sell, he cannot refuse to
deposit the P10 million down payment in court.35 Such deposit will ensure restitution of
the P10 million to its rightful owner. Lim, on the other hand, has nothing to refund, as he
has not received anything under the Contract to Sell.36

In Government of the Philippine Islands v. Wagner and Cleland Wagner,37 the Court
ruled the refund of amounts received under a contract is a precondition to the rescission
of the contract. The Court declared:

The Government, having asked for rescission, must restore to the defendants
whatever it has received under the contract. It will only be just if, as a condition to
rescission, the Government be required to refund to the defendants an amount
equal to the purchase price, plus the sums expended by them in improving the
land. (Civil Code, art. 1295.)

The principle that no person may unjustly enrich himself at the expense of another is
embodied in Article 2238 of the Civil Code. This principle applies not only to substantive
rights but also to procedural remedies. One condition for invoking this principle is that the
aggrieved party has no other action based on contract, quasi-contract, crime, quasi-delict
or any other provision of law.39 Courts can extend this condition to the hiatus in the Rules
of Court where the aggrieved party, during the pendency of the case, has no other
recourse based on the provisional remedies of the Rules of Court.

Thus, a court may not permit a seller to retain, pendente lite, money paid by a buyer if the
seller himself seeks rescission of the sale because he has subsequently sold the same
property to another buyer.40 By seeking rescission, a seller necessarily offers to return
what he has received from the buyer. Such a seller may not take back his offer if the
court deems it equitable, to prevent unjust enrichment and ensure restitution, to put the
money in judicial deposit.

There is unjust enrichment when a person unjustly retains a benefit to the loss of
another, or when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience.41 In this case, it was just, equitable and
proper for the trial court to order the deposit of the P10 million down payment to prevent
unjust enrichment by Reyes at the expense of Lim.42

WHEREFORE, we AFFIRM the Decision of the Court of Appeals.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner,

vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND
TOURIST INN, and TEODORICO ADARNA, respondents.

Breva & Breva Law Offices for petitioner.

Goc-Ong & Associates for private respondents.

NARVASA, J.:p

Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-
G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light &
Power Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and set aside the writ of
preliminary attachment issued by the Regional Trial Court of Davao City 2 in Civil Case No. 19513-89 on application of the
plaintiff (Davao Light & Power Co.), before the service of summons on the defendants (herein respondents Queensland Co.,
Inc. and Adarna).

Following is the chronology of the undisputed material facts culled from the Appellate
Tribunal's judgment of May 4, 1990.

1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a
verified complaint for recovery of a sum of money and damages against Queensland
Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint
contained an ex parte application for a writ of preliminary attachment.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle,
issued an Order granting theex parte application and fixing the attachment bond at
P4,600,513.37.

3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ
of attachment issued.

4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of
attachment and a copy of the attachment bond, were served on defendants Queensland
and Adarna; and pursuant to the writ, the sheriff seized properties belonging to the latter.

5. On September 6, 1989, defendants Queensland and Adarna filed a motion to

discharge the attachment for lack of jurisdiction to issue the same because at the time
the order of attachment was promulgated (May 3, 1989) and the attachment writ issued
(May 11, 1989), the Trial Court had not yet acquired jurisdiction over the cause and over
the persons of the defendants.
6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge
attachment.

7. On September 19, 1989, the Trial Court issued an Order denying the motion to
discharge.

This Order of September 19, 1989 was successfully challenged by Queensland and
Adarna in a special civil action of certiorari instituted by them in the Court of Appeals. The
Order was, as aforestated, annulled by the Court of Appeals in its Decision of May 4,
1990. The Appellate Court's decision closed with the following disposition:

. . . the Orders dated May 3, 1989 granting the issuance of a writ of

preliminary attachment, dated September 19, 1989 denying the motion to
discharge attachment; dated November 7, 1989 denying petitioner's
motion for reconsideration; as well as all other orders emanating
therefrom, specially the Writ of Attachment dated May 11, 1989 and
Notice of Levy on Preliminary Attachment dated May 11, 1989, are
hereby declared null and void and the attachment hereby ordered
DISCHARGED.

The Appellate Tribunal declared that

. . . While it is true that a prayer for the issuance of a writ of preliminary

attachment may be included m the complaint, as is usually done, it is
likewise true that the Court does not acquire jurisdiction over the person
of the defendant until he is duly summoned or voluntarily appears, and
adding the phrase that it be issued "ex parte" does not confer said
jurisdiction before actual summons had been made, nor retroact
jurisdiction upon summons being made. . . .

It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in attachment,"
the "critical time which must be identified is . . . when the trial court acquires authority under law to act coercively
against the defendant or his property . . .;" and that "the critical time is the of the vesting of jurisdiction in the court
over the person of the defendant in the main case."

Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light
seeks in the present appellate proceedings.

The question is whether or not a writ of preliminary attachment may issue ex

parte against a defendant before acquisition of jurisdiction of the latter's person by
service of summons or his voluntary submission to the Court's authority.

The Court rules that the question must be answered in the affirmative and that
consequently, the petition for review will have to be granted.

It is incorrect to theorize that after an action or proceeding has been commenced and
jurisdiction over the person of the plaintiff has been vested in the court, but before the
acquisition of jurisdiction over the person of the defendant (either by service of summons
or his voluntary submission to the court's authority), nothing can be validly done by the
plaintiff or the court. It is wrong to assume that the validity of acts done during this period
should be defendant on, or held in suspension until, the actual obtention of jurisdiction
over the defendant's person. The obtention by the court of jurisdiction over the person of
the defendant is one thing; quite another is the acquisition of jurisdiction over the person
of the plaintiff or over the subject-matter or nature of the action, or the res or object
hereof.
An action or proceeding is commenced by the filing of the complaint or other initiatory
pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding is
invoked or called into activity; 5 and it is thus that the court acquires jurisdiction over said subject matter or nature of the
action. 6 And it is by that self-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading)
by which he signifies his submission to the court's power and authority that jurisdiction is acquired by the court over his
person. 7 On the other hand, jurisdiction over the person of the defendant is obtained, as above stated, by the service of
summons or other coercive process upon him or by his voluntary submission to the authority of the court. 8

The events that follow the filing of the complaint as a matter of routine are well known.
After the complaint is filed, summons issues to the defendant, the summons is then
transmitted to the sheriff, and finally, service of the summons is effected on the defendant
in any of the ways authorized by the Rules of Court. There is thus ordinarily some
appreciable interval of time between the day of the filing of the complaint and the day of
service of summons of the defendant. During this period, different acts may be done by
the plaintiff or by the Court, which are unquestionable validity and propriety. Among
these, for example, are the appointment of a guardian ad litem, 9 the grant of authority to the
plaintiff to prosecute the suit as a pauper litigant, 10 the amendment of the complaint by the plaintiff as a matter of right
without leave of court, 11 authorization by the Court of service of summons by publication, 12 the dismissal of the action by
the plaintiff on mere notice. 13

This, too, is true with regard to the provisional remedies of preliminary attachment,
preliminary injunction, receivership or replevin. 14 They may be validly and properly applied for and
granted even before the defendant is summoned or is heard from.

A preliminary attachment may be defined, paraphrasing the Rules of Court, as the

provisional remedy in virtue of which a plaintiff or other party may, at the commencement
of the action or at any time thereafter, have the property of the adverse party taken into
the custody of the court as security for the satisfaction of any judgment that may be
recovered. 15 It is a remedy which is purely statutory in respect of which the law requires a strict construction of the
provisions granting it. 16 Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition
of jurisdiction over the person of the defendant.

Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or
at any time thereafter." 17The phase, "at the commencement of the action," obviously refers to the date of the filing
of the complaint which, as above pointed out, is the date that marks "the commencement of the action;" 18 and the
reference plainly is to a time before summons is served on the defendant, or even before summons issues. What the rule is
saying quite clearly is that after an action is properly commenced by the filing of the complaint and the payment of all
requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary attachment upon fulfillment of the
pertinent requisites laid down by law, and that he may do so at any time, either before or after service of summons on the
defendant. And this indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other proper party
to incorporate the application for attachment in the complaint or other appropriate pleading (counter-claim, cross-claim, third-
party claim) and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds the application
otherwise sufficient in form and substance.

In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for preliminary attachment is not
generally necessary unless otherwise directed by the Trial Court in its discretion. 20 And in Filinvest Credit Corporation
v. Relova, 21 the Court declared that "(n)othing in the Rules of Court makes notice and hearing indispensable and mandatory
requisites for the issuance of a writ of attachment." The only pre-requisite is that the Court be satisfied, upon consideration of
"the affidavit of the applicant or of some other person who personally knows the facts, that a sufficient cause of action exists,
that the case is one of those mentioned in Section 1 . . . (Rule 57), that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to the applicant, or the value of the property the possession of
which he is entitled to recover, is as much as the sum for which the order (of attachment) is granted above all legal
counterclaims." 22 If the court be so satisfied, the "order of attachment shall be granted," 23 and the writ shall issue upon the
applicant's posting of "a bond executed to the adverse party in an amount to be fixed by the judge, not exceeding the
plaintiffs 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." 24

In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18,
1989, 25 this Court had occasion to emphasize the postulate that no hearing is required on an application for preliminary
attachment, with notice to the defendant, for the reason that this "would defeat the objective of the remedy . . . (since the)
time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before
a writ of attachment issues." As observed by a former member of this Court, 26 such a procedure would warn absconding
debtors-defendants of the commencement of the suit against them and the probable seizure of their properties, and thus give
them the advantage of time to hide their assets, leaving the creditor-plaintiff holding the proverbial empty bag; it would place
the creditor-applicant in danger of losing any security for a favorable judgment and thus give him only an illusory victory.
Withal, ample modes of recourse against a preliminary attachment are secured by law to
the defendant. The relative ease with which a preliminary attachment may be obtained is
matched and paralleled by the relative facility with which the attachment may legitimately
be prevented or frustrated. These modes of recourse against preliminary attachments
granted by Rule 57 were discussed at some length by the separate opinion in Mindanao
Savings & Loans Asso. Inc. v. CA., supra.

That separate opinion stressed that there are two (2) ways of discharging an
attachment: first, by the posting of a counterbond; and second, by a showing of its
improper or irregular issuance.

1.0. The submission of a counterbond is an efficacious mode of lifting an attachment

already enforced against property, or even of preventing its enforcement altogether.

1.1. When property has already been seized under attachment, the attachment may be
discharged upon counterbond in accordance with Section 12 of Rule 57.

Sec. 12. Discharge of attachment upon giving counterbond. At any

time after an order of attachment has been granted, the party whose
property has been attached or the person appearing in his behalf, may,
upon reasonable notice to the applicant, apply to the judge who granted
the order, or to the judge of the court in which the action is pending, for
an order discharging the attachment wholly or in part on the security
given . . . in an amount equal to the value of the property attached as
determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action. . . .

1.2. But even before actual levy on property, seizure under attachment may be prevented
also upon counterbond. The defendant need not wait until his property is seized before
seeking the discharge of the attachment by a counterbond. This is made possible by
Section 5 of Rule 57.

Sec. 5. Manner of attaching property. The officer executing the order

shall without delay attach, to await judgment and execution in the action,
all the properties of the party against whom the order is issued in the
province, not exempt from execution, or so much thereof as may be
sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued, or
gives a counter-bond executed to the applicant, in an amount sufficient to
satisfy such demand besides costs, or in an amount equal to the value of
the property which is about to be attached, to secure payment to the
applicant of any judgment which he may recover in the action. . . .
(Emphasis supplied)

2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or
discharged on the ground that it has been irregularly or improperly issued, in accordance
with Section 13 of Rule 57. Like the first, this second mode of lifting an attachment may
be resorted to even before any property has been levied on. Indeed, it may be availed
of after property has been released from a levy on attachment, as is made clear by said
Section 13, viz.:

Sec. 13. Discharge of attachment for improper or irregular issuance.

The party whose property has been attached may also, at any time
either BEFORE or AFTER the release of the attached property, or before
any attachment shall have been actually levied, upon reasonable notice
to the attaching creditor, apply to the judge who granted the order, or to
 the judge of the court in which the action is pending, for an order to
discharge the attachment on the ground that the same was improperly or
irregularly issued. If the motion be made on affidavits on the part of the
party whose property has been attached, but not otherwise, the attaching
creditor may oppose the same by counter-affidavits or other evidence in
addition to that on which the attachment was made. . . . (Emphasis
supplied)

This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The
attachment debtor cannot be deemed to have waived any defect in the issuance of the
attachment writ by simply availing himself of one way of discharging the attachment writ,
instead of the other. Moreover, the filing of a counterbond is a speedier way of
discharging the attachment writ maliciously sought out by the attaching creditor instead of
the other way, which, in most instances . . . would require presentation of evidence in a
fullblown trial on the merits, and cannot easily be settled in a pending incident of the
case." 27

It may not be amiss to here reiterate other related principles dealt with in Mindanao
Savings & Loans Asso. Inc. v.C.A., supra., 28 to wit:

(a) When an attachment may not be dissolved by a showing of its

irregular or improper issuance:

. . . (W)hen the preliminary attachment is issued upon a ground which is

at the same time the applicant's cause of action; e.g., "an action for
money or property embezzled or fraudulently misapplied or converted to
his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment
as such, or by any other person in a fiduciary capacity, or for a willful
violation of duty." (Sec. 1 [b], Rule 57), or "an action against a party who
has been guilty of fraud m contracting the debt or incurring the obligation
upon which the action is brought" (Sec. 1 [d], Rule 57), 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
plaintiff's application and affidavits on which the writ was based and
consequently that the writ based thereon had been improperly or
irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) 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. Therefore, when the writ of attachment is of
this nature, the only way it can be dissolved is by a counterbond (G.B.
Inc. v. Sanchez, 98 Phil. 886).

(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond:

. . . The dissolution of the preliminary attachment upon security given, or

a showing of its irregular or improper issuance, does not of course
operate to discharge the sureties on plaintiff's own attachment bond. The
reason is simple. That bond is "executed to the adverse party, . . .
conditioned 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" (SEC. 4, Rule 57). Hence, until that
determination is made, as to the applicant's entitlement to the attachment,
his bond must stand and cannot be with-drawn.
With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58),
receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the
same: they may also issue ex parte. 29

It goes without saying that whatever be the acts done by the Court prior to the acquisition
of jurisdiction over the person of defendant, as above indicated issuance of summons,
order of attachment and writ of attachment (and/or appointments of guardian ad litem, or
grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment
of the complaint by the plaintiff as a matter of right without leave of court 30 and however
valid and proper they might otherwise be, these do not and cannot bind and affect the defendant until and unless jurisdiction
over his person is eventually obtained by the court, either by service on him of summons or other coercive process or his
voluntary submission to the court's authority. Hence, when the sheriff or other proper officer commences implementation of
the writ of attachment, it is essential that he serve on the defendant not only a copy of the applicant's affidavit and
attachment bond, and of the order of attachment, as explicity required by Section 5 of Rule 57, but also the summons
addressed to said defendant as well as a copy of the complaint and order for appointment of guardian ad litem, if any, as
also explicity directed by Section 3, Rule 14 of the Rules of Court. Service of all such documents is indispensable not only for
the acquisition of jurisdiction over the person of the defendant, but also upon considerations of fairness, to apprise the
defendant of the complaint against him, of the issuance of a writ of preliminary attachment and the grounds therefor and thus
accord him the opportunity to prevent attachment of his property by the posting of a counterbond in an amount equal to the
plaintiff's claim in the complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the
complaint itself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of the applicant's affidavit or
bond in accordance with Section 13, Rule 57.

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

For the guidance of all concerned, the Court reiterates and reaffirms the proposition that
writs of attachment may properly issue ex parte provided that the Court is satisfied that
the relevant requisites therefor have been fulfilled by the applicant, although it may, in its
discretion, require prior hearing on the application with notice to the defendant; but that
levy on property pursuant to the writ thus issued may not be validly effected unless
preceded, or contemporaneously accompanied, by service on the defendant of
summons, a copy of the complaint (and of the appointment of guardian ad litem, if any),
the application for attachment (if not incorporated in but submitted separately from the
complaint), the order of attachment, and the plaintiff's attachment bond.

WHEREFORE, the petition is GRANTED; the challenged decision of the Court of

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

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-12957 October 29, 1918

THE UNITED STATES, plaintiffs-appellee,

vs.
PONCIANO NAMIT, defendant-appellant.

Ramon Maza for appellant.

Acting Attorney-General Paredes for appellee.

STREET, J.:

This appeal is brought to this Court to reverse a judgment of the Court of First Instance of
the Province of Antique, adjudging the defendant guilty of the crime of murder and
sentencing him to cadena perpetua, with the accessories provided by law, and requiring
him to indemnify the heirs of the deceased in the sum of P1,000 and to pay the costs.

It appears in evidence that between 6 and 7 o'clock in the evening of February 24, 1917,
the deceased Damiano Jordan, and a neighbor, one Fernando Martinez, were talking
with each other while standing in the street immediately in front of Jordan's house in the
municipality o Sibalom, Province of Antique. While they were so engaged in conversation
they were approached by the accused, Ponciano Namit. The latter was at the time
apparently entering upon a duty as guard for the round in the capacity of substitute for a
son whose turn fell upon this night.

As Ponciano Namit came up he stopped and asked Fernando Martinez if he was on

guard that night. Upon receiving an affirmative reply, he asked Damiano Jordan if he too
was on guard, and Damiano replied that he was not as it was not his turn. Ponciano
thereupon at once ordered Damiano to go up into his house, and as Damiano did not
instantly obey, Ponciano in a few moments repeated the command. Damiano in a few
moments repeated the command. Damiano then replied that he was going and suiting his
actions to his words, turned to start for his house. As he was turning, Ponciano struck
him a blow on the left frontal part of the head with a heavy stick.

The end of this stick was supplied with a hatchet-shaped object, possibly of metal, and
the knob of this instrument crushed into the head of Damiano and penetrating into the
brain, there momentarily remained. Ponciano by giving the stick a jerk succeeded in
freeing it and immediately left the scene of the crime. When he pulled the stick out,
Damiano fell to the ground. Damiano's wife who was sitting in the door of their house
only a short distance away, saw what had happened and immediately ran down to her
husband and told Fernando to aid her in carrying him to the house, which he did. The
injured person lived for about six days and died as a result of the wound. It was shown by
an autopsy performed on the body that a hole was made in the skull about as large as a
half of peso coin. No motive sufficient to account for this unjustifiable attack was proved,
though there is a suggestion in the evidence that Ponciano may have been drinking.

After a careful review of the evidence we see no reason for discrediting the testimony of
the two eyewitnesses for the prosecution. We find no material contradiction in their
statements made either at the trial of this case or at the time of the commission of the
crime. The story told by the wife of the deceased Bonifacia Tubigon, appears to be a
simple and truthful narrative. The same may be said with regard to the testimony of
Fernando Martinez. Both witness apparently evidence a desire to tell what happened
without exaggeration or distortion. Another witness for the prosecution. Aurelio Sildo,
testified that on the night in question the accused admitted that he had the misfortune to
strike Damiano Jordan.

At the trial the accused did not directly admit having struck the fatal blow to Damiano; but
he claimed that on the night in question he was passing the place of this occurrence and
was there assaulted by some unknown person with the stick. He says that the and the
assailant struggled for the possession of the stick and that finally he, Ponciano, kicked
his adversary, who fell down, whereupon Ponciano departed. We consider this story
unlikely; and the judge as he did, that the accused is the person who caused the death of
Damiano Jordan.

Although the complaint charges alevosia as a qualifying circumstance in the commission

of the crime, thus elevating the offense to the degree of murder, and although the judge
of the trial court found that this element was present in the commission of the offense, we
are not satisfied with his conclusion on this point. It is true the two principal witness testify
that the blow was given after Damiano Jordan had turned his bask to the accused; but
the blow was truck, evidently with great force, upon the left frontal side of the head of
Damiano, and it is manifest that this could have been done only if the accused is a left-
handed person, supposing him to be standing behind his victim. There is no evidence,
however, that Ponciano Namit is left handed; and inasmuch as right handedness prevails
among the great majority, it is to be presumed in the absence of the evidence to the
contrary, that the accused is right-handed.

This circumstance raises in our mind a reasonable doubt as to whether the parties may
not have been facing each other when the blow was delivered. If such were the case, it
would be improper to find that the offense was qualified by alevosia. It must be admitted
that the attack was sudden and unexpected to Damiano Jordan, and it would perhaps be
possible to found upon this the conclusion that the attack was characterized by surprise
in such sense as to constitute alevosia. However, in considering a question of this kind,
every case must be judged by its particular facts; and we find nothing in the evidence to
show with certainty that the aggressor consciously adopted a mode of attack intended to
facilitate the perpetration of a homicide without risk to himself. a more reasonable, though
still doubtful, inference would possibly be that he did not in fact intend to kill Damiano at
all.

In this connection it is worth while to note that Bonifacia Tubigon declares that
immediately after the blow was truck Ponciano Namit exclaimed I have long desired to
strike some one and I have done so." This would seen to indicate, in the absence of
proof of other motive, that the accused was moved by a sudden desire to use his stick
and that he struck in obedience to this unreasoning impulse, without thinking of the
conditions under which he was acting. Upon the whole we incline to the opinion that the
fatal blow was the result of a casual encounter under conditions not sufficiently defined to
enable us to say that alevosia was certainly present in the case. 1awph!l.net

The offense committed is, in our opinion, to be qualified as homicide, under article 404 of
the Penal Code , in the estimation of which no generic circumstance either of an
aggravating or attenuating nature should be taken into consideration; and the proper
penalty is reclusion temporal in its medium degree. The accused should accordingly be
sentence to 14 years 8 months and 1 day, reclusion temporal with the accessories
prescribed in article 59 of the Penal Code.
Another feature of the case of some importance is presented in connection with an
attachment levied upon the property of the accused to secure the satisfaction of the civil
liability incident to the commission of the homicide. It appears that while the cause was
pending in the Court of First Instance an attorney appeared in the capacity of private
prosecutor, representing the widow of the deceased, and presented an affidavit showing
that the accused was selling his property in order to elude the payment of any indemnity
to which he would be liable in case of conviction. It was accordingly requested that an
attachment should be issued against his property. an order was thereupon made by the
court upon April 25, 1917, authorizing an attachment of property to the value of P1,500
unless he should give bond to answer in that amount. The clerk of the court issued the
order of attachment upon the same date, and three days later the court rendered its
decision finding the accused guilty and ordering him to indemnify the widow and children
of the deceased in the sum of P1,000. The attachment was not immediately levied; but
after an appeal had been taken, the sheriff, on November 28, 1917, levied the same
upon five parcels of land and a house belonging to the accused. It does not appear from
the record in this case whether the accused has ever given the bond necessary to
procure the dissolution of this attachment, although upon December 19, 1917, after the
cause had been brought to this Court by appeal, an order was here entered authorizing
the Court of First Instance to act in the latter of dissolving the attachment, if bond should
be given.

It is argued that the attachment granted in this case is sustainable under article 589 of
the Law of Criminal Procedure of Spain, which is to the following effect:

ART 589. When from the record of a cause appear circumstances tending to
establish the guilt of a person, the judge shall require him to give a bond sufficient
to secure the pecuniary liabilities which may be finally adjudged, ordering in the
same decree the attachment of sufficient property to cover such liabilities, should
he fail to give bond.

The amount of the bond shall be fixed in the same decree and it shall not be less
than one third of provable amount of the pecuniary liabilities.

We are of the opinion that this provisions and those related to it in the Spanish Code of
Criminal Procedure were abrogated by necessary implication upon the enactment of
General Orders No. 58. It is true that section 107 of this law recognizes the existence of
the civil liability connected with the commission of crime and reserves the privileges
previously secured by law to the person injured by the commission of an offense to take
part in the prosecution and to recover damages. Nevertheless, we think that the
commission of an offense to the procedure contained in the Spanish Code of Criminal
Procedure relating to the attachment of property and giving of bond.

Upon reading the entire section 107 of General Orders No. 58, it appears obvious that
the right which was intended to be saved by the reservation therein made was the right of
the party injured to appear and to be heard in all stages of the case with reference to
such liability and to obtain a judgment for the damages occasioned by the wrongful act,
as well as the further right to appeal from any decision of the court denying any legal right
connected therewith.

It is to be noted that while the "sumario" of Spanish criminal procedure is in many

respects similar to the preliminary hearing before a committing magistrate conducted
pursuant to section 13 and 14 of General Orders No. 58, there is nevertheless an
important difference, which is that the "sumario" constitutes a preliminary stage in the
criminal prosecution, and is not merely a step preparatory tot he initiation of the
proceedings. The evidence taken in the "sumario" therefore, capable for being used in
the plenary stage of the prosecution and if ratification was not required, served as the
basis of judgment. (Ley de 18 de junio de 1870 Law of June 18, 1870.) On the
contrary, the proceedings in the preliminary hearing never constitute a basis for a
subsequent judicial declaration of guilt. The "sumario" has been abrogated by the
enactment of General Orders No. 58 above referred to; and the ground expressed in
article 589 of the Spanish Code of Criminal Procedure for the attachments of the property
of the accused therefore no longer here exists.

With the adoption of General Orders No. 58, there was necessarily introduced into these
Islands a system of criminal procedure embodying the principles recognized in the
system of criminal procedure generally in vogue in the United States; and any
characteristics or rule of the former system inconsistent with these principles must be
held to have been abrogated. Attachment in American law is a purely statutory remedy. It
does not exist unless expressly given by statute and as it is an extraordinary and
summary remedy, it is unavailable except in those cases where the statute expressly
permits its issuance.

It remains to consider whether or not the attachment can be sustained under the
provisions of section 424, in connection with subsection 5 of section 412 of Code of Civil
Procedure. The affidavit made in this case states substantially, we think, that the accused
was selling his property with the intent to defraud the persons interested in the
enforcement of the civil liability but considered as an application for an attachment under
the provisions above cited, in connection with section 426 for the same Code, the
affidavit was several respect defective. Disregarding these informalities, however, we are
of the opinion that the remedy of attachment there provided is not available as an aide to
the enforcement of the civil liability incident to prosecution for crime. These provisions
contemplate the pendency of a civil action, and the remedy of attachment is merely an
auxiliary to such action. Section 795 of the Code of Civil Procedure in its first paragraph
declared that the procedure in all civil actions shall be in accordance with the provisions
of the said Code and it is quite evident that the legislature in adopting this Code could not
have intended to make its provisions in any respect applicable to the proceedings in a
criminal prosecution. The mere circumstance that a civil prosecution is in our opinion no
sufficient reason for holding that the remedy of attachment as designated for use in a civil
action is available in the criminal proceeding.

