cases on special civil actions 2013

7/28/2019 Cases on Special Civil Actions 2013

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Republic of the Philippines

SUPREME COURT

Baguio City

THIRD DIVISION

G.R. No. 158271 April 8, 2008

CHINA BANKING CORPORATION, petitioner,

vs.

ASIAN CONSTRUCTION and DEVELOPMENT CORPORATION, respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by

petitioner China Banking Corporation (China Bank) seeking to annul the Resolution1 dated October 14,

2002 and the Resolution2 dated May 16, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 72175.

The facts of the case:

On July 24, 1996, China Bank granted respondent Asian Construction and Development Corporation

(ACDC) an Omnibus Credit Line in the amount of P90,000,000.00.3

On April 12, 1999, alleging that ACDC failed to comply with its obligations under the Omnibus Credit

Line, China Bank filed a Complaint4 for recovery of sum of money and damages with prayer for the


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issuance of writ of preliminary attachment before the Regional Trial Court (RTC) of Makati, Branch 138,

docketed as Civil Case No. 99-796. In the Complaint, China Bank claimed that ACDC, after collecting and

receiving the proceeds or receivables from the various construction contracts and purportedly holding

them in trust for China Bank under several Deeds of Assignment, misappropriated, converted, and used

the funds for its own purpose and benefit, instead of remitting or delivering them to China Bank.5

On April 22, 1999, the RTC issued an Order6 granting China Banks prayer for writ of preliminary

attachment. Consequently, as shown in the Sheriffs Report7 dated June 14, 1999, the writ of

preliminary attachment was implemented levying personal properties of ACDC, i.e., vans, dump trucks,

cement mixers, cargo trucks, utility vehicles, machinery, equipment and office machines and fixtures.

On March 27, 2000, upon motion of China Bank, the RTC issued a Summary Judgment8 in favor of China

Bank. ACDC filed its Notice of Appeal9 dated April 24, 2000.

On June 15, 2000, China Bank filed a Motion to Take Custody of Attached Properties with Motion for

Grant of Authority to Sell to the Branch Sheriff10 with the RTC, praying that it be allowed to take

custody of ACDCs properties for the purpose of selling them in an auction.11 On June 20, 2000, ACDC

filed its Opposition12 to the June 15, 2000 Motion arguing that there can be no sale of the latters

attached properties in the absence of a final and executory judgment against ACDC.

On August 25, 2000, China Bank partially appealed the Summary Judgment for not awarding interest on

one of its promissory notes.13 Records of the case were elevated to the CA.14

On April 18, 2002, China Bank filed a Motion for Leave for Grant of Authority to Sell Attached

Properties15 which the CA denied in the herein assailed Resolution dated October 14, 2002.

According to the CA, selling the attached properties prior to final judgment of the appealed case is

premature and contrary to the intent and purpose of preliminary attachment for the following reasons:

first, the records reveal that the attached properties subject of the motion are not perishable in nature;

and second, while the sale of the attached properties may serve the interest of China Bank, it will not be

so for ACDC. The CA recognized China Banks apprehension that by the time a final judgment is

rendered, the attached properties would be worthless. However, the CA also acknowledged that since

ACDC is a corporation engaged in a construction business, the preservation of the properties is of

paramount importance; and that in the event that the decision of the lower court is reversed and a final


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judgment rendered in favor ACDC, great prejudice will result if the attached properties were already

sold.

China Bank filed a Motion for Reconsideration16 which was denied in the herein assailed CA

Resolution17 dated May 16, 2003.

Hence, the present petition for review on certiorari, on the following ground:

THE HONORABLE COURT OF APPEALS RENDERED THE QUESTIONED RESOLUTIONS (ANNEXES "A" and

"B") IN A MANNER NOT IN ACCORD WITH THE PROVISIONS OF SECTION 11, RULE 57 OF THE RULES OF

CIVIL PROCEDURE, AS IT SHELVED THE DEMANDS OF EQUITY BY ARBITRARILY DISALLOWING THE SALE

OF THE ATTACHED PROPERTIES, UPHOLDING ONLY THE INTEREST OF RESPONDENT, IN UTTER

PARTIALITY.18

Considering that the herein assailed CA Resolutions are interlocutory in nature as they do not dispose of

the case completely but leave something to be done upon the merits,19 the proper remedy should have

been by way of petition for certiorari under Rule 65, as provided for in Section 1 (b), Rule 41 of the Rules

of Court, as amended by A.M. No. 07-7-12-SC,20 which provides:

Section 1. Subject of appeal. - An appeal may be taken from a judgment or final order that completely

disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.

No appeal may be taken from:

x x x x

(b) An interlocutory order;

x x x x


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In any of the foregoing instances, the aggrieved party may file an appropriate special civil action as

provided in Rule 65. (Emphasis supplied).