From what has been said result that the attachment effected under the order of the Court
of First Instance dated April 25, 1917. must be considered to have been improvidently
granted. The same is hereby declared to be of no effect, by this declaration will of course
in no wise prejudice the right of the widow and children of the deceased to enforce the
payment of the indemnity for which judgment was rendered against the accused. The
judgment of the trial court in respect to the penalty imposed upon the accused, is
modified by subsisting 14 years 8 months and 1 day, reclusion temporal, with
accessories prescribed in article 59 of the Penal Code for so much thereof as imposes
the penalty of cadena perpetua, with the accessories prescribed in article 54 of the same
Code. As thus modified the judgment of the lower court is affirmed, with costs against the
appellant. So ordered.

Separate Opinions

MALCOLM, J., dissenting:

I agree with the main decision in its discussion of the facts and its qualification of the
crime. I agree again that article 589 of the law of Criminal Procedure of Spain was
necessarily abrogated upon the promulgation of General Order No. 58. I do not agree
with the proposition that the attachment cannot be levied upon the property of the
accused to secure the satisfaction of the civil liability incident to the commission of the
homicide. In my judgment such action is both legal and proper.

The law of the Philippine Islands is made up of certain parts which we call statutes or
codes. Yet this law is, if we interpret it understandingly, a harmonious and symmetrical
system. To give unity to the whole, it is essential to visualize the law in its entirety and not
as isolated segments. Even as to the codes, none is sufficient unto itself. For
convenience each code is given a title which it treats of fully, but never completely. Each
code necessarily must and should blend into every other code. To borrow a phrase of
statutory construction, codes are in a sense in pari materia. For one to enumerate
examples would be to demonstrate obvious.

There is no doubt as to the civil liability of a person for his criminal acts. To follow the
doctrine laid down by Justice Torres in the United States

Every crime or misdemeanor gives rise to a penal or criminal action for the
punishment of the guilty party, and also to a civil action for the restitution of the
thing, repair of the damage, and indemnification for the losses; wherefore, after
the prosecution of the criminal action, it shall be understood that the civil action
has been utilized, for the reason that every person criminally liable for a crime of
misdemeanor is also civilly liable (art. 17, Penal Code), unless the aggrieved
party should expressly waive his right (art. 23). (Syllabus.)

When therefore, in a criminal action the courts are permitted to give judgment for a civil
indemnity, they necessarily must have the power to make this remedy effective. This can
only be done by going to the Code of Civil Procedure, which contains the appropriate
provisions governing the subject of attachment. It would seem to be self-evident that the
property of the accused should be kept intact to satisfy the accused to dispose of his
property in order to escape the fulfillment of the entire judgment and to defeat the
purposes of the law.

With the exception above noted, the judgment is correct.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 133303 February 17, 2005

BERNARDO VALDEVIESO, petitioner,

vs.
CANDELARIO DAMALERIO AND AUREA C. DAMALERIO, respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to
set aside the 25 September 1997 Decision and the 10 February 1998 Resolution of the
Court of Appeals in CA-G.R. SP No. 43082 entitled, "Candelario Damalerio and Aurea
Damalerio v. Honorable Antonio S. Alano, et al."1

There is no dispute as to the following facts:

On 05 December 1995, Bernardo Valdevieso (petitioner) bought from spouses Lorenzo

and Elenita Uy a parcel of land consisting of 10,000 square meters, more or less, located
at Bo. Tambler, General Santos City, and covered by Transfer Certificate of Title (TCT)
No. T-30586.2

The deed of sale was not registered, nor was the title of the land transferred to
petitioner.3

On 07 December 1995, the said property was immediately declared by petitioner for
taxation purposes as Tax Declaration No. l6205 with the City Assessors Office.4

It came to pass that on 19 April 1996, spouses Candelario and Aurea Damalerio
(respondents) filed with the Regional Trial Court (RTC) of General Santos City, a
complaint for a sum of money against spouses Lorenzo and Elenita Uy docketed as Civil
Case No. 5748 with application for the issuance of a Writ of Preliminary Attachment.5

On 23 April 1996, the trial court issued a Writ of Preliminary Attachment by virtue of
which the property, then still in the name of Lorenzo Uy but which had already been sold
to petitioner, was levied. The levy was duly recorded in the Register of Deeds of General
Santos City and annotated upon TCT No. T-30586.6

On 06 June 1996, TCT No. T-30586 in the name of Lorenzo Uy was cancelled and, in
lieu thereof, TCT No. T-74439 was issued in the name of petitioner.7 This new TCT
carried with it the attachment in favor of respondents.

On 14 August 1996, petitioner filed a third-party claim in Civil Case No. 5748 to discharge
or annul the attachment levied on the property covered by TCT No. T-74439 on the
ground that the said property belongs to him and no longer to Lorenzo and Elenita Uy.8

In a resolution dated 21 October 1996, the trial court ruled for the
petitioner.9 Citing Manliguez v. Court of Appeals10and Santos v. Bayhon,11 it held that the
levy of the property by virtue of attachment is lawful only when the levied property
indubitably belongs to the defendant. Applying the rulings in the cited cases, it opined
that although defendant Lorenzo Uy remained the registered owner of the property
attached, yet the fact was that he was no longer the owner thereof as it was already sold
earlier to petitioner, hence, the writ of attachment was unlawful. 1awphi1.nt

Respondents sought reconsideration thereof which was denied by the trial court in a
resolution dated 03 January 1997.12

From the unfavorable resolution of the trial court in the third-party claim, respondents
appealed to the Court of Appeals. The appellate court reversed the resolution and by
judgment promulgated on 25 September 1997, it declared that an attachment or levy of
execution, though posterior to the sale, but if registered before the sale is registered,
takes precedence over the sale.13 The writ of attachment in favor of the respondents,
being recorded ahead of the sale to petitioner, will therefore take precedence.

Petitioner moved for reconsideration but this was denied by the Court of Appeals in its
Resolution of 10 February 1998.14

Hence, this Petition for Review on Certiorari.

The sole issue in this case is whether or not a registered writ of attachment on the land is
a superior lien over that of an earlier unregistered deed of sale.

Petitioner maintains that he has a superior right over the questioned property because
when the same was attached on 23 April 1996, this property was no longer owned by
spouses Uy against whom attachment was issued as it was already sold to petitioner on
05 December 1995. The ownership thereof was already transferred to petitioner pursuant
to Article 147715 in relation to Article 149816 of the Civil Code.

Dismissing the allegation that he slept on his rights by not immediately registering at least
an adverse claim based on his deed of sale, petitioner avers that he promptly worked out
for the transfer of registration in his name. The slight delay in the registration, he claims
was not due to his fault but attributable to the process involved in the registration of
property such as the issuance of the Department of Agrarian Reform clearance which
was effected only after compliance with several requirements. 1awphi 1.nt

Considering the peculiar facts and circumstances obtaining in this case, petitioner
submits it would be in accord with justice and equity to declare him as having a superior
right to the disputed property than the respondents.

Respondents maintain the contrary view. They aver that registration of a deed of sale is
the operative act which binds the land and creates a lien thereon. Before the registration
of the deed, the property is not bound insofar as third persons are concerned. Since the
writ of attachment in favor of respondents was registered earlier than the deed of sale to
petitioner, respondents were of the belief that their registered writ of attachment on the
subject property enjoys preference and priority over petitioners earlier unregistered deed
of sale over the same property. They also contend that Articles 1477 and 1498 of the
Civil Code as cited by petitioner are not applicable to the case because said provisions
apply only as between the parties to the deed of sale. These provisions do not apply to,
nor bind, third parties, like respondents, because what affects or binds third parties is the
registration of the instrument in the Register of Deeds. Furthermore, respondents argue
that petitioner cannot invoke equity in his favor unless the following conditions are met:
(a) the absence of specific provision of a law on the matter; and (b) if the person who
invokes it is not guilty of delay. Both conditions have not been met, however, since there
is a law on the subject matter, i.e., Section 51 of Presidential Decree No. 1529, and that
petitioner allegedly slept on his rights by not immediately registering an adverse claim
based on his deed of sale.

We agree with the respondents.

The law applicable to the facts of this case is Section 51 of P.D. No. 1529. Said Section
provides:

Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered
land may convey, mortgage, lease, charge, or otherwise deal with the same in
accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or
other voluntary instrument, except a will purporting to convey or affect registered land,
shall take effect as a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of Deeds to make
registration.

The act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned, and in all cases under this Decree, the registration shall be
made in the office of the Register of Deeds for the province or city where the land lies.

It is to be noted that though the subject land was deeded to petitioner as early as 05
December 1995, it was not until 06 June 1996 that the conveyance was registered, and,
during that interregnum, the land was subjected to a levy on attachment. It should also
be observed that, at the time of the attachment of the property on 23 April 1996, the
spouses Uy were still the registered owners of said property. Under the cited law, the
execution of the deed of sale in favor of petitioner was not enough as a succeeding step
had to be taken, which was the registration of the sale from the spouses Uy to him.
Insofar as third persons are concerned, what validly transfers or conveys a persons
interest in real property is the registration of the deed. Thus, when petitioner bought the
property on 05 December 1995, it was, at that point, no more than a private transaction
between him and the spouses Uy. It needed to be registered before it could bind third
parties, including respondents. When the registration finally took place on 06 June 1996,
it was already too late because, by then, the levy in favor of respondents, pursuant to the
preliminary attachment ordered by the General Santos City RTC, had already been
annotated on the title.

The settled rule is that levy on attachment, duly registered, takes preference over a prior
unregistered sale.17 This result is a necessary consequence of the fact that the property
involved was duly covered by the Torrens system which works under the fundamental
principle that registration is the operative act which gives validity to the transfer or creates
a lien upon the land.18

The preference created by the levy on attachment is not diminished even by the
subsequent registration of the prior sale. This is so because an attachment is a
proceeding in rem.19 It is against the particular property, enforceable against the whole
world. The attaching creditor acquires a specific lien on the attached property which
nothing can subsequently destroy except the very dissolution of the attachment or levy
itself.20 Such a proceeding, in effect, means that the property attached is an indebted
thing and a virtual condemnation of it to pay the owners debt.21The lien continues until
the debt is paid, or sale is had under execution issued on the judgment, or until the
judgment is satisfied, or the attachment discharged or vacated in some manner provided
by law.

Thus, in the registry, the attachment in favor of respondents appeared in the nature of a
real lien when petitioner had his purchase recorded. The effect of the notation of said lien
was to subject and subordinate the right of petitioner, as purchaser, to the lien. Petitioner
acquired ownership of the land only from the date of the recording of his title in the
register, and the right of ownership which he inscribed was not absolute but a limited
right, subject to a prior registered lien of respondents, a right which is preferred and
superior to that of petitioner.22

Anent petitioners reliance on the rulings laid down in Manliguez v. Court of

Appeals and Santos v. Bayhon, we find the same to be misplaced. These cases did not
deal at all with the dilemma at hand, i.e. the question of whether or not a registered writ
of attachment on land is superior to that of an earlier unregistered deed of sale.
In Santos, what was involved were machinery and pieces of equipment which were
executed upon pursuant to the favorable ruling of the National Labor Relations
Commission. A third party claimed that the machinery were already sold to her, but it
does not appear in the facts of the case if such sale was ever registered. Manliguez is
l^vvphi 1.net

similar to Santos, except that the former involved buildings and improvements on a piece
of land. To stress, in both cited cases, the registration of the sale, if any, of the subject
properties was never in issue. 1awphi1.nt

As to petitioners invocation of equity, we cannot, at this instance, yield to such principle

in the presence of a law clearly applicable to the case. We reiterate that this Court, while
aware of its equity jurisdiction, is first and foremost, a court of law.23 While equity might tilt
on the side of one party, the same cannot be enforced so as to overrule positive
provisions of law in favor of the other.24 Equity cannot supplant or contravene the
law.25 The rule must stand no matter how harsh it may seem. Dura lex sed lex.

WHEREFORE, the appealed Decision of the Court of Appeals in CA-G.R. SP No. 43082
dated 25 September 1997, and its Resolution dated 10 February 1998, are hereby
AFFIRMED. No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 175587 September 21, 2007

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner,

vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review assails the May 31, 2006 Decision1 of the Court of Appeals in CA-
G.R. CV No. 78200 affirming the August 30, 2000 Decision2 of the Regional Trial Court of
Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages
arising from petitioner Philippine Commercial International Banks (PCIB) invalid
garnishment of respondents deposits.

On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money
with prayer for the issuance of a writ of preliminary attachment. Said complaint alleged
that on September 10, 1997, respondent, a resident of Hong Kong, executed in favor of
petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest. In
view of the fluctuations in the foreign exchange rates which resulted in the insufficiency of
the deposits assigned by respondent as security for the loan, petitioner requested the
latter to put up additional security for the loan. Respondent, however, sought a
reconsideration of said request pointing out petitioners alleged mishandling of his
account due to its failure to carry out his instruction to close his account as early as April
1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was
US$1.00:JPY127.50.4 It appears that the amount of P249,828,588.90 was the
consolidated amount of a series of yen loans granted by petitioner to respondent during
the months of February and April 1997.5

In praying for the issuance of a writ of preliminary attachment under Section 1

paragraphs (e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1)
respondent fraudulently withdrew his unassigned deposits notwithstanding his verbal
promise to PCIB Assistant Vice President Corazon B. Nepomuceno not to withdraw the
same prior to their assignment as security for the loan; and (2) that respondent is not a
resident of the Philippines. The application for the issuance of a writ was supported with
the affidavit of Nepomuceno.6

On October 24, 1997, the trial court granted the application and issued the writ ex
parte7 after petitioner posted a bond in the amount of P18,798,734.69, issued by
Prudential Guarantee & Assurance Inc., under Bond No. HO-46764-97. On the same
date, the bank deposits of respondent with Rizal Commercial Banking Corporation
(RCBC) were garnished. On October 27, 1997, respondent, through counsel, filed a
manifestation informing the court that he is voluntarily submitting to its jurisdiction.8

Subsequently, respondent filed a motion to quash9 the writ contending that the
withdrawal of his unassigned deposits was not fraudulent as it was approved by
petitioner. He also alleged that petitioner knew that he maintains a permanent residence
at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in
Makati City at the Law Firm Romulo Mabanta Buenaventura Sayoc & De los
Angeles, 10 where he is a partner. In both addresses, petitioner regularly communicated
with him through its representatives. Respondent added that he is the managing partner
of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary;
and that he frequently travels back to the Philippines.

On December 24, 1997, the trial court issued an order quashing the writ and holding that
the withdrawal of respondents unassigned deposits was not intended to defraud
petitioner. It also found that the representatives of petitioner personally transacted with
respondent through his home address in Quezon City and/or his office in Makati City. It
thus concluded that petitioner misrepresented and suppressed the facts regarding
respondents residence considering that it has personal and official knowledge that for
purposes of service of summons, respondents residence and office addresses are
located in the Philippines. The dispositive portion of the courts decision is as follows:

WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby

GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET
ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED.

SO ORDERED.11

With the denial12 of petitioners motion for reconsideration, it elevated the case to the
Court of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999,
the petition was dismissed for failure to prove that the trial court abused its discretion in
issuing the aforesaid order.13 Petitioner filed a motion for reconsideration but was denied
on October 28, 1999.14 On petition with this Court, the case was dismissed for late filing
in a minute resolution (G.R. No. 140605) dated January 19, 2000.15 Petitioner filed a
motion for reconsideration but was likewise denied with finality on March 6, 2000.16

Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25
Million17 on the attachment bond (posted by Prudential Guarantee & Assurance, Inc.,
under JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful
garnishment of his deposits. He presented evidence showing that hisP150,000.00 RCBC
check payable to his counsel as attorneys fees, was dishonored by reason of the
garnishment of his deposits. He also testified that he is a graduate of the Ateneo de
Manila University in 1982 with a double degree of Economics and Management
Engineering and of the University of the Philippines in 1987 with the degree of Bachelor
of Laws. Respondent likewise presented witnesses to prove that he is a well known
lawyer in the business community both in the Philippines and in Hong Kong.18 For its
part, the lone witness presented by petitioner was Nepomuceno who claimed that she
acted in good faith in alleging that respondent is a resident of Hong Kong.19

On August 30, 2000, the trial court awarded damages to respondent in the amount of
P25 Million without specifying the basis thereof, thus:

WHEREFORE, premises above considered, and defendant having duly established his
claim in the amount ofP25,000,000.00, judgment is hereby rendered ordering Prudential
Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the
full amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081,
[Bond No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And,
considering that the amount of the bond is insufficient to fully satisfy the award for
damages, plaintiff is hereby ordered to pay defendant the amount of P6,201,265.31.

SO ORDERED.20

The trial court denied petitioners motion for reconsideration on October 24, 2000.21
Petitioner elevated the case to the Court of Appeals which affirmed the findings of the
trial court. It held that in claiming that respondent was not a resident of the Philippines,
petitioner cannot be said to have been in good faith considering that its knowledge of
respondents Philippine residence and office address goes into the very issue of the trial
courts jurisdiction which would have been defective had respondent not voluntarily
appeared before it.

The Court of Appeals, however, reduced the amount of damages awarded to petitioner
and specified their basis. The dispositive portion of the decision of the Court of Appeals
states:

WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is
hereby MODIFIED. The award of damages in the amount of P25,000,000.00 is deleted.
In lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with
appellant [herein petitioner], is ORDERED to pay appellee [herein
respondent]P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages;
and P1,000,000.00 as attorneys fees, to be satisfied against the attachment bond under
Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081.

SO ORDERED.22

Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals
denied petitioners motion for reconsideration but granted that of respondents by
ordering petitioner to pay additional P5Million as exemplary damages.23

Hence, the instant petition.

At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled
to a writ of attachment because respondent is a resident of the Philippines and that his
act of withdrawing his deposits with petitioner was without intent to defraud, can no
longer be passed upon by this Court. More importantly, the conclusions of the court that
petitioner bank misrepresented that respondent was residing out of the Philippines and
suppressed the fact that respondent has a permanent residence in Metro Manila where
he may be served with summons, are now beyond the power of this Court to review
having been the subject of a final and executory order. Said findings were sustained by
the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605.
The rule on conclusiveness of judgment, which obtains under the premises, precludes
the relitigation of a particular fact or issue in another action between the same parties
even if based on a different claim or cause of action. The judgment in the prior action
operates as estoppel as to those matters in issue or points controverted, upon the
determination of which the finding or judgment was rendered. The previous judgment is
conclusive in the second case, as to those matters actually and directly controverted and
determined.24 Hence, the issues of misrepresentation by petitioner and the residence of
respondent for purposes of service of summons can no longer be questioned by
petitioner in this case.

The core issue for resolution is whether petitioner bank is liable for damages for the
improper issuance of the writ of attachment against respondent.

We rule in the affirmative.

Notwithstanding the final judgment that petitioner is guilty of misrepresentation and

suppression of a material fact, the latter contends that it acted in good faith. Petitioner
also contends that even if respondent is considered a resident of the Philippines,
attachment is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court
since he (respondent) is a resident who is temporarily out of the Philippines upon whom
service of summons may be effected by publication.

Petitioners contentions are without merit.

While the final order of the trial court which quashed the writ did not categorically use the
word "bad faith" in characterizing the representations of petitioner, the tenor of said order
evidently considers the latter to have acted in bad faith by resorting to a deliberate
strategy to mislead the court. Thus

In the hearings of the motion, and oral arguments of counsels before the Court, it
appears that plaintiff BANK through its contracting officers Vice President Corazon B.
Nepomuceno and Executive Vice President Jose Ramon F. Revilla, personally
transacted with defendant mainly through defendants permanent residence in METRO-
MANILA, either in defendants home address in Quezon City or his main business
address at the Romulo Mabanta Buenaventura Sayoc & Delos Angeles in MAKATI and
while at times follow ups were made through defendants temporary home and business
addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal
and official knowledge that defendants permanent and official residence for purposes of
service of summons is in the Philippines. In fact, this finding is further confirmed by the
letter of Mr. JOHN GOKONGWEI, JR. Chairman, Executive Committee of plaintiff BANK,
in his letter dated 6 October 1997 on the subject loan to defendant of the same law firm
was addressed to the ROMULO LAW FIRM in MAKATI.

[Anent the] second ground of attachment x x x [t]he Court finds that the amount
withdrawn was not part of defendants peso deposits assigned with the bank to secure
the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor
is that plaintiff approved and allowed said withdrawals. It is even noted that when the
Court granted the prayer for attachment it was mainly on the first ground under Section
1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the
Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the
deficiency of its second ground for attachment [i.e.,] disposing properties with intent to
defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that
defendant was residing out of the Philippines and suppressed the fact that defendants
permanent residence is in METRO MANILA where he could be served with summons.

On the above findings, and mainly on the misrepresentations made by plaintiff on the
grounds for the issuance of the attachment in the verified complaint, the Court concludes
that defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled
to the attachment.25

Petitioner is therefore barred by the principle of conclusiveness of judgment from again

invoking good faith in the application for the issuance of the writ. Similarly, in the case
of Hanil Development Co., Ltd. v. Court of Appeals,26the Court debunked the claim of
good faith by a party who maliciously sought the issuance of a writ of attachment, the bad
faith of said party having been previously determined in a final decision which voided the
assailed writ. Thus

Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its
petition that the award of attorneys fees and injunction bond premium in favor of Hanil is
[contrary] to law and jurisprudence. It contends that no malice or bad faith may be
imputed to it in procuring the writ.
Escobars protestation is now too late in the day. The question of the illegality of the
attachment and Escobars bad faith in obtaining it has long been settled in one of the
earlier incidents of this case. The Court of Appeals, in its decision rendered on February
3, 1983 in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with
grave abuse of discretion. Escobars bad faith in procuring the writ cannot be doubted. Its
Petition for the Issuance of Preliminary Attachment made such damning allegations that:
Hanil was already able to secure a complete release of its final collection from the
MPWH; it has moved out some of its heavy equipments for unknown destination, and it
may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged
that "after personal verification by (Escobar) of (Hanils) equipment in Cagayan de Oro
City, it appears that the equipments were no longer existing from their compound." All
these allegations of Escobar were found to be totally baseless and untrue.

Even assuming that the trial court did not make a categorical pronouncement of
misrepresentation and suppression of material facts on the part of petitioner, the factual
backdrop of this case does not support petitioners claim of good faith. The facts and
circumstances omitted are highly material and relevant to the grant or denial of writ of
attachment applied for.

Finally, there is no merit in petitioners contention that respondent can be considered a

resident who is temporarily out of the Philippines upon whom service of summons may
be effected by publication, and therefore qualifies as among those against whom a writ of
attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court
which provides:

(f) In an action against a party x x x on whom summons may be served by publication.

In so arguing, petitioner attempts to give the impression that although it erroneously

invoked the ground that respondent does not reside in the Philippines, it should not be
made to pay damages because it is in fact entitled to a writ of attachment had it invoked
the proper ground under Rule 57. However, even on this alternative ground, petitioner is
still not entitled to the issuance of a writ of attachment.

The circumstances under which a writ of preliminary attachment may be issued are set
forth in Section 1, Rule 57 of the Rules of Court, to wit:

SEC. 1. Grounds upon which attachment may issue. At the commencement of the
action or at any time before entry of judgment, a plaintiff or any proper party may have
the property of the adverse party attached as security for the satisfaction of any judgment
that may be recovered in the following cases:

(a) In an action for the recovery of a specified amount of money or damages,

other than moral and exemplary, on a cause of action arising from law, contract,
quasi-contract, delict or quasi-delict against a party who is about to depart from
the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or

converted to his own use by a public officer, or an officer of a corporation or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly or

fraudulently taken, detained, or converted, when the property, or any part thereof,
has been concealed, removed, or disposed of to prevent its being found or taken
by the applicant or an authorized person;
 (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 the
performance thereof;

(e) In an action against a party who has removed or disposed of his property, or
is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication.

The purposes of preliminary attachment are: (1) to seize the property of the debtor in
advance of final judgment and to hold it for purposes of satisfying said judgment, as in
the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or
(2) to acquire jurisdiction over the action by actual or constructive seizure of the property
in those instances where personal or substituted service of summons on the defendant
cannot be effected, as in paragraph (f) of the same provision.27

Corollarily, in actions in personam, such as the instant case for collection of sum of
money,28 summons must be served by personal or substituted service, otherwise the
court will not acquire jurisdiction over the defendant. In case the defendant does not
reside and is not found in the Philippines (and hence personal and substituted service
cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction
to try the case is to convert the action into a proceeding in rem or quasi in rem by
attaching the property of the defendant.29 Thus, in order to acquire jurisdiction in actions
in personam where defendant resides out of and is not found in the Philippines, it
becomes a matter of course for the court to convert the action into a proceeding in rem or
quasi in rem by attaching the defendants property. The service of summons in this case
(which may be by publication coupled with the sending by registered mail of the copy of
the summons and the court order to the last known address of the defendant), is no
longer for the purpose of acquiring jurisdiction but for compliance with the requirements
of due process.30

However, where the defendant is a resident who is temporarily out of the Philippines,
attachment of his/her property in an action in personam, is not always necessary in order
for the court to acquire jurisdiction to hear the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. When an action is commenced
against a defendant who ordinarily resides within the Philippines, but who is temporarily
out of it, service may, by leave of court, be also effected out of the Philippines, as under
the preceding section.

The preceding section referred to in the above provision is Section 15 which provides for
extraterritorial service (a) personal service out of the Philippines, (b) publication
coupled with the sending by registered mail of the copy of the summons and the court
order to the last known address of the defendant; or (c) in any other manner which the
court may deem sufficient.

In Montalban v. Maximo,31 however, the Court held that substituted service of summons
(under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of
service of summons that will confer jurisdiction on the court over the person of residents
temporarily out of the Philippines. Meaning, service of summons may be effected by (a)
leaving copies of the summons at the defendants residence with some person of suitable
discretion residing therein, or (b) by leaving copies at the defendants office or regular
place of business with some competent person in charge thereof.32 Hence, the court may
acquire jurisdiction over an action in personam by mere substituted service without need
of attaching the property of the defendant.

The rationale in providing for substituted service as the normal mode of service for
residents temporarily out of the Philippines, was expounded in Montalban v. Maximo,33 in
this wise:

A man temporarily absent from this country leaves a definite place of residence, a
dwelling where he lives, a local base, so to speak, to which any inquiry about him may be
directed and where he is bound to return. Where one temporarily absents himself, he
leaves his affairs in the hands of one who may be reasonably expected to act in his place
and stead; to do all that is necessary to protect his interests; and to communicate with
him from time to time any incident of importance that may affect him or his business or
his affairs. It is usual for such a man to leave at his home or with his business associates
information as to where he may be contacted in the event a question that affects him
crops up.

Thus, in actions in personam against residents temporarily out of the Philippines, the
court need not always attach the defendants property in order to have authority to try the
case. Where the plaintiff seeks to attach the defendants property and to resort to the
concomitant service of summons by publication, the same must be with prior leave,
precisely because, if the sole purpose of the attachment is for the court to acquire
jurisdiction, the latter must determine whether from the allegations in the complaint,
substituted service (to persons of suitable discretion at the defendants residence or to a
competent person in charge of his office or regular place of business) will suffice, or
whether there is a need to attach the property of the defendant and resort to service of
summons by publication in order for the court to acquire jurisdiction over the case and to
comply with the requirements of due process.

In the instant case, it must be stressed that the writ was issued by the trial court mainly
on the representation of petitioner that respondent is not a resident of the
Philippines.34 Obviously, the trial courts issuance of the writ was for the sole purpose of
acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint
disclosed that respondent has a residence in Quezon City and an office in Makati City,
the trial court, if only for the purpose of acquiring jurisdiction, could have served
summons by substituted service on the said addresses, instead of attaching the property
of the defendant. The rules on the application of a writ of attachment must be strictly
construed in favor of the defendant. For attachment is harsh, extraordinary, and summary
in nature; it is a rigorous remedy which exposes the debtor to humiliation and
annoyance.35 It should be resorted to only when necessary and as a last remedy.

It is clear from the foregoing that even on the allegation that respondent is a resident
temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment
because the trial court could acquire jurisdiction over the case by substituted service
instead of attaching the property of the defendant. The misrepresentation of petitioner
that respondent does not reside in the Philippines and its omission of his local addresses
was thus a deliberate move to ensure that the application for the writ will be granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial
court that petitioner is liable for damages for the wrongful issuance of a writ of attachment
against respondent.

Anent the actual damages, the Court of Appeals is correct in not awarding the same
inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a
well settled rule that one who has been injured by a wrongful attachment can recover
damages for the actual loss resulting therefrom. But for such losses to be recoverable,
they must constitute actual damages duly established by competent proofs, which are,
however, wanting in the present case.36

Nevertheless, nominal damages may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing that
right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus
not for the purpose of indemnification for a loss but for the recognition and vindication of
a right. Indeed, nominal damages are damages in name only and not in fact.37 They are
recoverable where some injury has been done but the pecuniary value of the damage is
not shown by evidence and are thus subject to the discretion of the court according to the
circumstances of the case.38

In this case, the award of nominal damages is proper considering that the right of
respondent to use his money has been violated by its garnishment. The amount of
nominal damages must, however, be reduced from P2 million toP50,000.00 considering
the short period of 2 months during which the writ was in effect as well as the lack of
evidence as to the amount garnished. 1wphi1

Likewise, the award of attorneys fees is proper when a party is compelled to incur
expenses to lift a wrongfully issued writ of attachment. The basis of the award thereof is
also the amount of money garnished, and the length of time respondents have been
deprived of the use of their money by reason of the wrongful attachment.39 It may also be
based upon (1) the amount and the character of the services rendered; (2) the labor, time
and trouble involved; (3) the nature and importance of the litigation and business in which
the services were rendered; (4) the responsibility imposed; (5) the amount of money and
the value of the property affected by the controversy or involved in the employment; (6)
the skill and the experience called for in the performance of the services; (7) the
professional character and the social standing of the attorney; (8) the results secured, it
being a recognized rule that an attorney may properly charge a much larger fee when it is
contingent than when it is not.40

All the aforementioned weighed, and considering the short period of time it took to have
the writ lifted, the favorable decisions of the courts below, the absence of evidence as to
the professional character and the social standing of the attorney handling the case and
the amount garnished, the award of attorneys fees should be fixed not at P1 Million, but
only at P200,000.00.

The courts below correctly awarded moral damages on account of petitioners

misrepresentation and bad faith; however, we find the award in the amount of P5 Million
excessive. Moral damages are to be fixed upon the discretion of the court taking into
consideration the educational, social and financial standing of the parties. 41 Moral
damages are not intended to enrich a complainant at the expense of a defendant.42 They
are awarded only to enable the injured party to obtain means, diversion or amusements
that will serve to obviate the moral suffering he has undergone, by reason of petitioners
culpable action. Moral damages must be commensurate with the loss or injury suffered.
Hence, the award of moral damages is reduced to P500,000.00.

Considering petitioners bad faith in securing the writ of attachment, we sustain the award
of exemplary damages by way of example or correction for public good. This should
deter parties in litigations from resorting to baseless and preposterous allegations to
obtain writs of attachments. While as a general rule, the liability on the attachment bond
is limited to actual (or in some cases, temperate or nominal) damages, exemplary
damages may be recovered where the attachment was established to be maliciously
sued out.43 Nevertheless, the award of exemplary damages in this case should be
reduced from P5M to P500,000.00.
Finally, contrary to the claim of petitioner, the instant case for damages by reason of the
invalid issuance of the writ, survives the dismissal of the main case for sum of money.
Suffice it to state that the claim for damages arising from such wrongful attachment may
arise and be decided separately from the merits of the main action.44

WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the
Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial International Bank is ordered to pay
respondent Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal
damages, P200,000.00 as attorneys fees; and P500,000.00 as moral damages,
and P500,000.00 as exemplary damages, to be satisfied against the attachment bond
issued by Prudential Guarantee & Assurance Inc.,45 under JCL (4) No. 01081, Bond No.
HO-46764-97.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G. R. No. L-45948 September 10, 1985

MERCEDES GRUENBERG and ALBERT GRUENBERG, petitioners,

vs.
HONORABLE COURT OF APPEALS, HONORABLE LINO L. AOVER and ELDA R.
FLORES, respondents.

Perlas, Joven & Associate Law Office for private respondent.

GUTIERREZ, JR., J.:

This is a petition to review the decision of the Court of Appeals, now Intermediate
Appellate Court, which affirmed the order for the issuance of a writ of preliminary
attachment, and other related orders of the then Court of First Instance of Rizal in Civil
Case No. Q-18444.

The antecedent facts are summarized by the appellate court as follows:

Petitioners are the defendants and private respondent is the plaintiff in

Civil Case No. Q-18444, Court of First Instance of Rizal, Branch XVII-B-
Quezon City, for annulment of sale, recovery of ownership and
possession of the house and lot situated at No. 24 Scout Limbaga,
Diliman, Quezon City, the same, allegedly, having been sold in fraud of
creditors.

Private respondent filed the complaint in Civil Case No. Q18444, in her
capacity as the administratrix of the intestate estate of the late William
Gruenberg.

It is alleged in the complaint in Civil Case No. Q-18444 that the house
and lot in question, which were sold to defendant Albert Gruenberg (one
of the petitioners), form part of the conjugal partnership of the Gruenberg
spouses, which must answer for the obligations that deceased William
Gruenberg might have incurred during his lifetime in his capacity as
manager and administrator of the conjugal partnership; and that the sale
of the house and lot before the death of William Gruenberg, when at that
time two creditors had already filed suits against him for collection of
unpaid obligations, and the latter had unpaid obligation to plaintiff Elda R,
Flores (private respondent) in the amount of P13,000.00, exclusive of
interest and collection charges, patently and clearly can no longer be paid
or liquidated.

On March 1, 1974, petitioners filed their answer to the complaint.

Under date of February 7, 1976, private respondent filed a 'Motion for

Issuance of Writ of Preliminary Attachment' against the properties of
petitioners, alleging, among others, that the latter are indebted to her in
 the principal amount of P13,000.00, which, according to her, she seeks to
recover in Civil Case No. Q-18444.

On March 1, 1976, petitioners filed their opposition to the motion for the
issuance of writ of preliminary attachment, alleging among others, that
Civil Case No. Q-18444 is an action for annulment of sale and recovery of
the house and lot mentioned therein, and not for recovery of sum of
money. It is contended that a writ of preliminary attachment is not the
proper remedy for the protection of the rights of the estate. In the same
opposition, petitioners refuted the allegations of private respondent in her
motion that the complaint in Civil Case No. Q-18444 is one for collection
of a sum of money allegedly contracted fraudulently by petitioners.

On March 26, 1976, respondent Judge issued an order, granting the

motion of private respondent and issuing a writ of preliminary attachment
against the properties of petitioners, respondent Judge stating that no
opposition had been filed to the motion.

In the latter part of July, 1976, respondent Sheriff and/or his deputies
served on petitioners and the managers of the Hollywood Theater, Palace
Theater and Illusion Theatre a writ of preliminary attachment and notice
of garnishment against petitioners and personally in favor of respondent
Flores.

It is alleged that the order of respondent Judge was not received by

petitioners' new counsel but upon being informed by petitioners of the writ
of preliminary attachment and notice of garnishment, petitioners'new
counsel promptly went to the court of respondent Judge and then and
there he discovered that petitioners' opposition to the motion was not
attached to the record, because the same was forwarded to Branch XVIII
to which Civil Case No. Q-18444 was originally assigned,

On July 30, 1976, petitioners filed (a) a motion for reconsideration of the
order granting the motion for the issuance of a writ of preliminary
attachment, and (b) a motion to recall the writ of preliminary attachment
and notice of garnishment, on the ground that it is not true that petitioners
did not oppose the motion of private respondent, and that there is no valid
basis to grant the motion.

On August 16, 1976, respondent Judge issued an order, denying the

motions of petitioners.

On October 28, 1976, respondent Judge issued an order, requiring

petitioners to appear before his court to explain why they should not be
punished for contempt for denying or disobeying the lawful processes of
the court.

The issuance of the "show cause" order prompted the petitioners to file a petition for
certiorari with writ of preliminary injunction in the Court of Appeals. The petition was
dismissed. Hence, the instant petition

The issues raised to us are embodied in the petitioners' assignments of errors as follows:

I. THE COURT OF APPEALS ERRED IN OVERLOOKING THE FACT

THAT WRIT OF PRELIMINARY ATTACHMENT COULD ONLY BE
 GRANTED TO SECURE THE SATISFACTION OF A JUDGMENT IN A
CASE IN WHICH SAID WRIT IS PRAYED FOR;

II. THE COURT ERRED IN SUSTAINING THE ISSUANCE OF THE

WRIT OF PRELIMINARY ATTACHMENT FOR THE PERSONAL
BENEFIT OF PRIVATE RESPONDENT IN CIVIL CASE NO. Q-18444,
NOTWITHSTANDING THE FACT THAT SAID RESPONDENT
INSTITUTED SAID ACTION NOT IN HER PERSONAL CAPACITY, BUT
AS ADMINISTRATRIX OF THE ESTATE OF THE LATE WILLIAM
GRUENBERG, SR.;

III. THE COURT OF APPEALS ERRED IN RULING THAT

PETITIONERS CAN BE CITED FOR CONTEMPT FOR THE ALLEGED
FAILURE TO COMPLY WITH THE NOTICE OF GARNISHMENT
ADDRESSED TO THIRD PARTIES.

The issues are interrelated and may be discussed together. They all focus on the
proprietary of the writ of attachment and garnishment against the petitioners' properties
issued by the trial court and affirmed by the appellate court.

In her affidavit supporting the motion for a writ of preliminary attachment, the private
respondent stated that her case "... is one of the situations covered by Section 1 (d), Rule
57 of the Rules of Court whereby a writ of preliminary attachment may issue." Section 1
(d), Rule 57 provides:

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:

xxx xxx xxx

(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.

xxx xxx xxx

There are various reasons why this petition should prosper.

Private respondent Elda R. Flores, as a claimant for P13,000.00 against the estate of
William Gruenberg, Sr., was appointed administratrix of the estate of the deceased. In
her capacity as administratrix, she filed Civil Case No. Q-18444 against the petitioners.
This main case was for the annulment of a deed of sale executed by the late William
Gruenberg, Sr., in favor of Albert Gruenberg and for the recovery of possession and
ownership of the house and lot involved in that sale.

The motion for a writ of preliminary attachment filed by Flores, however, states:

1. Defendants are indebted to plaintiff in the amount of P13,000.00

exclusive of accrued interest and collection charges, which plaintiff seeks
to recover in the instant action; and
 2. Defendants are guilty of fraud in contracting the debt or incurring the
obligation due plaintiff in that they conspired and confederated with each
other as mother End son to defraud other creditors one of whom is
plaintiff, by simulating the sale of house and lot situated at No. 24 Scout
Limbaga Street, Quezon City ... .

While the respondent filed the motion in her capacity as administratrix of the Gruenberg
estate, the motion for a writ of attachment and its supporting affidavit show that the
attachment was intended to secure only her P13,000.00 claim against the estate.
Obviously, this cannot be done.

A writ of attachment is a remedy ancillary to the principal proceeding. The well-

entrenched principle is that:

Attachment is a juridical institution which has for its purpose to secure the
outcome of the trial, that is, the satisfaction of the pecuniary obligation
really contracted by a person or believed to have been contracted by him,
either by virtue of a civil obligation emanating from contract or from law,
or by virtue of some crime or misdemeanor that he might have
committed, and the writ issued, granted it, is executed by attaching and
safely keeping all the movable property of the defendant, or so much
thereof as may be sufficient to satisfy the plaintiff's demands ... .
(Guzman v. Catolico, et al., 65 Phil. 257).

The purpose behind the filing of the complaint was to recover a piece of property
allegedly belonging to the intestate estate of the deceased. Hence, any writ of
attachment necessary to secure the judgment must be related to the protection of the
estate. The writ may not issue if only to protect the personal interests of the private
respondent as a creditor of that estate.

The records show that the private respondent's interest in the estate is to recover a debt
based on a contract with the deceased Gruenberg, For this reason, she instituted the
special proceedings for the settlement of the intestate estate resulting to her appointment
as administratrix. Under these circumstances, the private respondent's remedy to recover
the outstanding debt of the deceased is to follow the procedure in Rule 86 on claims
against an estate. As a matter of fact, if an administrator has a claim against an estate,
Section 8 of Rule 86 calls for the appointment of a special administrator to defend the
estate against such claim.

A court order which violates the Rules constitutes grave abuse of discretion as it wrecks
the orderly procedure prescribed for the settlement of claims against deceased persons
designed to protect the interests of the creditors of the decedent. (See Dy v. Enage, 70
SCRA 96). Allowing the private respondent in the annulment case to attach the
petitioners' properties for the benefit of her P13,000.00 claim against the estate would
give her an undue advantage over other creditors against the estate,

Moreover, the P13,000.00 claim of the respondent cannot be settled in the case for
annulment of the deed of sale, wherein the writ of attachment is sought. What she seeks
to be secured is not the judgment in the main case but a mere claim against the estate
which is still to be considered and adjudicated by the court.

The rules on the issuance of a writ of attachment must be construed strictly in favor of the
defendant. The remedy of attachment is harsh, extraordinary, and summary in nature. If
all the requisites for the issuance of the writ are not present, the court which issues it acts
in excess of its jurisdiction.
In Salas v. Adil (90 SCRA 121), we stated:

A preliminary attachment is a rigorous remedy, which exposes the debtor

to humiliation and annoyance, such it should not be abused as to cause
unnecessary prejudice. It is, therefore, the duty of the court, before
issuing the writ, to ensure that all the requisites of the law have been
complied with; otherwise the judge acts in excess of his jurisdiction and
the writ so issued shall be null and void. (Guzman v. Catolico, 65 Phil.
257, 261).

xxx xxx xxx

Considering the gravity of the allegation that herein petitioners have

removed or disposed of their properties or are about to do so with intent
to defraud their creditors, and further considering that the affidavit in
support of the preliminary attachment merely states such ground in
general terms, without specific allegations of circumstances to show the
reason why plaintiffs believe that defendants are disposing of their
properties in fraud of creditors, it was incumbent upon respondent Judge
to give notice to petitioners and to allow them to present their position at a
hearing wherein evidence is to be received.

Following the principle of strict compliance with all requisites, this Court has also ruled
that "when the facts, or some of them, stated in the plaintiff's affidavit are shown by the
defendant to be untrue, the writ may be considered as improperly or irregularly issued."
(National Coconut Corporation V. Pecson, et al., 90 Phil. 809).

The February 7, 1976 motion for issuance of a writ of preliminary attachment and the
affidavit of preliminary attachment are misleading. First, the private respondent states
that the "defendants are indebted to plaintiff in the amount of P13,000.00" exclusive of
interests and collection charges. Then, she avers that the "defendants are guilty of fraud
in contracting the debt or incurring the obligation due plaintiff ".

The facts in the motion and the affidavit are deceptively framed. The obligation which the
respondent seeks to secure by an attachment was between her and the late William
Gruenberg, Sr. What she seeks to establish as fraudulent was the sale between the late
Mr. Gruenberg and his son. These are two entirely distinct transactions.

One of the reasons for granting the motion for the issuance of a writ of preliminary
attachment was the court's finding that the petitioners' failed to file an opposition thereto.
It turns out, however, that the petitioners filed a timely opposition to the motion but it was
filed in another branch of the court where the case had earlier been assigned.
Nevertheless, despite this timely opposition, the motion for reconsideration of the order
for the issuance of a writ of preliminary attachment, was summarily denied for lack of
merit.

We also note that the order which directed the issuance of a writ of preliminary
attachment merely recited the grounds alleged in the private respondent's motion without
any specific details as to the supposed fraud committed by the petitioners when they
contracted the debt and the alleged disposition or concealment by the petitioners of their
properties. The order of the trial court disregards the rule that attachment being a harsh
remedy, it must be issued on concrete and specific grounds and not on general
averments merely quoting the words of the pertinent rules. (Dy v. Enage, supra). The
absence of specific grounds highlights the fact that the petitioners are not indebted to
respondent Flores. It was the late William Gruenberg who incurred the alleged
indebtedness and it is his estate which owes Flores. The validity of the claim of Flores
will have to be threshed out in the special proceedings, not in the case for annulment of
the deed of sale.

Finally, the transaction sought to be annulled in the main case refers to a questioned sale
of a house and lot. It would have been sufficient to annotate a notice of lis pendens in the
title to that property. Assuming the trial court could validly attach the house and lot
involved in the sale, we see no justification why the attachment should reach out to the
petitioners' interests in the Hollywood Theatre, the Palace Theatre, and the Illusion
Theatre. The petitioners also point out that there is no showing of any attempt on their
part to conceal or to dispose of the house and lot nor of any change in the title or
condition of the property. Considering all the foregoing, we find the writ of preliminary
attachment to have been improvidently issued.

WHEREFORE, the petition is hereby GRANTED. The decision of the former Court of
Appeals is SET ASIDE. The writ of preliminary attachment and the notice of garnishment
issued in Civil Case No. Q-18444 are DISSOLVED. The other related orders issued in
connection with the writ of attachment are SET ASIDE.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-48080 August 31, 1942

JOSE DE BORJA, petitioner,

vs.
SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.

Vicente J. Francisco for petitioner.

E. V. Filamor for respondents.
No appearance for respondent judge

BOCOBO, J.:

Petitioner seeks the setting aside of an order of preliminary attachment issued on

November 6, 1940, and reiterated on January 13, 1941, by the respondent Judge of the
Court of First Instance against petitioner's properties.

On August 12, 1936, petitioner brought a civil action in the Court of First Instance of Rizal
against Hermogena Romero, Francisco de Borja, Josefa Tangco and Crisanto de Borja
to annul a second sale by Francisco de Borja to Hermogena Romero, of a large estate
known as the Hacienda Jalajala, and to recover damages in the amount of P25,000. On
August 29, 1936, Francisco de Borja and his wife Josefa Tangco filed an answer with
three counterclaims, and on September 29, 1936, they presented two more
counterclaims. Trial began September 30, 1936. Under date of August 4, 1937,
defendants Francisco de Borja, Josefa Tangco and Crisanto de Borja submitted their
amended answer, consisting of a general denial, special defenses, and five
counterclaims and cross-complaints. In these causes for counter-claim and cross-
complaint, it was alleged that plaintiff, being a son of defendants Francisco de Borja and
Josefa Tangco, had been entrusted with the administration of the extensive interests of
his parents, but had been unfaithful to his trust. Said defendants, therefore, prayed, inter
alia, that the spouses Borja and Tangco be declared owners of the Hacienda Jalajala in
question; that plaintiff be required to render an accounting of the products of said
hacienda that he had received and to pay said spouses at least P100,000 illegally
retained by him; that plaintiff be ordered to account for the proceed of rice and bran and
to pay at least P700,000 unlawfully retained by him; that plaintiff be made to deliver
P20,000 which he had collected from a debtor of said spouses; that plaintiff be likewise
ordered to pay another sum of P9,034 collected by him from the same debtor; and that
plaintiff be required to turn over to defendants Francisco de Borja and Josefa Tangco the
amount of P40,000 collected by him as indemnity of an insurance policy on property
belonging to said spouses.

On July 27, 1940, Francisco de Borja and his wife filed their petition for preliminary
attachment to cover their third, fourth, and fifth, grounds for cross-complaint, involving a
total of P69,035. In said motion, the defendants Borja and wife stated that they did not
include the first and second causes for cross-complaint because the visible property of
plaintiff that could then be attached was only worth about P2,000. On August 21, 1940,
plaintiff presented an amended answer setting up a counterclaim against defendants
Borja and wife in the sum of P99,175.46.
The order for preliminary attachment is questioned upon several grounds, among which
are: (1) that no writ of attachment can be issued in favor of a defendant who presents a
counterclaim; (2) and the defendants' affidavit was fatally defective.

On the first point, we believe a writ of preliminary attachment may be issued in favor of a
defendant who sets up a counterclaim. For the purpose of the protection afforded by
such attachment, it is immaterial whether the defendants Borja and wife simply presented
a counterclaim or brought a separate civil action against Jose de Borja, plaintiff in the
previous case and petitioner herein. To lay down a subtle distinction would be to sanction
that formalism and that technicality which are discountenanced by the modern laws of
procedure for the sake of speedy and substantial justice. In the present case we see no
reason why the order of the trial court should be disturbed, this question being a matter
within its discretion and we find no grave abuse of that discretion.

As to be the second objection of petitioner, his counsel strenuously advances the theory
that the affidavit attached to the petition for a writ of preliminary attachment was fatally
defective because it failed to allege that "the amount due to the plaintiff is as much as the
sum for which the order is granted above all legal counterclaims" as required in section
426, Code of Civil Procedure and section 3, Rule 59, Rules of Court. Petitioner contends
that his counterclaim against that of Francisco de Borja and wife being P99,175.46
whereas the latter's counterclaim totalled only P69,035, the omission of the allegation
referred to is a serious defect. The trial court found, however, that the counterclaim of
Francisco de Borja and wife exceed those of the petitioner Jose de Borja. It should be
borne in mind that the aggregate counterclaims of Francisco de Borja and wife amounted
to P869,000, which exceeds petitioner's counterclaim by P769,000 in round figures.
Moreover, as the trial court had before it the evidence adduce by both sides, the petition
for a writ of preliminary attachment having been filed four years after the trial had begun,
we presume that the lower court, having in mind such evidence, ordered the attachment
accordingly.

The order appealed from is hereby affirmed, with costs against the petitioner. So ordered.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 175587 September 21, 2007

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner,

vs.
JOSEPH ANTHONY M. ALEJANDRO, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review assails the May 31, 2006 Decision1 of the Court of Appeals in CA-
G.R. CV No. 78200 affirming the August 30, 2000 Decision2 of the Regional Trial Court of
Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages
arising from petitioner Philippine Commercial International Banks (PCIB) invalid
garnishment of respondents deposits.

On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money
with prayer for the issuance of a writ of preliminary attachment. Said complaint alleged
that on September 10, 1997, respondent, a resident of Hong Kong, executed in favor of
petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest. In
view of the fluctuations in the foreign exchange rates which resulted in the insufficiency of
the deposits assigned by respondent as security for the loan, petitioner requested the
latter to put up additional security for the loan. Respondent, however, sought a
reconsideration of said request pointing out petitioners alleged mishandling of his
account due to its failure to carry out his instruction to close his account as early as April
1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was
US$1.00:JPY127.50.4 It appears that the amount of P249,828,588.90 was the
consolidated amount of a series of yen loans granted by petitioner to respondent during
the months of February and April 1997.5

In praying for the issuance of a writ of preliminary attachment under Section 1

paragraphs (e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1)
respondent fraudulently withdrew his unassigned deposits notwithstanding his verbal
promise to PCIB Assistant Vice President Corazon B. Nepomuceno not to withdraw the
same prior to their assignment as security for the loan; and (2) that respondent is not a
resident of the Philippines. The application for the issuance of a writ was supported with
the affidavit of Nepomuceno.6

On October 24, 1997, the trial court granted the application and issued the writ ex
parte7 after petitioner posted a bond in the amount of P18,798,734.69, issued by
Prudential Guarantee & Assurance Inc., under Bond No. HO-46764-97. On the same
date, the bank deposits of respondent with Rizal Commercial Banking Corporation
(RCBC) were garnished. On October 27, 1997, respondent, through counsel, filed a
manifestation informing the court that he is voluntarily submitting to its jurisdiction.8

Subsequently, respondent filed a motion to quash9 the writ contending that the
withdrawal of his unassigned deposits was not fraudulent as it was approved by
petitioner. He also alleged that petitioner knew that he maintains a permanent residence
at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in
Makati City at the Law Firm Romulo Mabanta Buenaventura Sayoc & De los
Angeles, 10 where he is a partner. In both addresses, petitioner regularly communicated
with him through its representatives. Respondent added that he is the managing partner
of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary;
and that he frequently travels back to the Philippines.

On December 24, 1997, the trial court issued an order quashing the writ and holding that
the withdrawal of respondents unassigned deposits was not intended to defraud
petitioner. It also found that the representatives of petitioner personally transacted with
respondent through his home address in Quezon City and/or his office in Makati City. It
thus concluded that petitioner misrepresented and suppressed the facts regarding
respondents residence considering that it has personal and official knowledge that for
purposes of service of summons, respondents residence and office addresses are
located in the Philippines. The dispositive portion of the courts decision is as follows:

WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby

GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET
ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED.

SO ORDERED.11

With the denial12 of petitioners motion for reconsideration, it elevated the case to the
Court of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999,
the petition was dismissed for failure to prove that the trial court abused its discretion in
issuing the aforesaid order.13 Petitioner filed a motion for reconsideration but was denied
on October 28, 1999.14 On petition with this Court, the case was dismissed for late filing
in a minute resolution (G.R. No. 140605) dated January 19, 2000.15 Petitioner filed a
motion for reconsideration but was likewise denied with finality on March 6, 2000.16

Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25
Million17 on the attachment bond (posted by Prudential Guarantee & Assurance, Inc.,
under JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful
garnishment of his deposits. He presented evidence showing that hisP150,000.00 RCBC
check payable to his counsel as attorneys fees, was dishonored by reason of the
garnishment of his deposits. He also testified that he is a graduate of the Ateneo de
Manila University in 1982 with a double degree of Economics and Management
Engineering and of the University of the Philippines in 1987 with the degree of Bachelor
of Laws. Respondent likewise presented witnesses to prove that he is a well known
lawyer in the business community both in the Philippines and in Hong Kong.18 For its
part, the lone witness presented by petitioner was Nepomuceno who claimed that she
acted in good faith in alleging that respondent is a resident of Hong Kong.19

On August 30, 2000, the trial court awarded damages to respondent in the amount of
P25 Million without specifying the basis thereof, thus:

WHEREFORE, premises above considered, and defendant having duly established his
claim in the amount ofP25,000,000.00, judgment is hereby rendered ordering Prudential
Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the
full amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081,
[Bond No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And,
considering that the amount of the bond is insufficient to fully satisfy the award for
damages, plaintiff is hereby ordered to pay defendant the amount of P6,201,265.31.

SO ORDERED.20

The trial court denied petitioners motion for reconsideration on October 24, 2000.21
Petitioner elevated the case to the Court of Appeals which affirmed the findings of the
trial court. It held that in claiming that respondent was not a resident of the Philippines,
petitioner cannot be said to have been in good faith considering that its knowledge of
respondents Philippine residence and office address goes into the very issue of the trial
courts jurisdiction which would have been defective had respondent not voluntarily
appeared before it.

The Court of Appeals, however, reduced the amount of damages awarded to petitioner
and specified their basis. The dispositive portion of the decision of the Court of Appeals
states:

WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is
hereby MODIFIED. The award of damages in the amount of P25,000,000.00 is deleted.
In lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with
appellant [herein petitioner], is ORDERED to pay appellee [herein
respondent]P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages;
and P1,000,000.00 as attorneys fees, to be satisfied against the attachment bond under
Prudential Guarantee & Assurance, Inc. JCL (4) No. 01081.

SO ORDERED.22

Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals
denied petitioners motion for reconsideration but granted that of respondents by
ordering petitioner to pay additional P5Million as exemplary damages.23

Hence, the instant petition.

At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled
to a writ of attachment because respondent is a resident of the Philippines and that his
act of withdrawing his deposits with petitioner was without intent to defraud, can no
longer be passed upon by this Court. More importantly, the conclusions of the court that
petitioner bank misrepresented that respondent was residing out of the Philippines and
suppressed the fact that respondent has a permanent residence in Metro Manila where
he may be served with summons, are now beyond the power of this Court to review
having been the subject of a final and executory order. Said findings were sustained by
the Court of Appeals in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605.
The rule on conclusiveness of judgment, which obtains under the premises, precludes
the relitigation of a particular fact or issue in another action between the same parties
even if based on a different claim or cause of action. The judgment in the prior action
operates as estoppel as to those matters in issue or points controverted, upon the
determination of which the finding or judgment was rendered. The previous judgment is
conclusive in the second case, as to those matters actually and directly controverted and
determined.24 Hence, the issues of misrepresentation by petitioner and the residence of
respondent for purposes of service of summons can no longer be questioned by
petitioner in this case.

The core issue for resolution is whether petitioner bank is liable for damages for the
improper issuance of the writ of attachment against respondent.

We rule in the affirmative.

Notwithstanding the final judgment that petitioner is guilty of misrepresentation and

suppression of a material fact, the latter contends that it acted in good faith. Petitioner
also contends that even if respondent is considered a resident of the Philippines,
attachment is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court
since he (respondent) is a resident who is temporarily out of the Philippines upon whom
service of summons may be effected by publication.

Petitioners contentions are without merit.

While the final order of the trial court which quashed the writ did not categorically use the
word "bad faith" in characterizing the representations of petitioner, the tenor of said order
evidently considers the latter to have acted in bad faith by resorting to a deliberate
strategy to mislead the court. Thus

In the hearings of the motion, and oral arguments of counsels before the Court, it
appears that plaintiff BANK through its contracting officers Vice President Corazon B.
Nepomuceno and Executive Vice President Jose Ramon F. Revilla, personally
transacted with defendant mainly through defendants permanent residence in METRO-
MANILA, either in defendants home address in Quezon City or his main business
address at the Romulo Mabanta Buenaventura Sayoc & Delos Angeles in MAKATI and
while at times follow ups were made through defendants temporary home and business
addresses in Hongkong. It is therefore clear that plaintiff could not deny their personal
and official knowledge that defendants permanent and official residence for purposes of
service of summons is in the Philippines. In fact, this finding is further confirmed by the
letter of Mr. JOHN GOKONGWEI, JR. Chairman, Executive Committee of plaintiff BANK,
in his letter dated 6 October 1997 on the subject loan to defendant of the same law firm
was addressed to the ROMULO LAW FIRM in MAKATI.

[Anent the] second ground of attachment x x x [t]he Court finds that the amount
withdrawn was not part of defendants peso deposits assigned with the bank to secure
the loan and as proof that the withdrawal was not intended to defraud plaintiff as creditor
is that plaintiff approved and allowed said withdrawals. It is even noted that when the
Court granted the prayer for attachment it was mainly on the first ground under Section
1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that defendant resides out of the
Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the
deficiency of its second ground for attachment [i.e.,] disposing properties with intent to
defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that
defendant was residing out of the Philippines and suppressed the fact that defendants
permanent residence is in METRO MANILA where he could be served with summons.

On the above findings, and mainly on the misrepresentations made by plaintiff on the
grounds for the issuance of the attachment in the verified complaint, the Court concludes
that defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled
to the attachment.25

Petitioner is therefore barred by the principle of conclusiveness of judgment from again

invoking good faith in the application for the issuance of the writ. Similarly, in the case
of Hanil Development Co., Ltd. v. Court of Appeals,26the Court debunked the claim of
good faith by a party who maliciously sought the issuance of a writ of attachment, the bad
faith of said party having been previously determined in a final decision which voided the
assailed writ. Thus

Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its
petition that the award of attorneys fees and injunction bond premium in favor of Hanil is
[contrary] to law and jurisprudence. It contends that no malice or bad faith may be
imputed to it in procuring the writ.
Escobars protestation is now too late in the day. The question of the illegality of the
attachment and Escobars bad faith in obtaining it has long been settled in one of the
earlier incidents of this case. The Court of Appeals, in its decision rendered on February
3, 1983 in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with
grave abuse of discretion. Escobars bad faith in procuring the writ cannot be doubted. Its
Petition for the Issuance of Preliminary Attachment made such damning allegations that:
Hanil was already able to secure a complete release of its final collection from the
MPWH; it has moved out some of its heavy equipments for unknown destination, and it
may leave the country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged
that "after personal verification by (Escobar) of (Hanils) equipment in Cagayan de Oro
City, it appears that the equipments were no longer existing from their compound." All
these allegations of Escobar were found to be totally baseless and untrue.

Even assuming that the trial court did not make a categorical pronouncement of
misrepresentation and suppression of material facts on the part of petitioner, the factual
backdrop of this case does not support petitioners claim of good faith. The facts and
circumstances omitted are highly material and relevant to the grant or denial of writ of
attachment applied for.

Finally, there is no merit in petitioners contention that respondent can be considered a

resident who is temporarily out of the Philippines upon whom service of summons may
be effected by publication, and therefore qualifies as among those against whom a writ of
attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court
which provides:

(f) In an action against a party x x x on whom summons may be served by publication.

In so arguing, petitioner attempts to give the impression that although it erroneously

invoked the ground that respondent does not reside in the Philippines, it should not be
made to pay damages because it is in fact entitled to a writ of attachment had it invoked
the proper ground under Rule 57. However, even on this alternative ground, petitioner is
still not entitled to the issuance of a writ of attachment.

The circumstances under which a writ of preliminary attachment may be issued are set
forth in Section 1, Rule 57 of the Rules of Court, to wit:

SEC. 1. Grounds upon which attachment may issue. At the commencement of the
action or at any time before entry of judgment, a plaintiff or any proper party may have
the property of the adverse party attached as security for the satisfaction of any judgment
that may be recovered in the following cases:

(a) In an action for the recovery of a specified amount of money or damages,

other than moral and exemplary, on a cause of action arising from law, contract,
quasi-contract, delict or quasi-delict against a party who is about to depart from
the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or

converted to his own use by a public officer, or an officer of a corporation or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly or

fraudulently taken, detained, or converted, when the property, or any part thereof,
has been concealed, removed, or disposed of to prevent its being found or taken
by the applicant or an authorized person;
 (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 the
performance thereof;

(e) In an action against a party who has removed or disposed of his property, or
is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication.

The purposes of preliminary attachment are: (1) to seize the property of the debtor in
advance of final judgment and to hold it for purposes of satisfying said judgment, as in
the grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or
(2) to acquire jurisdiction over the action by actual or constructive seizure of the property
in those instances where personal or substituted service of summons on the defendant
cannot be effected, as in paragraph (f) of the same provision.27

Corollarily, in actions in personam, such as the instant case for collection of sum of
money,28 summons must be served by personal or substituted service, otherwise the
court will not acquire jurisdiction over the defendant. In case the defendant does not
reside and is not found in the Philippines (and hence personal and substituted service
cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction
to try the case is to convert the action into a proceeding in rem or quasi in rem by
attaching the property of the defendant.29 Thus, in order to acquire jurisdiction in actions
in personam where defendant resides out of and is not found in the Philippines, it
becomes a matter of course for the court to convert the action into a proceeding in rem or
quasi in rem by attaching the defendants property. The service of summons in this case
(which may be by publication coupled with the sending by registered mail of the copy of
the summons and the court order to the last known address of the defendant), is no
longer for the purpose of acquiring jurisdiction but for compliance with the requirements
of due process.30

However, where the defendant is a resident who is temporarily out of the Philippines,
attachment of his/her property in an action in personam, is not always necessary in order
for the court to acquire jurisdiction to hear the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. When an action is commenced
against a defendant who ordinarily resides within the Philippines, but who is temporarily
out of it, service may, by leave of court, be also effected out of the Philippines, as under
the preceding section.

The preceding section referred to in the above provision is Section 15 which provides for
extraterritorial service (a) personal service out of the Philippines, (b) publication
coupled with the sending by registered mail of the copy of the summons and the court
order to the last known address of the defendant; or (c) in any other manner which the
court may deem sufficient.

In Montalban v. Maximo,31 however, the Court held that substituted service of summons
(under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of
service of summons that will confer jurisdiction on the court over the person of residents
temporarily out of the Philippines. Meaning, service of summons may be effected by (a)
leaving copies of the summons at the defendants residence with some person of suitable
discretion residing therein, or (b) by leaving copies at the defendants office or regular
place of business with some competent person in charge thereof.32 Hence, the court may
acquire jurisdiction over an action in personam by mere substituted service without need
of attaching the property of the defendant.

The rationale in providing for substituted service as the normal mode of service for
residents temporarily out of the Philippines, was expounded in Montalban v. Maximo,33 in
this wise:

A man temporarily absent from this country leaves a definite place of residence, a
dwelling where he lives, a local base, so to speak, to which any inquiry about him may be
directed and where he is bound to return. Where one temporarily absents himself, he
leaves his affairs in the hands of one who may be reasonably expected to act in his place
and stead; to do all that is necessary to protect his interests; and to communicate with
him from time to time any incident of importance that may affect him or his business or
his affairs. It is usual for such a man to leave at his home or with his business associates
information as to where he may be contacted in the event a question that affects him
crops up.

Thus, in actions in personam against residents temporarily out of the Philippines, the
court need not always attach the defendants property in order to have authority to try the
case. Where the plaintiff seeks to attach the defendants property and to resort to the
concomitant service of summons by publication, the same must be with prior leave,
precisely because, if the sole purpose of the attachment is for the court to acquire
jurisdiction, the latter must determine whether from the allegations in the complaint,
substituted service (to persons of suitable discretion at the defendants residence or to a
competent person in charge of his office or regular place of business) will suffice, or
whether there is a need to attach the property of the defendant and resort to service of
summons by publication in order for the court to acquire jurisdiction over the case and to
comply with the requirements of due process.

In the instant case, it must be stressed that the writ was issued by the trial court mainly
on the representation of petitioner that respondent is not a resident of the
Philippines.34 Obviously, the trial courts issuance of the writ was for the sole purpose of
acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint
disclosed that respondent has a residence in Quezon City and an office in Makati City,
the trial court, if only for the purpose of acquiring jurisdiction, could have served
summons by substituted service on the said addresses, instead of attaching the property
of the defendant. The rules on the application of a writ of attachment must be strictly
construed in favor of the defendant. For attachment is harsh, extraordinary, and summary
in nature; it is a rigorous remedy which exposes the debtor to humiliation and
annoyance.35 It should be resorted to only when necessary and as a last remedy.

It is clear from the foregoing that even on the allegation that respondent is a resident
temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment
because the trial court could acquire jurisdiction over the case by substituted service
instead of attaching the property of the defendant. The misrepresentation of petitioner
that respondent does not reside in the Philippines and its omission of his local addresses
was thus a deliberate move to ensure that the application for the writ will be granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial
court that petitioner is liable for damages for the wrongful issuance of a writ of attachment
against respondent.

Anent the actual damages, the Court of Appeals is correct in not awarding the same
inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a
well settled rule that one who has been injured by a wrongful attachment can recover
damages for the actual loss resulting therefrom. But for such losses to be recoverable,
they must constitute actual damages duly established by competent proofs, which are,
however, wanting in the present case.36

Nevertheless, nominal damages may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing that
right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus
not for the purpose of indemnification for a loss but for the recognition and vindication of
a right. Indeed, nominal damages are damages in name only and not in fact.37 They are
recoverable where some injury has been done but the pecuniary value of the damage is
not shown by evidence and are thus subject to the discretion of the court according to the
circumstances of the case.38

In this case, the award of nominal damages is proper considering that the right of
respondent to use his money has been violated by its garnishment. The amount of
nominal damages must, however, be reduced from P2 million toP50,000.00 considering
the short period of 2 months during which the writ was in effect as well as the lack of
evidence as to the amount garnished. 1wphi1

Likewise, the award of attorneys fees is proper when a party is compelled to incur
expenses to lift a wrongfully issued writ of attachment. The basis of the award thereof is
also the amount of money garnished, and the length of time respondents have been
deprived of the use of their money by reason of the wrongful attachment.39 It may also be
based upon (1) the amount and the character of the services rendered; (2) the labor, time
and trouble involved; (3) the nature and importance of the litigation and business in which
the services were rendered; (4) the responsibility imposed; (5) the amount of money and
the value of the property affected by the controversy or involved in the employment; (6)
the skill and the experience called for in the performance of the services; (7) the
professional character and the social standing of the attorney; (8) the results secured, it
being a recognized rule that an attorney may properly charge a much larger fee when it is
contingent than when it is not.40

All the aforementioned weighed, and considering the short period of time it took to have
the writ lifted, the favorable decisions of the courts below, the absence of evidence as to
the professional character and the social standing of the attorney handling the case and
the amount garnished, the award of attorneys fees should be fixed not at P1 Million, but
only at P200,000.00.

The courts below correctly awarded moral damages on account of petitioners

misrepresentation and bad faith; however, we find the award in the amount of P5 Million
excessive. Moral damages are to be fixed upon the discretion of the court taking into
consideration the educational, social and financial standing of the parties. 41 Moral
damages are not intended to enrich a complainant at the expense of a defendant.42 They
are awarded only to enable the injured party to obtain means, diversion or amusements
that will serve to obviate the moral suffering he has undergone, by reason of petitioners
culpable action. Moral damages must be commensurate with the loss or injury suffered.
Hence, the award of moral damages is reduced to P500,000.00.

Considering petitioners bad faith in securing the writ of attachment, we sustain the award
of exemplary damages by way of example or correction for public good. This should
deter parties in litigations from resorting to baseless and preposterous allegations to
obtain writs of attachments. While as a general rule, the liability on the attachment bond
is limited to actual (or in some cases, temperate or nominal) damages, exemplary
damages may be recovered where the attachment was established to be maliciously
sued out.43 Nevertheless, the award of exemplary damages in this case should be
reduced from P5M to P500,000.00.
Finally, contrary to the claim of petitioner, the instant case for damages by reason of the
invalid issuance of the writ, survives the dismissal of the main case for sum of money.
Suffice it to state that the claim for damages arising from such wrongful attachment may
arise and be decided separately from the merits of the main action.44

WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the
Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial International Bank is ordered to pay
respondent Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal
damages, P200,000.00 as attorneys fees; and P500,000.00 as moral damages,
and P500,000.00 as exemplary damages, to be satisfied against the attachment bond
issued by Prudential Guarantee & Assurance Inc.,45 under JCL (4) No. 01081, Bond No.
HO-46764-97.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 115678 February 23, 2001

PHILIPPINES BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.

x ---------------------------------------- x

G.R. No. 119723 February 23, 2001

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.

YNARES-SANTIAGO, J.:

Before us are consolidated petitions for review both filed by Philippine Bank of
Communications; one against the May 24, 1994 Decision of respondent Court of Appeals
in CA-G.R. SP No. 328631 and the other against its March 31, 1995 Decision in CA-G.R.
SP No. 32762.2 Both Decisions set aside and nullified the August 11, 1993 Order3 of the
Regional Trial Court of Manila, Branch 7, granting the issuance of a writ of preliminary
attachment in Civil Case No. 91-56711.

The case commenced with the filing by petitioner, on April 8, 1991, of a Complaint
against private respondent Bernardino Villanueva, private respondent Filipinas Textile
Mills and one Sochi Villanueva (now deceased) before the Regional Trial Court of Manila.
In the said Complaint, petitioner sought the payment of P2,244,926.30 representing the
proceeds or value of various textile goods, the purchase of which was covered by
irrevocable letters of credit and trust receipts executed by petitioner with private
respondent Filipinas Textile Mills as obligor; which, in turn, were covered by surety
agreements executed by private respondent Bernardino Villanueva and Sochi Villanueva.
In their Answer, private respondents admitted the existence of the surety agreements
and trust receipts but countered that they had already made payments on the amount
demanded and that the interest and other charges imposed by petitioner were onerous.

On May 31, 1993, petitioner filed a Motion for Attachment,4 contending that violation of
the trust receipts law constitutes estafa, thus providing ground for the issuance of a writ
of preliminary attachment; specifically under paragraphs "b" and "d," Section 1, Rule 57
of the Revised Rules of Court. Petitioner further claimed that attachment was necessary
since private respondents were disposing of their properties to its detriment as a creditor.
Finally, petitioner offered to post a bond for the issuance of such writ of attachment.

The Motion was duly opposed by private respondents and, after the filing of a Reply
thereto by petitioner, the lower court issued its August 11, 1993 Order for the issuance of
a writ of preliminary attachment, conditioned upon the filing of an attachment bond.
Following the denial of the Motion for Reconsideration filed by private respondent
Filipinas Textile Mills, both private respondents filed separate petitions for certiorari
before respondent Court assailing the order granting the writ of preliminary attachment. 1w phi 1.nt
Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762,
respondent Court of Appeals ruled that the lower court was guilty of grave abuse of
discretion in not conducting a hearing on the application for a writ of preliminary
attachment and not requiring petitioner to substantiate its allegations of fraud,
embezzlement or misappropriation. On the other hand, in CA-G.R. SP No. 32863,
respondent Court of Appeals found that the grounds cited by petitioner in its Motion do
not provide sufficient basis for the issuance of a writ of preliminary attachment, they
being mere general averments. Respondent Court of appeals held that neither
embezzlement, misappropriation nor incipient fraud may be presumed; they must be
established in order for a writ of preliminary attachment to issue.

Hence, the instant consolidated5 petitions charging that respondent Court of Appeals
erred in

"1. Holding that there was no sufficient basis for the issuance of the writ of
preliminary attachment in spite of the allegations of fraud, embezzlement and
misappropriation of the proceeds or goods entrusted to the private respondents;

2. Disregarding the fact that the failure of FTMI and Villanueva to remit the
proceeds or return the goods entrusted, in violation of private respondents'
fiduciary duty as entrustee, constitute embezzlement or misappropriation which is
a valid ground for the issuance of a writ of preliminary attachment."6

We find no merit in the instant petitions.

To begin with, we are in accord with respondent Court of Appeals in CA-G.R. SP No.
32863 that the Motion for Attachment filed by petitioner and its supporting affidavit did not
sufficiently establish the grounds relied upon in applying for the writ of preliminary
attachment.

The Motion for Attachment of petitioner states that

1. The instant case is based on the failure of defendants as entrustee to pay or

remit the proceeds of the goods entrusted by plaintiff to defendant as evidenced
by the trust receipts (Annexes "B", "C" and "D" of the complaint), nor to return the
goods entrusted thereto, in violation of their fiduciary duty as agent or entrustee;

2. Under Section 13 of P.D. 115, as amended, violation of the trust receipt law
constitute(s) estafa (fraud and/or deceit) punishable under Article 315 par. 1[b] of
the Revised Penal Code;

3. On account of the foregoing, there exist(s) valid ground for the issuance of a
writ of preliminary attachment under Section 1 of Rule 57 of the Revised Rules of
Court particularly under sub-paragraphs "b" and "d", i.e. for embezzlement or
fraudulent misapplication or conversion of money (proceeds) or property (goods
entrusted) by an agent (entrustee) in violation of his fiduciary duty as such, and
against a party who has been guilty of fraud in contracting or incurring the debt or
obligation;

4. The issuance of a writ of preliminary attachment is likewise urgently necessary

as there exist(s) no sufficient security for the satisfaction of any judgment that
may be rendered against the defendants as the latter appears to have disposed
of their properties to the detriment of the creditors like the herein plaintiff;
 5. Herein plaintiff is willing to post a bond in the amount fixed by this Honorable
Court as a condition to the issuance of a writ of preliminary attachment against
the properties of the defendants.

Section 1 (b) and (d), Rule 57 of the then controlling Revised Rules of Court, provides, 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:

xxx xxx xxx

(b) In an action for money or property embezzled or fraudulently misapplied or

converted to his us by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or for a willful violation of duty;

xxx xxx xxx

(d) In 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, or in concealing
or disposing of the property for the taking, detention or conversion of which the
action is brought;

xxx xxx xxx

While the Motion refers to the transaction complained of as involving trust receipts, the
violation of the terms of which is qualified by law as constituting estafa, it does not follow
that a writ of attachment can and should automatically issue. Petitioner cannot merely
cite Section 1(b) and (d), Rule 57, of the Revised Rules of Court, as mere reproduction of
the rules, without more, cannot serve as good ground for issuing a writ of attachment. An
order of attachment cannot be issued on a general averment, such as one ceremoniously
quoting from a pertinent rule.7

The supporting Affidavit is even less instructive. It merely states, as follows

I, DOMINGO S. AURE, of legal age, married, with address at No. 214-216 Juan
Luna Street, Binondo, Manila, after having been sworn in accordance with law,
do hereby depose and say, THAT:

1. I am the Assistant Manager for Central Collection Units Acquired Assets

Section of the plaintiff, Philippine Bank of Communications, and as such I have
caused the preparation of the above motion for issuance of a writ of preliminary
attachment;

2. I have read and understood its contents which are true and correct of my
own knowledge;

3. There exist(s) sufficient cause of action against the defendants in the

instant case;
 4. The instant case is one of those mentioned in Section 1 of Rule 57 of the
Revised Rules of Court wherein a writ of preliminary attachment may be issued
against the defendants, particularly subparagraphs "b" and "d" of said section;

5. There is no other sufficient security for the claim sought to be enforced by

the instant case and the amount due to herein plaintiff or the value of the property
sought to be recovered is as much as the sum for which the order for attachment
is granted, above all legal counterclaims.

Again, it lacks particulars upon which the court can discern whether or not a writ of
attachment should issue.

Petitioner cannot insist that its allegation that private respondents failed to remit the
proceeds of the sale of the entrusted goods nor to return the same is sufficient for
attachment to issue. We note that petitioner anchors its application upon Section 1(d),
Rule 57. This particular provision was adequately explained in Liberty Insurance
Corporation v. Court of Appeals,8 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). (Emphasis ours)

We find an absence of factual allegations as to how the fraud alleged by petitioner was
committed. As correctly held by respondent Court of Appeals, such fraudulent intent not
to honor the admitted obligation cannot be inferred from the debtor's inability to pay or to
comply with the obligations.9 On the other hand, as stressed, above, fraud may be
gleaned from a preconceived plan or intention not to pay. This does not appear to be so
in the case at bar. In fact, it is alleged by private respondents that out of the total
P419,613.96 covered by the subject trust receipts, the amount of P400,000.00 had
already been paid, leaving only P19,613.96 as balance. Hence, regardless of the
arguments regarding penalty and interest, it can hardly be said that private respondents
harbored a preconceived plan or intention not to pay petitioner.

The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863 that
neither petitioner's Motion or its supporting Affidavit provides sufficient basis for the
issuance of the writ of attachment prayed for.

We also agree with respondent Court of Appeals in CA-G.R. SP No. 32762 that the lower
court should have conducted a hearing and required private petitioner to substantiate its
allegations of fraud, embezzlement and misappropriation.

To reiterate, petitioner's Motion for Attachment fails to meet the standard set in D.P. Lub
Oil Marketing Center, Inc. v. Nicolas,10 in applications for attachment. In the said case,
this Court cautioned

The petitioner's prayer for a writ of preliminary attachment hinges on the

allegations in paragraph 16 of the complaint and paragraph 4 of the affidavit of
Daniel Pe which are couched in general terms devoid of particulars of time,
 persons and places to support support such a serious assertion that "defendants
are disposing of their properties in fraud of creditors." There is thus the necessity
of giving to the private respondents an opportunity to ventilate their side in a
hearing, in accordance with due process, in order to determine the truthfulness of
the allegations. But no hearing was afforded to the private respondents the writ
having been issued ex parte. A writ of attachment can only be granted on
concrete and specific grounds and not on general averments merely quoting the
words of the rules.

As was frowned upon in D.P. Lub Oil Marketing Center, Inc.,11 not only was petitioner's
application defective for having merely given general averments; what is worse, there
was no hearing to afford private respondents an opportunity to ventilate their side, in
accordance with due process, in order to determine the truthfulness of the allegations of
petitioner. As already mentioned, private respondents claimed that substantial payments
were made on the proceeds of the trust receipts sued upon. They also refuted the
allegations of fraud, embezzlement and misappropriation by averring that private
respondent Filipinas Textile Mills could not have done these as it had ceased its
operations starting in June of 1984 due to workers' strike. These are matters which
should have been addressed in a preliminary hearing to guide the lower court to a
judicious exercise of its discretion regarding the attachment prayed for. On this score,
respondent Court of Appeals was correct in setting aside the issued writ of preliminary
attachment.

Time and again, we have held that the rules on the issuance of a writ of attachment must
be construed strictly against the applicants. This stringency is required because the
remedy of attachment is harsh, extraordinary and summary in nature. If all the requisites
for the granting of the writ are not present, then the court which issues it acts in excess of
its jurisdiction.12

WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The decision
of the Court of Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762
are AFFIRMED. No pronouncement as to costs. 1wphi1.nt

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-48756 September 11, 1982

K.O. GLASS CONSTRUCTION CO., INC., petitioner,

vs.
THE HONORABLE MANUEL VALENZUELA, Judge of the Court of First Instance of
Rizal, and ANTONIO D. PINZON, respondents.

CONCEPCION, JR., J.:

Petition for certiorari to annul and set aside the writ of preliminary attachment issued by
the respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal,
entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and
Kenneth O. Glass, defendants, and for the release of the amount of P37,190.00, which
had been deposited with the Clerk of Court, to the petitioner.

On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by
Antonio D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to
be the agreed rentals of his truck, as well as the value of spare parts which have not
been returned to him upon termination of the lease. In his verified complaint, the plaintiff
asked for an attachment against the property of the defendant consisting of collectibles
and payables with the Philippine Geothermal, Inc., on the grounds that the defendant is a
foreigner; that he has sufficient cause of action against the said defendant; and that there
is no sufficient security for his claim against the defendant in the event a judgment is
rendered in his favor. 1

Finding the petition to be sufficient in form and substance, the respondent Judge ordered
the issuance of a writ of attachment against the properties of the defendant upon the
plaintiff's filing of a bond in the amount of P37,190.00. 2

Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the
writ of attachment on the grounds that there is no cause of action against him since the
transactions or claims of the plaintiff were entered into by and between the plaintiff and
the K.O. Glass Construction Co., Inc., a corporation duly organized and existing under
Philippine laws; that there is no ground for the issuance of the writ of preliminary
attachment as defendant Kenneth O. Glass never intended to leave the Philippines, and
even if he does, plaintiff can not be prejudiced thereby because his claims are against a
corporation which has sufficient funds and property to satisfy his claim; and that the
money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to
defendant Kenneth O. Glass. 3

By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction
Co., Inc. as co-defendant of Kenneth O. Glass. 4

On January 26, 1978, the defendants therein filed a supplementary motion to discharge
and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed
in support of the motion for preliminary attachment was not sufficient or wanting in law for
the reason that: (1) the affidavit did not state that the amount of plaintiff's claim was
above all legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised
Rules of Court; (2) the affidavit did not state that there is no other sufficient security for
the claim sought to be recovered by the action as also required by said Sec. 3; and (3)
the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the
respondent Judge denied the motion and ordered the Philippine Geothermal, Inc. to deliver
and deposit with the Clerk of Court the amount of P37,190.00 immediately upon receipt of the
order which amount shall remain so deposited to await the judgment to be rendered in the
case. 6

On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and
asked the court for the release of the same amount deposited with the Clerk of
Court, 7 but, the respondent Judge did not order the release of the money deposited. 8

Hence, the present recourse. As prayed for, the Court issued a temporary restraining
order, restraining the respondent Judge from further proceeding with the trial of the
case. 9

We find merit in the petition. The respondent Judge gravely abused his discretion in
issuing the writ of preliminary attachment and in not ordering the release of the money
which had been deposited with the Clerk of Court for the following reasons:

First, there was no ground for the issuance of the writ of preliminary attachment. Section
1, Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance
of a writ of preliminary attachment, reads, as follows:

Sec. 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:

(a) In an action for the recovery of money or damages on a cause of

action arising from contract, express or implied, against a party who is
about to depart from the Philippines with intent to defraud his creditor;

(b) In an action for money or property embezzled or fraudulently

misapplied or converted to his own use by a public officer, or an officer of
a corporation, or an attorney, factor, broker, agent, or clerk, in the course
of his employment as such, or by any other person in a fiduciary capacity,
or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly

detained, when the property, or any part thereof, has been concealed,
removed, or disposed of to prevent its being found or taken by the
applicant or an officer;

(d) In an action against the 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;

(e) In an action against a party who has removed or disposed of his

property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on

whom summons may be served by publication.

In ordering the issuance of the controversial writ of preliminary attachment, the

respondent Judge said and We quote:
 The plaintiff filed a complaint for a sum of money with prayer for Writ of
Preliminary Attachment dated September 14, 1977, alleging that the
defendant who is a foreigner may, at any time, depart from the
Philippines with intent to defraud his creditors including the plaintiff
herein; that there is no sufficient security for the claim sought to be
enforced by this action; that the amount due the plaintiff is as much as the
sum for which an order of attachment is sought to be granted; and that
defendant has sufficient leviable assets in the Philippines consisting of
collectibles and payables due from Philippine Geothermal, Inc., which
may be disposed of at any time, by defendant if no Writ of Preliminary
Attachment may be issued. Finding said motion and petition to be
sufficient in form and substance. 10

Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who)
may, at any time, depart from the Philippines with intent to defraud his creditors including
the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The
pertinent portion of the complaint reads, as follows:

15. Plaintiff hereby avers under oath that defendant is a foreigner and
that said defendant has a valid and just obligation to plaintiff in the total
sum of P32,290.00 arising out from his failure to pay (i) service charges
for the hauling of construction materials; (ii) rentals for the lease of
plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed
spare parts of said leased unit; hence, a sufficient cause of action exists
against said defendant. Plaintiff also avers under oath that there is no
sufficient security for his claim against the defendant in the event a
judgment be rendered in favor of the plaintiff. however, defendant has
sufficient assets in the Philippines in the form of collectible and payables
due from the Philippine Geothermal, Inc. with office address at Citibank
Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if
not timely attached, may be disposed of by defendants and would render
ineffectual the reliefs prayed for by plaintiff in this Complaint. 11

In his Amended Complaint, Pinzon alleged the following:

15. Plaintiff hereby avers under oath that defendant GLASS is an

American citizen who controls most, if not all, the affairs of defendant
CORPORATION. Defendants CORPORATION and GLASS have a valid
and just obligation to plaintiff in the total sum of P32,290.00 arising out
for their failure to pay (i) service charges for hauling of construction
materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii)
total cost of the missing/destroyed spare parts of said leased unit: hence,
a sufficient cause of action exist against said defendants. Plaintiff also
avers under oath that there is no sufficient security for his claim against
the defendants in the event a judgment be rendered in favor of the
plaintiff. however, defendant CORPORATION has sufficient assets in the
Philippines in the form of collectibles and payables due from the
Philippine Geothermal., Inc. with office address at Citibank Center, Paseo
de Roxas, Makati, Metro Manila, but which properties, if not timely
attached, may be disposed of by defendants and would render ineffectual
the reliefs prayed for by plaintiff in this Complaint. 12

There being no showing, much less an allegation, that the defendants are about to
depart from the Philippines with intent to defraud their creditor, or that they are non-
resident aliens, the attachment of their properties is not justified.
Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the
Rules, an affidavit for attachment must state that (a) sufficient cause of action exists, (b)
the case is one of those mentioned in Section I (a) of Rule 57; (c) there is no other
sufficient security 'or the claim sought to be enforced by the action, and (d) the amount
due to the applicant for attachment or the value of the property the possession of which
he is entitled to recover, is as much as the sum for which the order is granted above all
legal counterclaims. Section 3, Rule 57 of the Revised Rules of Court reads. as follows:

Section 3. Affidavit and bond required.An order of attachment shall be

granted only when it is made to appear by the affidavit of the applicant, or
of some person who personally knows the facts, that a sufficient cause of
action exists that the case is one of those mentioned in Section 1 hereof;
that there is no other sufficient security for the claim sought to be
enforced by the action, and that the amount due to the applicant, or the
value of the property the possession of which he is entitled to recover, is
as much as the sum for which the order is granted above all legal
counterclaims. The affidavit, and the bond required by the next
succeeding section, must be duly filed with the clerk or judge of the court
before the order issues.

In his affidavit, Pinzon stated the following:

I, ANTONIO D. PINZON Filipino, of legal age, married and with residence

and postal address at 1422 A. Mabini Street, Ermita, Manila, subscribing
under oath, depose and states that.

1. On October 6,1977,I filed with the Court of First Instance of Rizal,

Pasay City Branch, a case against Kenneth O. Glass entitled 'ANTONIO
D. PINZON vs. KENNETH O. GLASS', docketed as Civil Case No. 5902-
P;

2. My Complaint against Kenneth O. Glass is based on several causes of

action, namely:

(i) On February 15, 1977, we mutually agreed that I undertake to haul his
construction materials from Manila to his construction project in Bulalo,
Bay, Laguna and vice-versa, for a consideration of P50.00 per hour;

(ii) Also, on June 18, 1977, we entered into a separate agreement

whereby my Isuzu cargo truck will be leased to him for a consideration of
P4,000.00 a month payable on the 15th day of each month;

(iii) On September 7, 1977, after making use of my Isuzu truck, he

surrendered the same without paying the monthly rentals for the leased
Isuzu truck and the peso equivalent of the spare parts that were either
destroyed or misappropriated by him;

3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the
total sum of P32,290.00 representing his obligation arising from the
hauling of his construction materials, monthly rentals for the lease Isuzu
truck and the peso equivalent of the spare parts that were either
destroyed or misappropriated by him;

4. I am executing this Affidavit to attest to the truthfulness of the foregoing

and in compliance with the provisions of Rule 57 of the Revised Rules of
Court. 13
While Pinzon may have stated in his affidavit that a sufficient cause of action exists
against the defendant Kenneth O. Glass, he did not state therein that "the case is one of
those mentioned in Section 1 hereof; that there is no other sufficient security for the claim
sought to be enforced by the action; and that the amount due to the applicant is as much
as the sum for which the order granted above all legal counter-claims." It has been held
that the failure to allege in the affidavit the requisites prescribed for the issuance of a writ
of preliminary attachment, renders the writ of preliminary attachment issued against the
property of the defendant fatally defective, and the judge issuing it is deemed to have
acted in excess of his jurisdiction. 14

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

Section 12. Discharge of attachment upon giving counterbond.At any

time after an order of attachment has been granted, the party whose
property has been attached, or the person appearing on his behalf, may
upon reasonable notice to the applicant, apply to the judge who granted
the order, or to the judge of the court in which the action is pending, for
an order discharging the attachment wholly or in part on the security
given. The judge shall, after hearing, order the discharge of the
attachment if a cash deposit is made or a counterbond executed to the
attaching creditor is filed, on behalf of the adverse party, with the clerk or
judge of the court where the application is made, in an amount equal to
the value of the property attached as determined by the judge, to secure
the payment of any judgment that the attaching creditor may recover in
the action. Upon the filing of such counter-bond, copy thereof shall
forthwith be served on the attaching creditor or his lawyer. 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 the person appearing on his behalf, the deposit or counter-bond
aforesaid standing in the 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 creditor may apply for a new order of attachment.

The filing of the counter-bond will serve the purpose of preserving the defendant's
property and at the same time give the plaintiff security for any judgment that may be
obtained against the defendant. 15

WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders
issued by the respondent Judge on October 11, 19719, January 26, 1978, and February
3, 1978 in Civil Case No. 5902-P of the Court of First Instance of Rizal, insofar as they
relate to the issuance of the writ of preliminary attachment, should be as they are hereby
ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith
release the garnished amount of P37,190.00 to the petitioner. The temporary restraining
order, heretofore issued, is hereby lifted and set aside. Costs against the private
respondent Antonio D. Pinzon.

SO ORDERED.
G.R. No. L-35990 June 17, 1981

ABOITIZ & COMPANY, INC., HONORABLE VICENTE N. CUSI JR., Judge of the
Court of First Instance of Davao, and the PROVINCIAL SHERIFF OF DAVAO DEL
SUR, petitioners,
vs.
COTABATO BUS COMPANY, INC., respondent.

The instant petition stemmed from Civil Case No. 7329 of the Court of First Instance of
Davao (Branch 1) in which a writ of preliminary attachment was issued ex-parte by the
Court on the strength of an affidavit of merit attached to the verified complaint filed by
petitioner herein, Aboitiz & Co., Inc., on November 2, 1971, as plaintiff in said case, for
the collection of money in the sum of P 155,739.41, which defendant therein, the
respondent in the instant case, Cotabato Bus Co., owed the said petitioner.

By virtue of the writ of preliminary attachment, the provincial sheriff attached personal
properties of the defendant bus company consisting of some buses, machinery and
equipment. The ground for the issuance of the writ is, as alleged in the complaint and the
affidavit of merit executed by the Assistant Manager of petitioner, that the defendant "has
removed or disposed of its properties or assets, or is about to do so, with intent to
defraud its creditors."

Respondent company filed in the lower court an "Urgent Motion to Dissolve or Quash
Writ of Attachment" to which was attached an affidavit executed by its Assistant
Manager, Baldovino Lagbao, alleging among other things that "the Cotabato Bus
Company has not been selling or disposing of its properties, neither does it intend to do
so, much less to defraud its creditors; that also the Cotabato Bus Company, Inc. has
been acquiring and buying more assets". An opposition and a supplemental opposition
were filed to the urgent motion. The lower court denied the motion stating in its Order that
"the testimony of Baldovino Lagbao, witness for the defendant, corroborates the facts in
the plaintiff's affidavit instead of disproving or showing them to be untrue."

A motion for reconsideration was filed by the defendant bus company but the lower court
denied it. Hence, the defendant went to the Court of Appeals on a petition for certiorari
alleging grave abuse of discretion on the part of herein respondent Judge, Hon. Vicente
R. Cusi Jr. On giving due course to the petition, the Court of Appeals issued a restraining
order restraining the trial court from enforcing further the writ of attachment and from
proceeding with the hearing of Civil Case No. 7329. In its decision promulgated on
October 3, 1971, the Court of Appeals declared "null and void the order/writ of
attachment dated November 3, 1971 and the orders of December 2, 1971, as well as that
of December 11, 1971, ordered the release of the attached properties, and made the
restraining order originally issued permanent.

The present recourse is an appeal by certiorari from the decision of the Court of Appeals
reversing the assailed orders of the Court of First Instance of Davao, (Branch I),
petitioner assigning against the lower court the following errors:

ERROR I

THE COURT OF APPEALS ERRED IN HASTILY AND

PERFUNCTORILY RENDERING, ON OCTOBER 3, 1971, A DECISION
WITHOUT CONSIDERING MOST OF THE EVIDENCE SUCH THAT

l) EVEN AN IMPORTANT FACT, ESTABLISHED BY DOCUMENTARY

EVIDENCE AND NOT DENIED BY RESPONDENT, IS MENTIONED
ONLY AS A "CLAIM" OF PETITIONER COMPANY;
 2) THE DECISION CONTAINS NO DISCUSSION AND APPRECIATION
OF THE FACTS AS PROVED, ASSEMBLED AND PRESENTED BY
PETITIONER COMPANY SHOWING IN THEIR TOTALITY THAT
RESPONDENT HAS REMOVED, DIVERTED OR DISPOSED OF ITS
BANK DEPOSITS, INCOME AND OTHER LIQUID ASSETS WITH
INTENT TO DEFRAUD ITS CREDITORS, ESPECIALLY ITS
UNSECURED SUPPLIERS;

3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL

OF RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE
METROPOLITAN BANK & TRUST CO. TO BRING, IN COMPLIANCE
WITH A subpoena DUCES TECUM TO THE TRIAL COURT ALL THE
RECORDS OF RESPONDENT'S DEPOSITS AND WITHDRAWALS
UNDER ITS CURRENT AND SAVINGS ACCOUNTS (NOW NIL) FOR
EXAMINATION BY PETITIONER COMPANY FOR THE PURPOSE OF
SHOWING DIRECTLY THE REMOVAL, DIVERSION OR DISPOSAL OF
RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO
DEFRAUD ITS CREDITORS.

ERROR II

THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE

FACTS THAT RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF
WHICH - TOGETHER WITH RESPONDENT'S ADMISSION OF AN
INCOME OF FROM P10,000.00 to P 14,000.00 A DAY AND THE
EVIDENCE THAT IT CANNOT PRODUCE P 634.00 WITHOUT USING A
PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY
STOCKHOLDER, AND OTHER EVIDENCE SHOWS THE REMOVAL
OR CHANNELING OF ITS INCOME TO THE LATTER.

ERROR III

THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE

RESCUE AND REMOVAL BY RESPONDENT OF FIVE ATTACHED
BUSES, DURING THE DEPENDENCY OF ITS MOTION TO DISSOLVE
THE ATTACHMENT IN THE, TRIAL COURT, AS A FURTHER ACT OF
REMOVAL OF PROPERTIES BY RESPONDENT WITH INTENT TO
DEFRAUD PETITIONER COMPANY, FOR WHOSE BENEFIT SAID
BUSES HAD BEEN ATTACHED.

The questions raised are mainly, if not solely, factual revolving on whether respondent
bus company has in fact removed its properties, or is about to do so, in fraud of its
creditors. This being so, the findings of the Court of Appeals on said issues of facts are
generally considered conclusive and final, and should no longer be disturbed. However,
We gave due course to the petition because it raises also a legal question of whether the
writ of attachment was properly issued upon a showing that defendant is on the verge of
insolvency and may no longer satisfy its just debts without issuing the writ. This may be
inferred from the emphasis laid by petitioner on the fact that even for the measly amount
of P 634.00 payment thereof was made with a personal check of the respondent
company's president and majority stockholder, and its debts to several creditors,
including secured ones like the DBP, have remained unpaid, despite its supposed daily
income of an average of P 12,000.00, as declared by its assistant manager, Baldovino
Lagbao. 1

Going forthwith to this question of whether insolvency, which petitioners in effect claims
to have been proven by the evidence, particularly by company's bank account which has
been reduced to nil, may be a ground for the issuance of a writ of attachment, the
respondent Court of Appeals correctly took its position in the negative on the strength of
the explicit ruling of this Court in Max Chamorro & Co. vs. Philippine Ready Mix Concrete
Company, Inc. and Hon. Manuel P. Barcelona. 2

Petitioner, however, disclaims any intention of advancing the theory that insolvency is a
ground for the issuance of a writ of attachment , 3 and insists that its evidence -is intended
to prove his assertion that respondent company has disposed, or is about to dispose, of its
properties, in fraud of its creditors. Aside from the reference petitioner had made to
respondent company's "nil" bank account, as if to show removal of company's funds,
petitioner also cited the alleged non-payment of its other creditors, including secured creditors
like the DBP to which all its buses have been mortgaged, despite its daily income averaging
P12,000.00, and the rescue and removal of five attached buses.

It is an undisputed fact that, as averred by petitioner itself, the several buses attached are
nearly junks. However, upon permission by the sheriff, five of them were repaired, but
they were substituted with five buses which were also in the same condition as the five
repaired ones before the repair. This cannot be the removal intended as ground for the
issuance of a writ of attachment under section 1 (e), Rule 57, of the Rules of Court. The
repair of the five buses was evidently motivated by a desire to serve the interest of the
riding public, clearly not to defraud its creditors, as there is no showing that they were not
put on the run after their repairs, as was the obvious purpose of their substitution to be
placed in running condition.

Moreover, as the buses were mortgaged to the DBP, their removal or disposal as alleged
by petitioner to provide the basis for its prayer for the issuance of a writ of attachment
should be very remote, if not nil. If removal of the buses had in fact been committed,
which seems to exist only in petitioner's apprehensive imagination, the DBP should not
have failed to take proper court action, both civil and criminal, which apparently has not
been done.

The dwindling of respondent's bank account despite its daily income of from P10,000.00
to P14,000.00 is easily explained by its having to meet heavy operating expenses, which
include salaries and wages of employees and workers. If, indeed the income of the
company were sufficiently profitable, it should not allow its buses to fall into disuse by
lack of repairs. It should also maintain a good credit standing with its suppliers of
equipment, and other needs of the company to keep its business a going concern.
Petitioner is only one of the suppliers.

It is, indeed, extremely hard to remove the buses, machinery and other equipments
which respondent company have to own and keep to be able to engage and continue in
the operation of its transportation business. The sale or other form of disposition of any of
this kind of property is not difficult of detection or discovery, and strangely, petitioner, has
adduced no proof of any sale or transfer of any of them, which should have been easily
obtainable.

In the main, therefore, We find that the respondent Court of Appeals has not committed
any reversible error, much less grave abuse of discretion, except that the restraining
order issued by it should not have included restraining the trial court from hearing the
case, altogether. Accordingly, the instant petition is hereby denied, but the trial court is
hereby ordered to immediately proceed with the hearing of Civil Case No. 7329 and
decide it in accordance with the law and the evidence. No special pronouncement as to
costs.

SO ORDERED.
A.M. No. RTJ-06-2017 June 19, 2008

LT. GEN. ALFONSO P. DAGUDAG (Ret.), complainant,

vs.
JUDGE MAXIMO G.W. PADERANGA, Regional Trial Court, Branch 38, Cagayan de
Oro City, respondent.

This is a complaint for gross ignorance of the law and conduct unbecoming a judge filed
by retired Lt. Gen. Alfonso P. Dagudag (Gen. Dagudag), Head of Task Force Sagip
Kalikasan, against Judge Maximo G. W. Paderanga (Judge Paderanga), Presiding Judge
of the Regional Trial Court, Branch 38, Cagayan de Oro City.

On or about 30 January 2005, the Region VII Philippine National Police Regional
Maritime Group (PNPRMG) received information that MV General Ricarte of NMC
Container Lines, Inc. was shipping container vans containing illegal forest products from
Cagayan de Oro to Cebu. The shipments were falsely declared as cassava meal and
corn grains to avoid inspection by the Department of Environment and Natural Resources
(DENR).1

On 30 and 31 January 2005, a team composed of representatives from the PNPRMG,

DENR, and the Philippine Coast Guard inspected the container vans at a port in
Mandaue City, Cebu. The team discovered the undocumented forest products and the
names of the shippers and consignees:

Container Van No. Shipper Consignee

NCLU 2000492-22GI Polaris Chua Polaris Chua
IEAU 2521845-2210 Polaris Chua Polaris Chua
NOLU 2000682-22GI Rowena Balangot Rowena Balangot
INBU 3125757-BB2210 Rowena Balangot Rowena Balangot
NCLU 20001591-22GI Jovan Gomez Jovan Gomez
GSTU 339074-US2210 Jovan Gomez Jovan Gomez
CRXU 2167567 Raffy Enriquez Raffy Enriquez
NCLU 2001570-22GI Raffy Enriquez Raffy Enriquez

The crew of MV General Ricarte failed to produce the certificate of origin forms and other
pertinent transport documents covering the forest products, as required by DENR
Administrative Order No. 07-94. Gen. Dagudag alleged that, since nobody claimed the
forest products within a reasonable period of time, the DENR considered them as
abandoned and, on 31 January 2005, the Provincial Environment and Natural Resources
Office (PENRO) Officer-in-Charge (OIC), Richard N. Abella, issued a seizure receipt to
NMC Container Lines, Inc.2

On 1 February 2005, Community Environment and Natural Resources Office (CENRO)

OIC Loreto A. Rivac (Rivac) sent a notice to NMC Container Lines, Inc. asking for
explanation why the government should not confiscate the forest products.3 In an
affidavit4 dated 9 February 2005, NMC Container Lines, Inc.s Branch Manager Alex
Conrad M. Seno stated that he did not see any reason why the government should not
confiscate the forest products and that NMC Container Lines, Inc. had no knowledge of
the actual content of the container vans.

On 2, 9, and 15 February 2005, DENR Forest Protection Officer Lucio S. Canete, Jr.
posted notices on the CENRO and PENRO bulletin boards and at the NMC Container
Lines, Inc. building informing the unknown owner about the administrative adjudication
scheduled on 18 February 2005 at the Cebu City CENRO. Nobody appeared during the
adjudication.5 In a resolution6 dated 10 March 2005, Rivac, acting as adjudication officer,
recommended to DENR Regional Executive Director Clarence L. Baguilat that the forest
products be confiscated in favor of the government.

In a complaint7 dated 16 March 2005 and filed before Judge Paderanga, a certain Roger
C. Edma (Edma) prayed that a writ of replevin be issued ordering the defendants DENR,
CENRO, Gen. Dagudag, and others to deliver the forest products to him and that
judgment be rendered ordering the defendants to pay him moral damages, attorneys
fees, and litigation expenses. On 29 March 2005, Judge Paderanga issued a writ of
replevin8 ordering Sheriff Reynaldo L. Salceda to take possession of the forest products.

In a motion to quash the writ of replevin,9 the defendants DENR, CENRO, and Gen.
Dagudag prayed that the writ of replevin be set aside: (1) Edmas bond was insufficient;
(2) the forest products were falsely declared as cassava meal and corn grains; (3) Edma
was not a party-in-interest; (4) the forest products were not covered by any legal
document; (5) nobody claimed the forest products within a reasonable period of time; (6)
the forest products were already considered abandoned; (7) the forest products were
lawfully seized under the Revised Forestry Code of the Philippines; (8) replevin was not
proper; (9) courts could not take cognizance of cases pending before the DENR; (10)
Edma failed to exhaust administrative remedies; and (11) the DENR was the agency
responsible for the enforcement of forestry laws. In a motion to dismiss ad
cautelam10 dated 12 April 2005, the defendants prayed that the complaint for replevin and
damages be dismissed: (1) the real defendant is the Republic of the Philippines; (2)
Edma failed to exhaust administrative remedies; (3) the State cannot be sued without its
consent; and (4) Edma failed to allege that he is the owner or is entitled to the
possession of the forest products.

In an order11 dated 14 April 2005, Judge Paderanga denied the motion to quash the writ
of replevin for lack of merit.

Gen. Dagudag filed with the Office of the Court Administrator (OCA) an affidavit-
complaint12 dated 8 July 2005 charging Judge Paderanga with gross ignorance of the law
and conduct unbecoming a judge. Gen. Dagudag stated that:

During the x x x hearing, [Judge Paderanga] showed manifest partiality in favor of

x x x Edma. DENRs counsel was lambasted, cajoled and intimidated by [Judge
Paderanga] using words such as "SHUT UP" and "THATS BALONEY."

xxxx

Edma in the replevin case cannot seek to recover the wood shipment from the
DENR since he had not sought administrative remedies available to him. The
prudent thing for [Judge Paderanga] to have done was to dismiss the replevin
suit outright.

xxxx

[Judge Paderangas] act[s] of taking cognizance of the x x x replevin suit, issuing

the writ of replevin and the subsequent denial of the motion to quash clearly
demonstrates [sic] ignorance of the law.

In its 1st Indorsement13 dated 1 August 2005, the OCA directed Judge Paderanga to
comment on the affidavit-complaint. In his comment14 dated 6 September 2005, Judge
Paderanga stated that he exercised judicial discretion in issuing the writ of replevin and
that he could not delve into the issues raised by Gen. Dagudag because they were
related to a case pending before him.

In its Report15 dated 10 July 2006, the OCA found that Judge Paderanga (1) violated the
doctrine of exhaustion of administrative remedies; (2) violated the doctrine of primary
jurisdiction; and (3) used inappropriate language in court. The OCA recommended that
the case be re-docketed as a regular administrative matter; that Judge Paderanga be
held liable for gross ignorance of the law and for violation of Section 6, Canon 6 of the
New Code of Judicial Conduct for the Philippine Judiciary;16 and that he be
fined P30,000.

In its Resolution17 dated 16 August 2006, the Court re-docketed the case as a regular
administrative matter and required the parties to manifest whether they were willing to
submit the case for decision based on the pleadings already filed. Judge Paderanga
manifested his willingness to submit the case for decision based on the pleadings already
filed.18 Since Gen. Dagudag did not file any manifestation, the Court considered him to
have waived his compliance with the 16 August 2006 Resolution.19

The Court finds Judge Paderanga liable for gross ignorance of the law and for conduct
unbecoming a judge.

The DENR is the agency responsible for the enforcement of forestry laws. Section 4 of
Executive Order No. 192 states that the DENR shall be the primary agency responsible
for the conservation, management, development, and proper use of the countrys natural
resources.

Section 68 of Presidential Decree No. 705, as amended by Executive Order No. 277,
states that possessing forest products without the required legal documents is
punishable. Section 68-A states that the DENR Secretary or his duly authorized
representatives may order the confiscation of any forest product illegally cut, gathered,
removed, possessed, or abandoned.

In the instant case, the forest products were possessed by NMC Container Lines, Inc.
without the required legal documents and were abandoned by the unknown owner.
Consequently, the DENR seized the forest products.

Judge Paderanga should have dismissed the replevin suit outright for three reasons.
First, under the doctrine of exhaustion of administrative remedies, courts cannot take
cognizance of cases pending before administrative agencies. In Factoran, Jr. v. Court of
Appeals,20 the Court held that:

The doctrine of exhaustion of administrative remedies is basic. Courts, for

reasons of law, comity and convenience, should not entertain suits unless the
available administrative remedies have first been resorted to and the proper
authorities have been given an appropriate opportunity to act and correct
their alleged errors, if any, committed in the administrative forum.
(Emphasis ours)

In Dy v. Court of Appeals,21 the Court held that a party must exhaust all administrative
remedies before he can resort to the courts. In Paat v. Court of Appeals,22 the Court held
that:

This Court in a long line of cases has consistently held that before a party is
allowed to seek the intervention of the court, it is a pre-condition that he
should have availed of all the means of administrative processes afforded
him. Hence, if a remedy within the administrative machinery can still be
 resorted to by giving the administrative officer concerned every opportunity to
decide on a matter that comes within his jurisdiction then such remedy should
be exhausted first before courts judicial power can be sought. The
premature invocation of courts intervention is fatal to ones cause of
action. Accordingly, absent any finding of waiver or estoppel the case is
susceptible of dismissal for lack of cause of action. (Emphasis ours)

In the instant case, Edma did not resort to, or avail of, any administrative remedy. He
went straight to court and filed a complaint for replevin and damages. Section 8 of
Presidential Decree No. 705, as amended, states that (1) all actions and decisions of the
Bureau of Forest Development Director are subject to review by the DENR Secretary; (2)
the decisions of the DENR Secretary are appealable to the President; and (3) courts
cannot review the decisions of the DENR Secretary except through a special civil action
for certiorari or prohibition. In Dy,23 the Court held that all actions seeking to recover
forest products in the custody of the DENR shall be directed to that agency not the
courts. In Paat,24 the Court held that:

Dismissal of the replevin suit for lack of cause of action in view of the
private respondents failure to exhaust administrative remedies should
have been the proper course of action by the lower court instead of
assuming jurisdiction over the case and consequently issuing the writ [of
replevin].Exhaustion of the remedies in the administrative forum, being a
condition precedent prior to ones recourse to the courts and more importantly,
being an element of private respondents right of action, is too significant to be
waylaid by the lower court.

xxxx

Moreover, the suit for replevin is never intended as a procedural tool to

question the orders of confiscation and forfeiture issued by the DENR in
pursuance to the authority given under P.D. 705, as amended. Section 8 of the
said law is explicit that actions taken by the

Director of the Bureau of Forest Development concerning the enforcement of

the provisions of the said law are subject to review by the Secretary of DENR
and that courts may not review the decisions of the Secretary except
through a special civil action for certiorari or prohibition. (Emphasis ours)

Second, under the doctrine of primary jurisdiction, courts cannot take cognizance of
cases pending before administrative agencies of special competence. The DENR is the
agency responsible for the enforcement of forestry laws. The complaint for replevin itself
stated that members of DENRs Task Force Sagip Kalikasan took over the forest
products and brought them to the DENR Community Environment and Natural
Resources Office. This should have alerted Judge Paderanga that the DENR had
custody of the forest products, that administrative proceedings may have been
commenced, and that the replevin suit had to be dismissed outright. In Tabao v. Judge
Lilagan25 a case with a similar set of facts as the instant case the Court held that:

The complaint for replevin itself states that the shipment x x x [was] seized by the
NBI for verification of supporting documents. It also states that the NBI turned
over the seized items to the DENR "for official disposition and appropriate
action." x x x To our mind, these allegations [should] have been sufficient to
alert respondent judge that the DENR has custody of the seized items and
that administrative proceedings may have already been commenced
concerning the shipment. Under the doctrine of primary jurisdiction, courts
cannot take cognizance of cases pending before administrative agencies of
 special competence. x x x The prudent thing for respondent judge to have
done was to dismiss the replevin suit outright. (Emphasis ours)

In Paat,26 the Court held that:

[T]he enforcement of forestry laws, rules and regulations and the protection,
development and management of forest lands fall within the primary and special
responsibilities of the Department of Environment and

Natural Resources. By the very nature of its function, the DENR should be
given a free hand unperturbed by judicial intrusion to determine a
controversy which is well within its jurisdiction. The assumption by the trial
court, therefore, of the replevin suit filed by private respondents constitutes
an unjustified encroachment into the domain of the administrative agencys
prerogative. The doctrine of primary jurisdiction does not warrant a court to
arrogate unto itself the authority to resolve a controversy the jurisdiction
over which is initially lodged with an administrative body of special
competence. (Emphasis ours)

Third, the forest products are already in custodia legis and thus cannot be the subject of
replevin. There was a violation of the Revised Forestry Code and the DENR seized the
forest products in accordance with law. In Calub v. Court of Appeals,27 the Court held that
properties lawfully seized by the DENR cannot be the subject of replevin:

Since there was a violation of the Revised Forestry Code and the seizure
was in accordance with law, in our view the [properties seized] were validly
deemed in custodia legis. [They] could not be subject to an action for
replevin. For it is property lawfully taken by virtue of legal process and
considered in the custody of the law, and not otherwise. (Emphasis ours)

Judge Paderangas acts of taking cognizance of the replevin suit and of issuing the writ
of replevin constitute gross ignorance of the law. In Tabao,28 the Court held that:

Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases
pending before administrative of special competence. x x x [T]he plaintiff in the
replevin suit who [sought] to recover the shipment from the DENR had not
exhausted the administrative remedies available to him. The prudent thing
for respondent judge to have done was to dismiss the replevin suit
outright.

Under Section 78-A of the Revised Forestry Code, the DENR secretary or his
authorized representatives may order the confiscation of forest products illegally
cut, gathered, removed, or possessed or abandoned.

xxxx

Respondent judges act of taking cognizance of the x x x replevin suit

clearly demonstrates ignorance of the law. x x x [J]udges are expected to
keep abreast of all laws and prevailing jurisprudence. Judges are duty bound to
have more than just a cursory acquaintance with laws and jurisprudence. Failure
to follow basic legal commands constitutes gross ignorance of the law
from which no one may be excused, not even a judge. (Emphasis ours)

Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that
competence is a prerequisite to the due performance of judicial office. Section 3 of
Canon 6 states that judges shall take reasonable steps to maintain and enhance their
knowledge necessary for the proper performance of judicial duties. Judges should keep
themselves abreast with legal developments and show acquaintance with laws.29

The rule that courts cannot prematurely take cognizance of cases pending before
administrative agencies is basic. There was no reason for Judge Paderanga to make an
exception to this rule. The forest products were in the custody of the DENR and Edma
had not availed of any administrative remedy. Judge Paderanga should have dismissed
the replevin suit outright. In Espaol v. Toledo-Mupas,30 the Court held that:

Being among the judicial front-liners who have direct contact with the litigants, a
wanton display of utter lack of familiarity with the rules by the judge inevitably
erodes the confidence of the public in the competence of our courts to render
justice. It subjects the judiciary to embarrassment. Worse, it could raise the
specter of corruption.

When the gross inefficiency springs from a failure to consider so basic and
elemental a rule, a law, or a principle in the discharge of his or her duties, a judge
is either too incompetent and undeserving of the exalted position and title he or
she holds, or the oversight or omission was deliberately done in bad faith and in
grave abuse of judicial authority.

The OCA found Judge Paderanga liable for using inappropriate language in court: "We x
x x find respondents intemperate use of "Shut up!" and "Baloney!" well nigh
inappropriate in court proceedings. The utterances are uncalled for."31

Indeed, the 14 and 22 April 2005 transcripts of stenographic notes show that Judge
Paderanga was impatient, discourteous, and undignified in court:

Atty. Luego: Your Honor, we want to have this motion because that is...

Judge Paderanga: I am asking you why did you not make any rejoinder[?]

xxxx

Atty. Luego: I apologize, Your Honor. We are ready to...

Judge Paderanga: Ready to what? Proceed.

Atty. Luego: Yes, Your Honor. We filed this motion to quash replevin, Your
Honor, on the grounds, first and foremost, it is our contention, Your Honor, with
all due respect of [sic] this Honorable Court, that the writ of replevin dated March
29, 2005 was improper, Your Honor, for the reasons that the lumber, subject
matter of this case, were apprehended in accordance with...

Judge Paderanga: Where is your proof that it was apprehended? Where is your
proof? Is that apprehension proven by a seizure receipt? Where is your seizure
receipt?

Atty. Luego: Under the rules...

Judge Paderanga: Where is your seizure receipt? You read your rules. What
does [sic] the rules say? Where in your rules does it say that it does not need any
seizure receipt? You look at your rules. You point out the rules. You take out your
rules and then you point out. Do you have the rules?
xxxx

Atty. Luego: Your Honor, there was no seizure receipt, but during the
apprehension, Your Honor, there was no claimant.

Judge Paderanga: Answer me. Is there a seizure receipt?

Atty. Luego: But during the apprehension, Your Honor, no owner has [sic]
appeared.

xxxx

Atty. Luego: According to [the] rules, Your Honor, if there is no...

Judge Paderanga: Whom are you seizing it from? To [sic] whom are you taking it
from?

Atty. Luego: From the shipping company, Your Honor.

xxxx

Atty. Luego: Your Honor please, the shipping company denied the ownership of
that lumber.

xxxx

Atty. Luego: But the shipping company, Your Honor,...

Judge Paderanga: Shut up. Thats baloney. You are seizing it from nobody.
Then how can you seize it from the shipping company. Are you not? You are a
lawyer. Who is in possession of the property? The shipping company. Why did
you not issue [a] seizure receipt to the shipping company?

Atty. Luego: But the... May I continue, Your Honor?

xxxx

Judge Paderanga: Stop talking about the shipping company. Still you did not
issue a seizure receipt here. Well, Im telling you you should have issued [a]
seizure receipt to the shipping company.

xxxx

Judge Paderanga: You are a lawyer. You should know how to write
pleadings. You write the pleadings the way it should be, not the way you think it
should be.

Atty. Luego: Im sorry, Your Honor.

Judge Paderanga: You are an officer of the court. You should be careful with
your language. You say that I am wrong. Its you who are [sic] wrong because
you do not read the law.

xxxx
 Judge Paderanga: Then you read the law. How dare you say that the Court is
wrong.

xxxx

Judge Paderanga: Are you not representing [the DENR]?

Atty. Luego: Yes, in this case, Your Honor.

Judge Paderanga: Then you are representing them. They are your clients. What
kind of a lawyer are you?32

xxxx

Atty. Tiamson: Specifically it was stated in the [Factoran] versus Court of Appeals
[case] that the Court should not interfere, Your Honor.

Judge Paderanga: No.

xxxx

Judge Paderanga: The problem with you people is you do not use your
heads.

Atty. Tiamson: We use our heads, your Honor.

xxxx

Atty. Tiamson: Your Honor, we would like to put on record that we use our heads,
your Honor.33 (Emphasis ours)

Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary
states that judges shall be patient, dignified, and courteous in relation to lawyers. Rule
3.04, Canon 3 of the Code of Judicial Conduct states that judges should be patient and
courteous to lawyers, especially the inexperienced. They should avoid the attitude that
the litigants are made for the courts, instead of the courts for the litigants.

Judicial decorum requires judges to be temperate in their language at all times. They
must refrain from inflammatory, excessively rhetoric, or vile language.34 They should (1)
be dignified in demeanor and refined in speech; (2) exhibit that temperament of utmost
sobriety and self-restraint; and (3) be considerate, courteous, and civil to all persons who
come to their court.35 In Juan de la Cruz v. Carretas,36 the Court held that:

A judge who is inconsiderate, discourteous or uncivil to lawyers x x x who appear

in his sala commits an impropriety and fails in his duty to reaffirm the peoples
faith in the judiciary. He also violates Section 6, Canon 6 of the New Code of
Judicial Conduct for the Philippine Judiciary.

xxxx

It is reprehensible for a judge to humiliate a lawyer x x x. The act betrays lack of

patience, prudence and restraint. Thus, a judge must at all times be temperate in
his language. He must choose his words x x x with utmost care and sufficient
control. The wise and just man is esteemed for his discernment. Pleasing speech
increases his persuasiveness.
 Equanimity and judiciousness should be the constant marks of a dispenser of
justice. A judge should always keep his passion guarded. He can never allow it to
run loose and overcome his reason. He descends to the level of a sharp-tongued,
ill-mannered petty tyrant when he utters harsh words x x x. As a result, he
degrades the judicial office and erodes public confidence in the judiciary.

Judge Paderangas refusal to consider the motion to quash the writ of replevin, repeated
interruption of the lawyers, and utterance of "shut up," "thats baloney," "how dare you
say that the court is wrong," "what kind of a lawyer are you?," and "the problem with you
people is you do not use your heads" are undignified and very unbecoming a judge.
In Office of the Court Administrator v. Paderanga,37 the Court already reprimanded Judge
Paderanga for repeatedly saying "shut up," being arrogant, and declaring that he had
"absolute power" in court. He has not changed.

Section 8, Rule 140 of the Rules of Court classifies gross ignorance of the law as a
serious offense. It is punishable by (1) dismissal from the service, forfeiture of benefits,
and disqualification from reinstatement to any public office; (2) suspension from office
without salary and other benefits for more than three months but not exceeding six
months; or (3) a fine of more than P20,000 but not exceeding P40,000.38 Section 10 of
Rule 140 classifies conduct unbecoming a judge as a light offense. It is punishable by (1)
a fine of not less than P1,000 but not exceedingP10,000; (2) censure; (3) reprimand; or
(4) admonition with warning.39

The Court notes that this is Judge Paderangas third offense. In Office of the Court
Administrator v. Paderanga,40the Court held him liable for grave abuse of authority and
simple misconduct for unceremoniously citing a lawyer in contempt while declaring
himself as having "absolute power" and for repeatedly telling a lawyer to "shut up."
InBeltran, Jr. v. Paderanga,41 the Court held him liable for undue delay in rendering an
order for the delay of nine months in resolving an amended formal offer of exhibits. In
both cases, the Court sternly warned Judge Paderanga that the commission of another
offense shall be dealt with more severely. The instant case and the two cases decided
against him demonstrate Judge Paderangas arrogance, incorrigibility, and unfitness to
become a judge.

Judge Paderanga has two other administrative cases pending against him one42 for
gross ignorance of the law, knowingly rendering an unjust judgment, and grave abuse of
authority, and the other43 for gross misconduct, grave abuse of authority, and gross
ignorance of the law.

The Court will not hesitate to impose the ultimate penalty on those who have fallen short
of their accountabilities. It will not tolerate any conduct that violates the norms of public
accountability and diminishes the faith of the people in the judicial system.44

WHEREFORE, the Court finds Judge Maximo G.W. Paderanga, Regional Trial Court,
Branch 38, Cagayan de Oro City, GUILTY of GROSS IGNORANCE OF THE
LAW and UNBECOMING CONDUCT. Accordingly, the CourtDISMISSES him from the
service, with forfeiture of all retirement benefits, except accrued leave credits, and with
prejudice to reinstatement or appointment to any public office, including government-
owned or controlled corporations.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-50378 September 30, 1982

FILINVEST CREDIT CORPORATION, petitioner,

vs.
THE HONORABLE JUDGE BENJAMIN RELOVA (In his capacity as Presiding Judge
of the Court of First Instance of Manila, Branch XI) and ERNESTO
SALAZAR, respondents.

Labaquis, Loyola & Angara Law Offices for petitioner.

Cecilio D. Ignacio for respondents.

GUERRERO, J.:

This is a special civil action for certiorari, with prayer for restraining order or preliminary
injunction, filed by petitioner Filinvest Credit Corporation seeking to annul the Orders
issued by respondent Judge dated February 2, 1979 and April 4, 1979 in Civil Case No.
109900.

As shown by the records, the antecedents of the instant Petition are as follows:

On August 2, 1977, Filinvest Credit Corporation (hereinafter referred to as FILINVEST)

filed a complaint in the lower court against defendants Rallye Motor Co., Inc. (hereinafter
referred to as RALLYE) and Emesto Salazar for the collection of a sum of money with
damages and preliminary writ of attachment. From the allegations of the complaint, 1 it
appears that in payment of a motor vehicle described as: "One (1) Unit MAZDA DIESEL
SCHOOL BUS, Model: E4100, Serial No.: EXC43P-02356, Motor No.: Y-13676," Salazar
executed a promissory note dated May 5, 1977 in favor of RALLYE for the amount of
P99,828.00. To secure the note, Salazar also executed in favor of RALLYE a deed of chattel
mortgage over the above described motor vehicle. On May 7, 1977, RALLYE, for valuable
consideration, assigned all its rights, title and interest to the aforementioned note and
mortgage to FILINVEST. Thereafter, FILINVEST came to know that RALLYE had not
delivered the motor vehicle subject of the chattel mortgage to Salazar, "as the said vehicle
(had) been the subject of a sales agreement between the codefendants." Salazar defaulted in
complying with the terms and conditions of the aforesaid promissory note and chattel
mortgage. RALLYE, as assignor who guaranteed the validity of the obligation, also failed and
refused to pay FILINVEST despite demand. According to FILINVEST, the defendants
intentionally, fraudulently and with malice concealed from it the fact that there was no vehicle
delivered under the documents negotiated and assigned to it, otherwise, it would not have
accepted the negotiation and assignment of the rights and interest covered by the promissory
note and chattel mortgage. Praying for a writ of preliminary attachment, FILINVEST submitted
with its complaint the affidavit of one Gil Mananghaya, pertinent portions of which read thus:

That he is the Collection Manager, Automotive Division of Filinvest Credit

Corporation;

That in the performance of his duties, he came to know of the account of

Ernesto Salazar, which is covered by a Promissory Note and secured by
 a Chattel Mortgage, which documents together with all the rights and
interest thereto were assigned by Rallye Motor Co., Inc.;

That for failure to pay a stipulated installment, and the fact that the
principal debtor, Ernesto Salazar, and the assignor, Rallye Motor Co., Inc.
concealed the fact that there was really no motor vehicle mortgaged
under the terms of the Promissory Note and the Chattel Mortgage, the
entire amount of the obligation stated in the Promissory Note becomes
due and demandable, which Ernesto Salazar and Rallye Motor Co., Inc.
failed and refused to pay, so much so that a sufficient cause of action
really exists for Filinvest Credit Corporation to institute the corresponding
complaint against said person and entity;

That the case is one of those mentioned in Section 1, Rule 57 of his

Rules of Court, particularly an action against parties who have been guilty
of a fraud in contracting the debt or incurring the obligation upon which
the action is brought;

That there is no other sufficient security for the claim sought to be

enforced by the action, and that the amount due to the applicant Filinvest
Credit Corporation is as much as the sum for which the order is granted
above all legal counterclaims;

That this affidavit is executed for the purpose of securing a writ of

attachment from the court. 2

The specific provision adverted to in the above Affidavit is Section 1(d) of Rule 57 which
includes "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, or in concealing or disposing of
the property for the taking, detention or conversion of which the action is brought" as one
of the cases in which 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."

Judge Jorge R. Coquia (now Justice of the Court of Appeals), then presiding Judge of the
lower court, granted the prayer for a writ of attachment in an Order dated August 17,
1977 stating that:

Finding the complaint sufficient in form and substance, and in view of the
sworn statement of Gil Mananghaya, Collection Manager of the plaintiff
that defendants have committed fraud in securing the obligation and are
now avoiding payment of the same, let a writ of attachment issue upon
the plaintiff's filing of a bond in the sum of P97,000.00.

In the meantime, let summons issue on the defendants. 3

More than a year later, in an Urgent Motion dated December 11, 1978, 4 defendant
Salazar prayed that the writ of preliminary attachment issued ex parte and implemented
solely against his property be recalled and/or quashed. He argued that when he signed the
promissory note and chattel mortgage on May 5, 1977 in favor of RALLYE, FILINVEST was
hot vet his creditor or obligee, therefore, he could not be said to have committed fraud when
he contracted the obligation on May 5, 1977. Salazar added that as the motor vehicle which
was the object of the chattel mortgage and the consideration for the promissory note had
admittedly not been delivered to him by RALLYE, his repudiation of the loan and mortgage is
more justifiable.
FILINVEST filed an Opposition, but on February 2, 1979, the court a quo, this time
presided over by herein respondent Judge, ordered the dissolution and setting aside of
the writ of preliminary attachment issued on August 17, 1977 and the return to defendant
Salazar of all his properties attached by the Sheriff by virtue of the said writ. In this Order,
respondent Judge explained that:

When the incident was called for hearing, the Court announced that, as a
matter of procedure, when a motion to quash a writ of preliminary
attachment is filed, it is incumbent upon the plaintiff to prove the truth of
the allegations which were the basis for the issuance of said writ. In this
hearing, counsel for the plaintiff manifested that he was not going to
present evidence in support of the allegation of fraud. He maintained that
it should be the defendant who should prove the truth of his allegation in
the motion to dissolve the said writ. The Court disagrees. 5

FILINVEST filed a Motion for Reconsideration of the above Order, and was subsequently
allowed to adduce evidence to prove that Salazar committed fraud as alleged in the
affidavit of Gil Mananghaya earlier quoted. This notwithstanding, respondent Judge
denied the Motion in an Order dated April 4, 1979 reasoning thus:

The plaintiff's evidence show that the defendant Rallye Motor assigned to
the former defendant Salazar's promissory note and chattel mortgage by
virtue of which plaintiff discounted the note. Defendant Salazar refused to
pay the plaintiff for the reason that Rallye Motor has not delivered to
Salazar the motor vehicle which he bought from Rallye. It is the position
of plaintiff that defendant Salazar was in conspiracy with Rallye Motor in
defrauding plaintiff.

Ernesto Salazar, on his part complained that he was himself defrauded,

because while he signed a promissory note and chattel mortgage over
the motor vehicle which he bought from Rallye Motor, Rallye Motor did
not deliver to him the personal property he bought; that the address and
existence of Rallye Motor can no longer be found.

While it is true that the plaintiff may have been defrauded in this
transaction, it having paid Rallye Motor the amount of the promissory
note, there is no evidence that Ernesto Salazar had connived or in any
way conspired with Rallye Motor in the assignment of the promissory note
to the plaintiff, because of which the plaintiff paid Rallye Motor the
amount of the promissory note. Defendant Ernesto Salazar was himself a
victim of fraud. Rallye Motor was the only party which committed it. 6

From the above order denying reconsideration and ordering the sheriff to return to
Salazar the personal property attached by virtue of the writ of preliminary attachment
issued on August 17, 1977, FILINVEST filed the instant Petition on April 19, 1979. On
July 16, 1979, petitioner FILINVEST also filed an Urgent Petition for Restraining
Order7 alleging, among others, that pending this certiorari proceeding in this court, private
respondent Salazar filed a Motion for Contempt of Court in the court below directed against
FILINVEST and four other persons allegedly for their failure to obey the Order of respondent
Judge dated April 4, 1979, which Order is the subject of this Petition. On July 23, 1979, this
Court issued a temporary restraining order "enjoining respondent Judge or any person or
persons acting in his behalf from hearing private respondent's motion for contempt in Civil
Case No. 109900, entitled, 'Filinvest Credit Corporation, Plaintiff, versus The Rallye Motor
Co., Inc., et al., Defendants' of the Court of First Instance of Manila, Branch XI. " 8

Petitioner FILINVEST in its MEMORANDUM contends that respondent Judge erred:

 (1) In dissolving the writ of preliminary attachment already enforced by
the Sheriff of Manila without Salazar's posting a counter-replevin bond as
required by Rule 57, Section 12; and

(2) In finding that there was no fraud on the part of Salazar, despite
evidence in abundance to show the fraud perpetrated by Salazar at the
very inception of the contract.

It is urged in petitioner's first assignment of error that the writ of preliminary attachment
having been validly and properly issued by the lower court on August 17, 1977, the same
may only be dissolved, quashed or recalled by the posting of a counter-replevin bond
under Section 12, Rule 57 of the Revised Rules of Court which provides that:

Section 12. Discharge of Attachment upon, gluing counterbond.At any

time after an order of attachment has been granted, the party whose
property has been attached, or the person appearing on his behalf, may,
upon reasonable notice to the applicant, apply to the judge who granted
the order, or to the judge of the court, in which the action is pending, for
an order discharging the attachment wholly or in part on the security
given. The judge shall, after hearing, order the discharge of the
attachment if a cash deposit is made, or a counter-bond executed to the
attaching creditor is filed, on behalf of the adverse party, with the clerk or
judge of the court where the application is made, in an amount equal to
the value of the property attached as determined by the judge, to secure
the payment of any judgment that the attaching creditor may recover in
the action. ...

Citing the above provision, petitioner contends that the court below should not have
issued the Orders dated February 2, 1979 and April 4, 1979 for failure of private
respondent Salazar to make a cash deposit or to file a counter-bond.

On the other hand, private respondent counters that the subject writ of preliminary
attachment was improperly or irregularly issued in the first place, in that it was issued ex
parte without notice to him and without hearing.

We do not agree with the contention of private respondent. Nothing in the Rules of Court
makes notice and hearing indispensable and mandatory requisites for the issuance of a
writ of attachment. The statement in the case of Blue Green Waters, Inc. vs. Hon.
Sundiam and Tan 9 cited by private respondent, to the effect that the order of attachment
issued without notice to therein petitioner Blue Green Waters, Inc. and without giving it a
chance to prove that it was not fraudulently disposing of its properties is irregular, gives the
wrong implication. As clarified in the separate opinion of Mr. Justice Claudio Teehankee in the
same cited case, 10 a writ of attachment may be issued ex parte. Sections 3 and 4, Rule 57,
merely require that an applicant for an order of attachment file an affidavit and a bond:
the affidavit to be executed by the applicant himself or some other person who personally
knows the facts and to show that (1) there is a sufficient cause of action, (2) the case is one
of those mentioned in Section 1 of Rule 57, (3) there is no other sufficient security for the
claim sought to be enforced, and (4) the amount claimed in the action is as much as the sum
for which the order is granted above all legal counterclaims; and the bond to be "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."

We agree, however, with private respondents contention that a writ of attachment may be
discharged without the necessity of filing the cash deposit or counter-bond required by
Section 12, Rule 57, cited by petitioner. The following provision of the same Rule allows
it:

Sec. 13. Discharge of attachment for improper or irregular issuance.

The party whose property has been attached may also, at any time either
before or after the release of the attached property, or before any
attachment shall have been actually levied, upon reasonable notice to the
attaching creditor, apply to the judge who granted the order, or to the
judge of the court in which the action is pending, for an order to discharge
the attachment on the ground that the same was improperly or irregularly
issued. If the motion be made on affidavits on the part of the party whose
property has been attached, but not otherwise, the attaching creditor may
oppose the same by counter-affidavits or other evidence in addition to
that on which the attachment was made. After hearing, the judge shall
order the discharge of the attachment if it appears that it was improperly
or irregularly issued and the defect is not cured forthwith."(Emphasis
supplied)

The foregoing provision grants an aggrieved party relief from baseless and unjustifiable
attachments procured, among others, upon false allegations, without having to file any
cash deposit or counter-bond. In the instant case the order of attachment was granted
upon the allegation of petitioner, as plaintiff in the court below, that private respondent
RALLYE, the defendants, had committed "fraud in contracting the debt or incurring the
obligation upon which the action is brought," covered by Section i(d), Rule 57, earlier
quoted. Subsequent to the issuance of the attachment order on August 17, 1977, private
respondent filed in the lower court an "Urgent Motion for the Recall and Quashal of the
Writ of Preliminary Attachment on (his property)" dated December 11, 1978 11 precisely
upon the assertion that there was "absolutely no fraud on (his) part" in contracting the
obligation sued upon by petitioner. Private respondent was in effect claiming that petitioner's
allegation of fraud was false, that hence there was no ground for attachment, and that
therefore the attachment order was "improperly or irregularly issued." This Court was held
that "(i)f the grounds upon which the attachment was issued were not true ..., the defendant
has his remedy by immediately presenting a motion for the dissolution of the same. 12 We find
that private respondent's abovementioned Urgent Motion was filed under option 13, Rule 57.

The last sentence of the said provision, however, indicates that a hearing must be
conducted by the judge for the purpose of determining whether or not there reality was a
defect in the issuance of the attachment. The question is: At this hearing, on whom does
the burden of proof lie? Under the circumstances of the present case, We sustain the
ruling of the court a quo in its questioned Order dated February 2, 1979 that it should be
the plaintiff (attaching creditor), who should prove his allegation of fraud. This
pronouncement finds support in the first sentence of Section 1, Rule 131, which states
that: "Each party must prove his own affirmative allegations." The last part of the same
provision also provides that: "The burden of proof lies on the party who would be
defeated if no evidence were given on either side." It must be brne in mind that in this
jurisdiction, fraud is never presumed. FRAUS EST IdIOS ET NON
PRAESUMENDA. 13 Indeed, private transactions are presumed to have been fair and
regular. 14 Likewise, written contracts such as the documents executed by the parties in the
instant case, are presumed to have been entered into for a sufficient consideration. 15

In a similar case of Villongco, et al., vs. Hon. Panlilio, et al., 16 a writ of preliminary
attachment was issued ex parte in a case for damages on the strength of the affidavit of
therein petitioners to the effect that therein respondents had concealed, removed or disposed
of their properties, credits or accounts collectible to defraud their creditors. Subsequently, the
lower court dissolved the writ of attachment. This was questioned in a certiorari proceeding
wherein this Court held, inter alia, that:
 The affidavit supporting the petition for the issuance of the preliminary
attachment may have been sufficient to justify the issuance of the
preliminary writ, but it cannot be considered as proof of the allegations
contained in the affidavit. The reason is obvious. The allegations are
mere conclusions of law, not statement of facts. No acts of the
defendants are ever mentioned in the affidavit to show or prove the
supposed concealment to defraud creditors. Said allegations are
affirmative allegations, which plaintiffs had the obligation to prove ... 17

It appears from the records that both herein private parties did in fact adduce evidence to
support their respective claims. 18 Attached to the instant Petition as its Annex "H" 19 is a
Memorandum filed by herein petitioner FILINVEST in the court below on March 20, 1979.
After private respondent filed his Comment to the Petition, 20 petitioner filed a
Reply 21,attaching another copy of the aforesaid Memorandum as Annex "A" 22 In this case on
February 28, 1979 and March 1, 1979, the plaintiff (FILINVEST) presented in evidence
documentary exhibits "marked Exhibit A, A- I, B, B-1, B-2, B-3, B-4, C, C-1, D, E, F, G and G-
1. The Memorandum goes on to state that FILINVEST presented as its witness defendant
Salazar himself who testified that he signed Exhibits A, B, C, D, E and G; that he is a holder
of a master's degree in Business Administration and is himself a very careful and prudent
person; that he does not sign post-dated documents; that he does not sign contracts which do
not reflect the truth or which are irregular on their face, that he intended to purchase a school
bus from Rallye Motors Co., Inc. from whom he had already acquired one unit; that he had
been dealing with Abel Sahagun, manager of RALLYE, whom he had known for a long time
that he intended to purchase the school bus on installment basis so he applied for financing
with the FILINVEST; that he knew his application was approved; that with his experience as a
business executive, he knew that under a financing arrangement, upon approval of his
application, when he signed Exhibits A, B, C, D, E and G, the financing company
(FILINVEST) would release the proceeds of the loan to RALLYE and that he would be
obligated to pay the installments to FILINVEST; that he signed Exhibits A, B and C
simultaneously; that it was his wife who was always transacting business with RALLYE and
Abel Sahagun. 23

Without disputing the above summary of evidence, private respondent Salazar states in
his Comment that "the same evidence proferred by (petitioner's) counsel was adopted by
(private respondent) Ernesto Salazar during the proceedings. 24

According to the court a quo in its assailed order of April 4, 1979, Emesto Salazar "was
himself defrauded because while he signed the promissory note and the chattel
mortgage over the vehicle which he bought from Rallye Motors, RALLYE did not deliver
to him the personal property he bought." And since no fraud was committed by Salazar,
the court accordingly ordered the sheriff to return to Salazar the properties attached by
virtue of the writ of preliminary attachment issued on August 17, 1977.

We do not agree. Considering the claim of respondent Salazar that Rallye Motors did not
deliver the motor vehicle to him, it follows that the Invoice, Exhibit "C", for the motor
vehicle and the Receipt, Exhibit "G", for its delivery and both signed by Salazar, Exhibits
"C-1 " and "G-1", were fictitious. It also follows that the Promissory Note, Exhibit "A", to
pay the price of the undelivered vehicle was without consideration and therefore fake; the
Chattel Mortgage, Exhibit "B", over the non-existent vehicle was likewise a fraud; the
registration of the vehicle in the name of Salazar was a falsity and the assignment of the
promissory note by RALLYE with the conforme of respondent Salazar in favor of
petitioner over the undelivered motor vehicle was fraudulent and a falsification.

Respondent Salazar, knowing that no motor vehicle was delivered to him by RALLYE,
executed and committed all the above acts as shown the exhibits enumerated above. He
agreed and consented to the assignment by RALLYE of the fictitious promissory note
and the fraudulent chattel mortgage, affixing his signature thereto, in favor of petitioner
FILINVEST who, in the ordinary course of business, relied on the regularity and validity of
the transaction. Respondent had previously applied for financing assistance from
petitioner FILINVEST as shown in Exhibits "E " and "E-1 " and his application was
approved, thus he negotiated for the acquisition of the motor vehicle in question from
Rallye Motors. Since he claimed that the motor vehicle was not delivered to him, then he
was duty-bound to reveal that to FILINVEST, it being material in inducing the latter to
accept the assignment of the promissory note and the chattel mortgage. More than that,
good faith as well as commercial usages or customs require the disclosure of facts and
circumstances which go into the very object and consideration of the contractual
obligation. We rule that the failure of respondent Salazar to disclose the material fact of
non-delivery of the motor vehicle, there being a duty on his part to reveal them,
constitutes fraud. (Article 1339, New Civil Code).

We hold that the court a quo committed grave abuse of discretion in dissolving and
setting aside the writ of preliminary attachment issued on August 17, 1977.

WHEREFORE, IN VIEW OF THE FOREGOING, the appealed Orders of the lower court
dated February 2, 1979 and April 4, 1979 are hereby REVERSED and SET ASIDE. The
temporary restraining order issued by Us on July 23, 1979 is hereby made permanent.
No costs.

Petition granted.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 124642 February 23, 2004

ALFREDO CHING and ENCARNACION CHING, petitioners

vs.
THE HON. COURT OF APPEALS and ALLIED BANKING
CORPORATION, respondents.

DECISION

CALLEJO, SR., J.:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the
Decision1 of the Court of Appeals (CA) dated November 27, 1995 in CA-G.R. SP No.
33585, as well as the Resolution2 on April 2, 1996 denying the petitioners motion for
reconsideration. The impugned decision granted the private respondents petition
for certiorariand set aside the Orders of the trial court dated December 15, 19933 and
February 17, 19944 nullifying the attachment of 100,000 shares of stocks of the Citycorp
Investment Philippines under the name of petitioner Alfredo Ching.

The following facts are undisputed:

On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained
a loan of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue of this loan,
the PBMCI, through its Executive Vice-President Alfredo Ching, executed a promissory
note for the said amount promising to pay on December 22, 1978 at an interest rate of
14% per annum.5 As added security for the said loan, on September 28, 1978, Alfredo
Ching, together with Emilio Taedo and Chung Kiat Hua, executed a continuing guaranty
with the ABC binding themselves to jointly and severally guarantee the payment of all the
PBMCI obligations owing the ABC to the extent ofP38,000,000.00.6 The loan was
subsequently renewed on various dates, the last renewal having been made on
December 4, 1980.7

Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the
amount of P13,000,000.00 payable in eighteen months at 16% interest per annum. As in
the previous loan, the PBMCI, through Alfredo Ching, executed a promissory note to
evidence the loan maturing on June 29, 1981.8 This was renewed once for a period of
one month.9

The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the
ABC filed a complaint for sum of money with prayer for a writ of preliminary attachment
against the PBMCI to collect the P12,612,972.88 exclusive of interests, penalties and
other bank charges. Impleaded as co-defendants in the complaint were Alfredo Ching,
Emilio Taedo and Chung Kiat Hua in their capacity as sureties of the PBMCI.

The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila,
Branch XVIII.10 In its application for a writ of preliminary attachment, the ABC averred that
the "defendants are guilty of fraud in incurring the obligations upon which the present
action is brought11 in that they falsely represented themselves to be in a financial position
to pay their obligation upon maturity thereof."12 Its supporting affidavit stated, inter alia,
that the "[d]efendants have removed or disposed of their properties, or [are] ABOUT to
do so, with intent to defraud their creditors."13

On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying
the ABCs application for a writ of preliminary attachment. The trial court decreed that the
grounds alleged in the application and that of its supporting affidavit "are all conclusions
of fact and of law" which do not warrant the issuance of the writ prayed for.14On motion
for reconsideration, however, the trial court, in an Order dated September 14, 1981,
reconsidered its previous order and granted the ABCs application for a writ of preliminary
attachment on a bond of P12,700,000. The order, in relevant part, stated:

With respect to the second ground relied upon for the grant of the writ of preliminary
attachment ex-parte, which is the alleged disposal of properties by the defendants with
intent to defraud creditors as provided in Sec. 1(e) of Rule 57 of the Rules of Court, the
affidavits can only barely justify the issuance of said writ as against the defendant Alfredo
Ching who has allegedly bound himself jointly and severally to pay plaintiff the defendant
corporations obligation to the plaintiff as a surety thereof.

WHEREFORE, let a writ of preliminary attachment issue as against the defendant

Alfredo Ching requiring the sheriff of this Court to attach all the properties of said Alfredo
Ching not exceeding P12,612,972.82 in value, which are within the jurisdiction of this
Court and not exempt from execution upon, the filing by plaintiff of a bond duly approved
by this Court in the sum of Twelve Million Seven Hundred Thousand Pesos
(P12,700,000.00) executed in favor of the defendant Alfredo Ching to secure the
payment by plaintiff to him of all the costs which may be adjudged in his favor and all
damages he may sustain by reason of the attachment if the court shall finally adjudge
that the plaintiff was not entitled thereto.

SO ORDERED.15

Upon the ABCs posting of the requisite bond, the trial court issued a writ of preliminary
attachment. Subsequently, summonses were served on the defendants,16 save Chung
Kiat Hua who could not be found.

Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for
suspension of payments with the Securities and Exchange Commission (SEC), docketed
as SEC Case No. 2250, at the same time seeking the PBMCIs rehabilitation.17

On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including its
assets and liabilities, under rehabilitation receivership, and ordered that "all actions for
claims listed in Schedule "A" of the petition pending before any court or tribunal are
hereby suspended in whatever stage the same may be until further orders from the
Commission."18 The ABC was among the PBMCIs creditors named in the said schedule.

Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion
to Dismiss and/or motion to suspend the proceedings in Civil Case No. 142729 invoking
the PBMCIs pending application for suspension of payments (which Ching co-signed)
and over which the SEC had already assumed jurisdiction.19 On February 4, 1983, the
ABC filed its Opposition thereto.20

In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on
attachment the 100,000 common shares of Citycorp stocks in the name of Alfredo
Ching.21

Thereafter, in an Order dated September 16, 1983, the trial court partially granted the
aforementioned motion by suspending the proceedings only with respect to the PBMCI. It
denied Chings motion to dismiss the complaint/or suspend the proceedings and pointed
out that P.D. No. 1758 only concerns the activities of corporations, partnerships and
associations and was never intended to regulate and/or control activities of individuals.
Thus, it directed the individual defendants to file their answers.22

Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend
Proceedings on the same ground of the pendency of SEC Case No. 2250. This motion
met the opposition from the ABC.23

On January 20, 1984, Taedo filed his Answer with counterclaim and cross-
claim.24 Ching eventually filed his Answer on July 12, 1984.25

On October 25, 1984, long after submitting their answers, Ching filed an Omnibus
Motion,26 again praying for the dismissal of the complaint or suspension of the
proceedings on the ground of the July 9, 1982 Injunctive Order issued in SEC Case No.
2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from
the defenses of his principal. The ABC opposed Chings omnibus motion.

Emilio Y. Taedo, thereafter, filed his own Omnibus Motion27 praying for the dismissal of
the complaint, arguing that the ABC had "abandoned and waived" its right to proceed
against the continuing guaranty by its act of resorting to preliminary attachment.

On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary
attachment bond fromP12,700,000 to P6,350,000.28 Alfredo Ching opposed the
motion,29 but on April 2, 1987, the court issued an Order setting the incident for further
hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the actual
value of the properties of Alfredo Ching levied on by the sheriff.30

On March 2, 1988, the trial court issued an Order granting the motion of the ABC and
rendered the attachment bond of P6,350,000.31

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching,
filed a Motion to Set Aside the levy on attachment. She alleged inter alia that the 100,000
shares of stocks levied on by the sheriff were acquired by her and her husband during
their marriage out of conjugal funds after the Citycorp Investment Philippines was
established in 1974. Furthermore, the indebtedness covered by the continuing
guaranty/comprehensive suretyship contract executed by petitioner Alfredo Ching for the
account of PBMCI did not redound to the benefit of the conjugal partnership. She,
likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant
entitled to file a motion for the release of the properties.32 She attached therewith a copy
of her marriage contract with Alfredo Ching.33

The ABC filed a comment on the motion to quash preliminary attachment and/or motion
to expunge records, contending that:

2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present
case; thus, she has no personality to file any motion before this Honorable Court;

2.2 Said supposed movant did not file any Motion for Intervention pursuant to
Section 2, Rule 12 of the Rules of Court;

2.3 Said Motion cannot even be construed to be in the nature of a Third-Party

Claim conformably with Sec. 14, Rule 57 of the Rules of Court.
3. Furthermore, assuming in gracia argumenti that the supposed movant has the required
personality, her Motion cannot be acted upon by this Honorable Court as the above-
entitled case is still in the archives and the proceedings thereon still remains suspended.
And there is no previous Motion to revive the same.34

The ABC also alleged that the motion was barred by prescription or by laches because
the shares of stocks were in custodia legis.

During the hearing of the motion, Encarnacion T. Ching adduced in evidence her
marriage contract to Alfredo Ching to prove that they were married on January 8,
1960;35 the articles of incorporation of Citycorp Investment Philippines dated May 14,
1979;36 and, the General Information Sheet of the corporation showing that petitioner
Alfredo Ching was a member of the Board of Directors of the said corporation and was
one of its top twenty stockholders.

On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to
expunge records.

Acting on the aforementioned motion, the trial court issued on December 15, 1993 an
Order37 lifting the writ of preliminary attachment on the shares of stocks and ordering the
sheriff to return the said stocks to the petitioners. The dispositive portion reads:

WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9,

1993, is hereby granted. Let the writ of preliminary attachment subject matter of said
motion, be quashed and lifted with respect to the attached 100,000 common shares of
stock of Citycorp Investment Philippines in the name of the defendant Alfredo Ching, the
said shares of stock to be returned to him and his movant-spouse by Deputy Sheriff
Apolonio A. Golfo who effected the levy thereon on July 26, 1983, or by whoever may be
presently in possession thereof.

SO ORDERED.38

The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order
but denied the same on February 17, 1994. The petitioner bank forthwith filed a petition
for certiorari with the CA, docketed as CA-G.R. SP No. 33585, for the nullification of the
said order of the court, contending that:

1. The respondent Judge exceeded his authority thereby acted without

jurisdiction in taking cognizance of, and granting a "Motion" filed by a complete
stranger to the case.

2. The respondent Judge committed a grave abuse of discretion in lifting the writ
of preliminary attachment without any basis in fact and in law, and contrary to
established jurisprudence on the matter.39

On November 27, 1995, the CA rendered judgment granting the petition and setting
aside the assailed orders of the trial court, thus:

WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the
questioned orders (dated December 15, 1993 and February 17, 1994) for being null and
void.

SO ORDERED.40
The CA sustained the contention of the private respondent and set aside the assailed
orders. According to the CA, the RTC deprived the private respondent of its right to file a
bond under Section 14, Rule 57 of the Rules of Court. The petitioner Encarnacion T.
Ching was not a party in the trial court; hence, she had no right of action to have the levy
annulled with a motion for that purpose. Her remedy in such case was to file a separate
action against the private respondent to nullify the levy on the 100,000 Citycorp shares of
stocks. The court stated that even assuming that Encarnacion T. Ching had the right to
file the said motion, the same was barred by laches.

Citing Wong v. Intermediate Appellate Court,41 the CA ruled that the presumption in
Article 160 of the New Civil Code shall not apply where, as in this case, the petitioner-
spouses failed to prove the source of the money used to acquire the shares of stock. It
held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the fact
that the said shares were registered in the corporate books of Citycorp solely under his
name. Thus, according to the appellate court, the RTC committed a grave abuse of its
discretion amounting to excess or lack of jurisdiction in issuing the assailed orders. The
petitioners motion for reconsideration was denied by the CA in a Resolution dated April
2, 1996.

The petitioner-spouses filed the instant petition for review on certiorari, asserting that the
RTC did not commit any grave abuse of discretion amounting to excess or lack of
jurisdiction in issuing the assailed orders in their favor; hence, the CA erred in reversing
the same. They aver that the source of funds in the acquisition of the levied shares of
stocks is not the controlling factor when invoking the presumption of the conjugal nature
of stocks under Art. 160,42 and that such presumption subsists even if the property is
registered only in the name of one of the spouses, in this case, petitioner Alfredo
Ching.43 According to the petitioners, the suretyship obligation was not contracted in the
pursuit of the petitioner-husbands profession or business.44 And, contrary to the ruling of
the CA, where conjugal assets are attached in a collection suit on an obligation
contracted by the husband, the wife should exhaust her motion to quash in the main case
and not file a separate suit.45 Furthermore, the petitioners contend that under Art. 125 of
the Family Code, the petitioner-husbands gratuitous suretyship is null and void ab
initio,46 and that the share of one of the spouses in the conjugal partnership remains
inchoate until the dissolution and liquidation of the partnership.47

In its comment on the petition, the private respondent asserts that the CA correctly
granted its petition for certiorari nullifying the assailed order. It contends that the CA
correctly relied on the ruling of this Court in Wong v. Intermediate Appellate Court. Citing
Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private respondent
alleges that the continuing guaranty and suretyship executed by petitioner Alfredo Ching
in pursuit of his profession or business. Furthermore, according to the private
respondent, the right of the petitioner-wife to a share in the conjugal partnership property
is merely inchoate before the dissolution of the partnership; as such, she had no right to
file the said motion to quash the levy on attachment of the shares of stocks.

The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file
the motion to quash the levy on attachment on the 100,000 shares of stocks in the
Citycorp Investment Philippines; (b) whether or not the RTC committed a grave abuse of
its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.

On the first issue, we agree with the petitioners that the petitioner-wife had the right to file
the said motion, although she was not a party in Civil Case No. 142729.48

In Ong v. Tating,49 we held that the sheriff may attach only those properties of the
defendant against whom a writ of attachment has been issued by the court. When the
sheriff erroneously levies on attachment and seizes the property of a third person in
which the said defendant holds no right or interest, the superior authority of the court
which has authorized the execution may be invoked by the aggrieved third person in the
same case. Upon application of the third person, the court shall order a summary hearing
for the purpose of determining whether the sheriff has acted rightly or wrongly in the
performance of his duties in the execution of the writ of attachment, more specifically if
he has indeed levied on attachment and taken hold of property not belonging to the
plaintiff. If so, the court may then order the sheriff to release the property from the
erroneous levy and to return the same to the third person. In resolving the motion of the
third party, the court does not and cannot pass upon the question of the title to the
property with any character of finality. It can treat the matter only insofar as may be
necessary to decide if the sheriff has acted correctly or not. If the claimants proof does
not persuade the court of the validity of the title, or right of possession thereto, the claim
will be denied by the court. The aggrieved third party may also avail himself of the
remedy of "terceria" by executing an affidavit of his title or right of possession over the
property levied on attachment and serving the same to the office making the levy and the
adverse party. Such party may also file an action to nullify the levy with damages
resulting from the unlawful levy and seizure, which should be a totally separate and
distinct action from the former case. The above-mentioned remedies are cumulative and
any one of them may be resorted to by one third-party claimant without availing of the
other remedies.50

In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the
100,000 shares of stocks in the name of petitioner-husband claiming that the said shares
of stocks were conjugal in nature; hence, not liable for the account of her husband under
his continuing guaranty and suretyship agreement with the PBMCI. The petitioner-wife
had the right to file the motion for said relief.

On the second issue, we find and so hold that the CA erred in setting aside and reversing
the orders of the RTC. The private respondent, the petitioner in the CA, was burdened to
prove that the RTC committed a grave abuse of its discretion amounting to excess or
lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the legal
purpose to determine the case; there is excess of jurisdiction where the tribunal, being
clothed with the power to determine the case, oversteps its authority as determined by
law. There is grave abuse of discretion where the tribunal acts in a capricious, whimsical,
arbitrary or despotic manner in the exercise of its judgment and is equivalent to lack of
jurisdiction.51

It was incumbent upon the private respondent to adduce a sufficiently strong

demonstration that the RTC acted whimsically in total disregard of evidence material to,
and even decide of, the controversy before certiorari will lie. A special civil action for
certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of
judgment. When a court exercises its jurisdiction, an error committed while so engaged
does not deprive it of its jurisdiction being exercised when the error is committed.52

After a comprehensive review of the records of the RTC and of the CA, we find and so
hold that the RTC did not commit any grave abuse of its discretion amounting to excess
or lack of jurisdiction in issuing the assailed orders.

Article 160 of the New Civil Code provides that all the properties acquired during the
marriage are presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband, or to the wife. InTan v. Court of Appeals,53 we held
that it is not even necessary to prove that the properties were acquired with funds of the
partnership. As long as the properties were acquired by the parties during the marriage,
they are presumed to be conjugal in nature. In fact, even when the manner in which the
properties were acquired does not appear, the presumption will still apply, and the
properties will still be considered conjugal. The presumption of the conjugal nature of the
properties acquired during the marriage subsists in the absence of clear, satisfactory and
convincing evidence to overcome the same.54

In this case, the evidence adduced by the petitioners in the RTC is that the 100,000
shares of stocks in the Citycorp Investment Philippines were issued to and registered in
its corporate books in the name of the petitioner-husband when the said corporation was
incorporated on May 14, 1979. This was done during the subsistence of the marriage of
the petitioner-spouses. The shares of stocks are, thus, presumed to be the conjugal
partnership property of the petitioners. The private respondent failed to adduce evidence
that the petitioner-husband acquired the stocks with his exclusive money.55 The
barefaced fact that the shares of stocks were registered in the corporate books of
Citycorp Investment Philippines solely in the name of the petitioner-husband does not
constitute proof that the petitioner-husband, not the conjugal partnership, owned the
same.56 The private respondents reliance on the rulings of this Court in Maramba v.
Lozano57 and Associated Insurance & Surety Co., Inc. v. Banzon58 is misplaced. In the
Maramba case, we held that where there is no showing as to when the property was
acquired, the fact that the title is in the wifes name alone is determinative of the
ownership of the property. The principle was reiterated in the Associated Insurance case
where the uncontroverted evidence showed that the shares of stocks were acquired
during the marriage of the petitioners.

Instead of fortifying the contention of the respondents, the ruling of this Court in Wong v.
Intermediate Appellate Court59 buttresses the case for the petitioners. In that case, we
ruled that he who claims that property acquired by the spouses during their marriage is
not conjugal partnership property but belongs to one of them as his personal property is
burdened to prove the source of the money utilized to purchase the same. In this case,
the private respondent claimed that the petitioner-husband acquired the shares of stocks
from the Citycorp Investment Philippines in his own name as the owner thereof. It was,
thus, the burden of the private respondent to prove that the source of the money utilized
in the acquisition of the shares of stocks was that of the petitioner-husband alone. As
held by the trial court, the private respondent failed to adduce evidence to prove this
assertion.

The CA, likewise, erred in holding that by executing a continuing guaranty and suretyship
agreement with the private respondent for the payment of the PBMCI loans, the
petitioner-husband was in the exercise of his profession, pursuing a legitimate business.
The appellate court erred in concluding that the conjugal partnership is liable for the said
account of PBMCI under Article 161(1) of the New Civil Code.

Article 161(1) of the New Civil Code (now Article 121[2 and 3]60 of the Family Code of the
Philippines) provides:

Art. 161. The conjugal partnership shall be liable for:

(1) All debts and obligations contracted by the husband for the benefit of the conjugal
partnership, and those contracted by the wife, also for the same purpose, in the cases
where she may legally bind the partnership.

The petitioner-husband signed the continuing guaranty and suretyship agreement as

security for the payment of the loan obtained by the PBMCI from the private respondent
in the amount of P38,000,000. In Ayala Investment and Development Corp. v. Court of
Appeals,61 this Court ruled "that the signing as surety is certainly not an exercise of an
industry or profession. It is not embarking in a business. No matter how often an
executive acted on or was persuaded to act as surety for his own employer, this should
not be taken to mean that he thereby embarked in the business of suretyship or
guaranty."
For the conjugal partnership to be liable for a liability that should appertain to the
husband alone, there must be a showing that some advantages accrued to the spouses.
Certainly, to make a conjugal partnership responsible for a liability that should appertain
alone to one of the spouses is to frustrate the objective of the New Civil Code to show the
utmost concern for the solidarity and well being of the family as a unit. The husband,
therefore, is denied the power to assume unnecessary and unwarranted risks to the
financial stability of the conjugal partnership.62

In this case, the private respondent failed to prove that the conjugal partnership of the
petitioners was benefited by the petitioner-husbands act of executing a continuing
guaranty and suretyship agreement with the private respondent for and in behalf of
PBMCI. The contract of loan was between the private respondent and the PBMCI, solely
for the benefit of the latter. No presumption can be inferred from the fact that when the
petitioner-husband entered into an accommodation agreement or a contract of surety, the
conjugal partnership would thereby be benefited. The private respondent was burdened
to establish that such benefit redounded to the conjugal partnership.63

It could be argued that the petitioner-husband was a member of the Board of Directors of
PBMCI and was one of its top twenty stockholders, and that the shares of stocks of the
petitioner-husband and his family would appreciate if the PBMCI could be rehabilitated
through the loans obtained; that the petitioner-husbands career would be enhanced
should PBMCI survive because of the infusion of fresh capital. However, these are not
the benefits contemplated by Article 161 of the New Civil Code. The benefits must be
those directly resulting from the loan. They cannot merely be a by-product or a spin-off of
the loan itself.64

This is different from the situation where the husband borrows money or receives
services to be used for his own business or profession. In the Ayala case, we ruled that it
is such a contract that is one within the term "obligation for the benefit of the conjugal
partnership." Thus:

(A) If the husband himself is the principal obligor in the contract, i.e., he directly received
the money and services to be used in or for his own business or his own profession, that
contract falls within the term " obligations for the benefit of the conjugal partnership."
Here, no actual benefit may be proved. It is enough that the benefit to the family is
apparent at the time of the signing of the contract. From the very nature of the contract of
loan or services, the family stands to benefit from the loan facility or services to be
rendered to the business or profession of the husband. It is immaterial, if in the end, his
business or profession fails or does not succeed. Simply stated, where the husband
contracts obligations on behalf of the family business, the law presumes, and rightly so,
that such obligation will redound to the benefit of the conjugal partnership.65

The Court held in the same case that the rulings of the Court in Cobb-Perez and G-
Tractors, Inc. are not controlling because the husband, in those cases, contracted the
obligation for his own business. In this case, the petitioner-husband acted merely as a
surety for the loan contracted by the PBMCI from the private respondent.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals are SET ASIDE AND REVERSED. The assailed
orders of the RTC are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 155868 February 6, 2007

SPOUSES GREGORIO and JOSEFA YU, Petitioners,

vs.
NGO YET TE, doing business under the name and style, ESSENTIAL
MANUFACTURING, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the March 21, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
522462 and its October 14, 2002 Resolution.3

The antecedent facts are not disputed.

Spouses Gregorio and Josefa Yu (Spouses Yu) purchased from Ngo Yet Te (Te) bars of
detergent soap worthP594,240.00, and issued to the latter three postdated checks 4 as
payment of the purchase price. When Te presented the checks at maturity for
encashment, said checks were returned dishonored and stamped "ACCOUNT
CLOSED".5 Te demanded6 payment from Spouses Yu but the latter did not heed her
demands. Acting through her son and attorney-in-fact, Charry Sy (Sy), Te filed with the
Regional Trial Court (RTC), Branch 75, Valenzuela, Metro Manila, a
Complaint,7 docketed as Civil Case No. 4061-V-93, for Collection of Sum of Money and
Damages with Prayer for Preliminary Attachment.

In support of her prayer for preliminary attachment, Te attached to her Complaint an

Affidavit executed by Sy that Spouses Yu were guilty of fraud in entering into the
purchase agreement for they never intended to pay the contract price, and that, based on
reliable information, they were about to move or dispose of their properties to defraud
their creditors.8

Upon Tes posting of an attachment bond,9 the RTC issued an Order of

Attachment/Levy10 dated March 29, 1993 on the basis of which Sheriff Constancio
Alimurung (Sheriff Alimurung) of RTC, Branch 19, Cebu City levied and attached
Spouses Yus properties in Cebu City consisting of one parcel of land (known as Lot No.
11)11 and four units of motor vehicle, specifically, a Toyota Ford Fierra, a jeep, a Canter
delivery van, and a passenger bus.12

On April 21, 1993, Spouses Yu filed an Answer13 with counterclaim for damages arising
from the wrongful attachment of their properties, specifically, actual damages amounting
to P1,500.00 per day; moral damages,P1,000,000.00; and exemplary
damages, P50,000.00. They also sought payment of P120,000.00 as attorneys fees
and P80,000.00 as litigation expenses.14 On the same date, Spouses Yu filed an Urgent
Motion to Dissolve Writ of Preliminary Attachment.15 They also filed a Claim Against
Surety Bond16 in which they demanded payment from Visayan Surety and Insurance
Corporation (Visayan Surety), the surety which issued the attachment bond, of the sum
of P594,240.00, representing the damages they allegedly sustained as a consequence of
the wrongful attachment of their properties.
While the RTC did not resolve the Claim Against Surety Bond, it issued an Order 17 dated
May 3, 1993, discharging from attachment the Toyota Ford Fierra, jeep, and Canter
delivery van on humanitarian grounds, but maintaining custody of Lot No. 11 and the
passenger bus. Spouses Yu filed a Motion for Reconsideration18 which the RTC denied.19

Dissatisfied, they filed with the CA a Petition for Certiorari,20 docketed as CA-G.R. SP No.
31230, in which a Decision21 was rendered on September 14, 1993, lifting the RTC Order
of Attachment on their remaining properties. It reads in part:

In the case before Us, the complaint and the accompanying affidavit in support of the
application for the writ only contains general averments. Neither pleading states in
particular how the fraud was committed or the badges of fraud purportedly committed by
the petitioners to establish that the latter never had an intention to pay the obligation;
neither is there a statement of the particular acts committed to show that the petitioners
are in fact disposing of their properties to defraud creditors. x x x.

xxxx

Moreover, at the hearing on the motion to discharge the order of attachment x x x

petitioners presented evidence showing that private respondent has been extending
multi-million peso credit facilities to the petitioners for the past seven years and that the
latter have consistently settled their obligations. This was not denied by private
respondent. Neither does the private respondent contest the petitioners allegations that
they have been recently robbed of properties of substantial value, hence their inability to
pay on time. By the respondent courts own pronouncements, it appears that the order of
attachment was upheld because of the admitted financial reverses the petitioner is
undergoing.

This is reversible error. Insolvency is not a ground for attachment especially when
defendant has not been shown to have committed any act intended to defraud its
creditors x x x.

For lack of factual basis to justify its issuance, the writ of preliminary attachment issued
by the respondent court was improvidently issued and should be discharged.22

From said CA Decision, Te filed a Motion for Reconsideration but to no avail.23

Te filed with us a Petition for Review on Certiorari24 but we denied the same in a
Resolution dated June 8, 1994 for having been filed late and for failure to show that a
reversible error was committed by the CA.25 Entry of Judgment of our June 8, 1994
Resolution was made on July 22, 1994.26 Thus, the finding of the CA in its September 14,
1993 Decision in CA-G.R. SP No. 31230 on the wrongfulness of the attachment/levy of
the properties of Spouses Yu became conclusive and binding.

However, on July 20, 1994, the RTC, apparently not informed of the SC Decision,
rendered a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the Court finds that the plaintiff has established a
valid civil cause of action against the defendants, and therefore, renders this judgment in
favor of the plaintiff and against the defendants, and hereby orders the following:

1) Defendants are hereby ordered or directed to pay the plaintiff the sum
of P549,404.00, with interest from the date of the filing of this case (March 3,
1993);
 2) The Court, for reasons aforestated, hereby denies the grant of damages to the
plaintiff;

3) The Court hereby adjudicates a reasonable attorneys fees and litigation

expenses of P10,000.00 in favor of the plaintiff;

4) On the counterclaim, this Court declines to rule on this, considering that the
question of the attachment which allegedly gave rise to the damages incurred by
the defendants is being determined by the Supreme Court.

SO ORDERED.27 (Emphasis ours)

Spouses Yu filed with the RTC a Motion for Reconsideration28 questioning the disposition
of their counterclaim. They also filed a Manifestation29 informing the RTC of our June 8,
1994 Resolution in G.R. No. 114700.

The RTC issued an Order dated August 9, 1994, which read:

xxxx

(2) With regard the counter claim filed by the defendants against the plaintiff for
the alleged improvident issuance of this Court thru its former Presiding Judge
(Honorable Emilio Leachon, Jr.), the same has been ruled with definiteness by
the Supreme Court that, indeed, the issuance by the Court of the writ of
preliminary attachment appears to have been improvidently done, but nowhere
in the decision of the Supreme Court and for that matter, the Court of
Appeals decision which was in effect sustained by the High Court,
contains any ruling or directive or imposition, of any damages to be paid by
the plaintiff to the defendants, in other words, both the High Court and the CA,
merely declared the previous issuance of the writ of attachment by this Court thru
its former presiding judge to be improvidently issued, but it did not award any
damages of any kind to the defendants, hence, unless the High Court or the CA
rules on this, this Court coud not grant any damages by virtue of the improvident
attachment made by this Court thru its former presiding judge, which was claimed
by the defendants in their counter claim.

(3) This Court hereby reiterates in toto its Decision in this case dated July 20,
1994. 30 (Emphasis ours)

The RTC also issued an Order dated December 2, 1994,31 denying the Motion for
Reconsideration of Spouses Yu.32

In the same December 2, 1994 Order, the RTC granted two motions filed by Te, a Motion
to Correct and to Include Specific Amount for Interest and a Motion for Execution
Pending Appeal.33 The RTC also denied Spouses Yus Notice of Appeal34 from the July
20, 1994 Decision and August 9, 1994 Order of the RTC.

From said December 2, 1994 RTC Order, Spouses Yu filed another Notice of
Appeal 35 which the RTC also denied in an Order36 dated January 5, 1995.

Spouses Yu filed with the CA a Petition37 for Certiorari, Prohibition and Mandamus,
docketed as CA-G.R. SP No. 36205, questioning the denial of their Notices of Appeal;
and seeking the modification of the July 20, 1994 Decision and the issuance of a Writ of
Execution. The CA granted the Petition in a Decision38 dated June 22, 1995.
Hence, Spouses Yu filed with the CA an appeal39 docketed as CA-G.R. CV No. 52246,
questioning only that portion of the July 20, 1994 Decision where the RTC declined to
rule on their counterclaim for damages.40 However, Spouses Yu did not dispute the
specific monetary awards granted to respondent Te; and therefore, the same have
become final and executory.

Although in the herein assailed Decision41 dated March 21, 2001, the CA affirmed in
toto the RTC Decision, it nonetheless made a ruling on the counterclaim of Spouses Yu
by declaring that the latter had failed to adduce sufficient evidence of their entitlement to
damages.

Spouses Yu filed a Motion for Reconsideration42 but the CA denied it in the herein
assailed Resolution43 dated October 14, 2002.

Spouses Yu filed the present Petition raising the following issues:

I. Whether or not the appellate court erred in not holding that the writ of
attachment was procured in bad faith, after it was established by final judgment
that there was no true ground therefor.

II. Whether or not the appellate court erred in refusing to award actual, moral and
exemplary damages after it was established by final judgment that the writ of
attachment was procured with no true ground for its issuance.44

There is one preliminary matter to set straight before we resolve the foregoing issues.

According to respondent Te,45 regardless of the evidence presented by Spouses Yu, their
counterclaim was correctly dismissed for failure to comply with the procedure laid down
in Section 20 of Rule 57. Te contends that as Visayan Surety was not notified of the
counterclaim, no judgment thereon could be validly rendered.

Such argument is not only flawed, it is also specious.

As stated earlier, Spouses Yu filed a Claim Against Surety Bond on the same day they
filed their Answer and Urgent Motion to Dissolve Writ of Preliminary
Attachment.46 Further, the records reveal that on June 18, 1993, Spouses Yu filed with
the RTC a Motion to Give Notice to Surety.47 The RTC granted the Motion in an
Order48 dated June 23, 1993. Accordingly, Visayan Surety was notified of the pre-trial
conference to apprise it of a pending claim against its attachment bond. Visayan Surety
received the notice on July 12, 1993 as shown by a registry return receipt attached to the
records.49

Moreover, even if it were true that Visayan Surety was left in the proceedings a quo, such
omission is not fatal to the cause of Spouses Yu. In Malayan Insurance Company, Inc. v.
Salas,50 we held that "x x x if the surety was not given notice when the claim for damages
against the principal in the replevin bond was heard, then as a matter of procedural due
process the surety is entitled to be heard when the judgment for damages against the
principal is sought to be enforced against the suretys replevin bond."51 This remedy is
applicable for the procedures governing claims for damages

on an attachment bond and on a replevin bond are the same.52

We now proceed to resolve the issues jointly.

Spouses Yu contend that they are entitled to their counterclaim for damages as a matter
of right in view of the finality of our June 8, 1994 Resolution in G.R. No. 114700 which
affirmed the finding of the CA in its September 14, 1993 Decision in CA-G.R. SP No.
31230 that respondent Te had wrongfully caused the attachment of their properties.
Citing Javellana v. D.O. Plaza Enterprises, Inc.,53 they argue that they should be awarded
damages based solely on the CA finding that the attachment was illegal for it already
suggests that Te acted with malice when she applied for attachment. And even if we
were to assume that Te did not act with malice, still she should be held liable for the
aggravation she inflicted when she applied for attachment even when she was clearly not
entitled to it.54

That is a rather limited understanding of Javellana. The counterclaim disputed therein

was not for moral damages and therefore, there was no need to prove malice. As early
as in Lazatin v. Twao,55 we laid down the rule that where there is wrongful attachment,
the attachment defendant may recover actual damages even without proof that the
attachment plaintiff acted in bad faith in obtaining the attachment. However, if it is alleged
and established that the attachment was not merely wrongful but also malicious, the
attachment defendant may recover moral damages and exemplary damages as
well. 56 Either way, the wrongfulness of the attachment does not warrant the automatic
award of damages to the attachment defendant; the latter must first discharge the burden
of proving the nature and extent of the loss or injury incurred by reason of the wrongful
attachment.57

In fine, the CA finding that the attachment of the properties of Spouses Yu was wrongful
did not relieve Spouses Yu of the burden of proving the factual basis of their counterclaim
for damages.

To merit an award of actual damages arising from a wrongful attachment, the attachment
defendant must prove, with the best evidence obtainable, the fact of loss or injury
suffered and the amount thereof.58 Such loss or injury must be of the kind which is not
only capable of proof but must actually be proved with a reasonable degree of certainty.
As to its amount, the same must be measurable based on specific facts, and not on
guesswork or speculation. 59 In particular, if the claim for actual damages covers
unrealized profits, the amount of unrealized profits must be estalished and supported by
independent evidence of the mean income of the business undertaking interrupted by the
illegal seizure. 60

Spouses Yu insist that the evidence they presented met the foregoing standards. They
point to the lists of their daily net income from the operation of said passenger bus based
on used ticket stubs61 issued to their passengers. They also cite unused ticket stubs as
proof of income foregone when the bus was wrongfully seized.62 They further cite the
unrebutted testimony of Josefa Yu that, in the day-to-day operation of their passenger
bus, they use up at least three ticket stubs and earn a minimum daily income
of P1,500.00.63

In ruling that Spouses Yu failed to adduce sufficient evidence to support their

counterclaim for actual damages, the CA stated, thus:

In this case, the actual damages cannot be determined. Defendant-appellant Josefa Yu

testified on supposed lost profits without clear and appreciable explanation. Despite her
submission of the used and unused ticket stubs, there was no evidence on the daily net
income, the routes plied by the bus and the average fares for each route. The submitted
basis is too speculative and conjectural. No reports regarding the average actual profits
and other evidence of profitability necessary to prove the amount of actual damages
were presented. Thus, the Court a quodid not err in not awarding damages in favor of
defendants-appellants.64
We usually defer to the expertise of the CA, especially when it concurs with the factual
findings of the RTC.65Indeed, findings of fact may be passed upon and reviewed by the
Supreme Court in the following instances: (1) when the conclusion is a finding grounded
entirely on speculations, surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) where there is a grave abuse of discretion
in the appreciation of facts; (4) when judgment is based on a misapprehension of facts;
(5) when the lower court, in making its findings, went beyond the issues of the case and
such findings are contrary to the admissions of both appellant and appellee; (6) when the
factual findings of the CA are contrary to those of the trial court; (7) when the findings of
fact are themselves conflicting; (8) when the findings of fact are conclusions made
without a citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners main and reply briefs are not disputed by
the respondents; (10) when the findings of fact of the lower court are premised on the
supposed absence of evidence and are contradicted by the evidence on
record.66 However, the present case does not fall under any of the exceptions. We are in
full accord with the CA that Spouses Yu failed to prove their counterclaim.

Spouses Yus claim for unrealized income of P1,500.00 per day was based on their
computation of their average daily income for the year 1992. Said computation in turn is
based on the value of three ticket stubs sold over only five separate days in 1992. 67 By
no stretch of the imagination can we consider ticket sales for five days sufficient evidence
of the average daily income of the passenger bus, much less its mean income. Not even
the unrebutted testimony of Josefa Yu can add credence to such evidence for the
testimony itself lacks corroboration.68

Besides, based on the August 29, 1994 Manifestation69 filed by Sheriff Alimurung, it
would appear that long before the passenger bus was placed under preliminary
attachment in Civil Case No. 4061-V-93, the same had been previously attached by the
Sheriff of Mandaue City in connection with another case and that it was placed in the
Cebu Bonded Warehousing Corporation, Cebu City. Thus, Spouses Yu cannot complain
that they were unreasonably deprived of the use of the passenger bus by reason of the
subsequent wrongful attachment issued in Civil Case No. 4061-V-93. Nor can they also
attribute to the wrongful attachment their failure to earn income or profit from the
operation of the passenger bus.

Moreover, petitioners did not present evidence as to the damages they suffered by
reason of the wrongful attachment of Lot No. 11.

Nonetheless, we recognize that Spouses Yu suffered some form of pecuniary loss when
their properties were wrongfully seized, although the amount thereof cannot be
definitively ascertained. Hence, an award of temperate or moderate damages in the
amount of P50,000.00 is in order.70

As to moral and exemplary damages, to merit an award thereof, it must be shown that
the wrongful attachment was obtained by the attachment plaintiff with malice or bad faith,
such as by appending a false affidavit to his application.71

Spouses Yu argue that malice attended the issuance of the attachment bond as shown
by the fact that Te deliberately appended to her application for preliminary attachment an
Affidavit where Sy perjured himself by stating that they had no intention to pay their
obligations even when he knew this to be untrue given that they had always paid their
obligations; and by accusing them of disposing of their properties to defraud their
creditors even when he knew this to be false, considering that the location of said
properties was known to him.72
The testimony of petitioner Josefa Yu herself negates their claim for moral and exemplary
damages. On cross-examination she testified, thus:

Q: Did you ever deposit any amount at that time to fund the check?

A: We requested that it be replaced and staggered into smaller amounts.

COURT: Did you fund it or not?

Atty. Ferrer: The three checks involved?

Atty. Florido: Already answered. She said that they were not able to fund it.

Atty. Ferrer: And as a matter of fact, you went to the bank to close your account?

A: We closed account with the bank because we transferred the account to another bank.

Q: How much money did you transfer from that bank to which the three checks were
drawn to this new bank?

A: I dont know how much was there but we transferred already to the Solid Bank.

Q: Who transferred?

A: My daughter, sir.73 (Emphasis ours)

Based on the foregoing testimony, it is not difficult to understand why Te concluded that
Spouses Yu never intended to pay their obligation for they had available funds in their
bank but chose to transfer said funds instead of cover the checks they issued. Thus, we
cannot attribute malice nor bad faith to Te in applying for the attachment writ. We cannot
hold her liable for moral and exemplary damages.

As a rule, attorneys fees cannot be awarded when moral and exemplary damages are
not granted, the exception however is when a party incurred expenses to lift a wrongfully
issued writ of attachment. 74 Without a doubt, Spouses Yu waged a protracted legal
1aw phi 1.net

battle to fight off the illegal attachment of their properties and pursue their claims for
damages. It is only just and equitable that they be awarded reasonable attorneys fees in
the amount ofP30,000.00.

In sum, we affirm the dismissal of the counterclaim of petitioners Spouses Yu for actual,
moral, and exemplary damages. However, we grant them temperate damages and
attorneys fees.

WHEREFORE, the petition is partly GRANTED. The March 21, 2001 Decision of the
Court of Appeals isAFFIRMED with the MODIFICATION that petitioners counterclaim
is PARTLY GRANTED. Gregorio Yu and Josefa Yu are awarded P50,000.00 temperate
damages and P30,000.00 attorneys fees.

No costs.

SO ORDERED.