The present petition for review on certiorari should have been dismissed outright. However, in many

instances, the Court has treated a petition for review on certiorari under Rule 45 as a petition for

certiorari under Rule 65 of the Rules of Court, such as in cases where the subject of the recourse was

one of jurisdiction, or the act complained of was perpetrated by a court with grave abuse of discretion

amounting to lack or excess of jurisdiction.21 The present petition does not involve any issue on

jurisdiction, neither does it show that the CA committed grave abuse of discretion in denying the motion

to sell the attached property.

Section 11, Rule 57 of the Rules of Court provides:

Sec. 11. When attached property may be sold after levy on attachment and before entry of judgment.-

Whenever it shall be made to appear to the court in which the action is pending, upon hearing with

notice to both parties, that the property attached is perishable, or that the interests of all the parties to

the action will be subserved by the sale thereof, the court may order such property to be sold at public

auction in such manner as it may direct, and the proceeds of such sale to be deposited in court to abide

the judgment in the action. (Emphasis supplied)

Thus, an attached property may be sold after levy on attachment and before entry of judgment

whenever it shall be made to appear to the court in which the action is pending, upon hearing with

notice to both parties, that the attached property is perishable or that the interests of all the parties to

the action will be subserved by the sale of the attached property.

In its Memorandum,22 China Bank argues that the CAs notion of perishable property, which pertains

only to those goods which rot and decay and lose their value if not speedily put to their intended use,23is a strict and stringent interpretation that would betray the purpose for which the preliminary

attachment was engrafted.24 Citing Witherspoon v. Cross,25 China Bank invokes the definition of

"perishable property" laid down by the Supreme Court of California as goods which decay and lose their

value if not speedily put to their intended use; but where the time contemplated is necessarily long, the

term may embrace property liable merely to material depreciation in value from other causes than such

decay.


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As stated in the Sheriffs Report26 and Notices of Levy on Properties,27 all of

ACDCs properties which were levied are personal properties consisting of used vehicles, i.e., vans, dump

trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment and office machines and

fixtures. China Bank insists that the attached properties, all placed inside ACDCs stockyard located at

Silang, Cavite and the branch office in Mayamot, Antipolo City, are totally exposed to natural elements

and adverse weather conditions.28 Thus, China Bank argues, that should the attached properties be

allowed to depreciate, perish or rot while the main case is pending, the attached properties will

continue losing their worth thereby rendering the rules on preliminary attachment nugatory.

The issue hinges on the determination whether the vehicles, office machines and fixtures are

"perishable property" under Section 11, Rules 57 of the Rules of Court, which is actually one of first

impression. No local jurisprudence or authoritative work has touched upon this matter. This being so, an

examination of foreign laws and jurisprudence, particularly those of the United States where some of

our laws and rules were patterned after, is in order.29

In Mossler Acceptance Co. v. Denmark,30 an order of the lower court in directing the sale of attached

properties, consisting of 20 automobiles and 2 airplanes, was reversed by the Supreme Court of

Louisiana. In support of its contention that automobiles are perishable, Mossler offered testimony to the

effect that automobile tires tend to dry-rot in storage, batteries to deteriorate, crankcases to becomedamaged, paint and upholstery to fade, that generally automobiles tend to depreciate while in

storage.31 Rejecting these arguments, the Supreme Court of Louisiana held that while there might be a

depreciation in the value of a car during storage, depending largely on existing economic conditions,

there would be no material deterioration of the car itself or any of its appurtenances if the car was

properly cared for, and therefore it could not be said that automobiles were of a perishable nature

within the intendment of the statute, which could only be invoked when the property attached and

seized was of a perishable nature.32

With respect to the determination of the question on whether the attached office furniture, office

equipment, accessories and supplies are perishable properties, the Supreme Court of Alabama in

McCreery v. Berney National Bank33 discussed the "perishable" nature of the attached properties,

consisting of shelving, stock of drygoods and a complete set of store fixtures, consisting of counters iron

safe, desk and showcases, to be within the meaning of "perishable" property under the Alabama Code

which authorizes a court, on motion of either party, to order the sale, in advance of judgment, of

perishable property which had been levied on by a writ of attachment.34


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In McCreery, the Supreme Court of Alabama rejected the argument that the sale of the attached

property was void because the term "perishable" property, as used in the statute, meant only such

property as contained in itself the elements of speedy decay, such as fruits, fish, fresh meats, etc.35 The

Supreme Court of Alabama held that whatever may be the character of the property, if the court issatisfied that, either by reason of its perishable nature, or because of the expense of keeping it until the

termination of the litigation, it will prove, or be likely to prove, fruitless to the creditor, and that the

purpose of its original seizure will probably be frustrated, the sale of the attached property is justified.

McCreery applied the doctrine in Millards Admrs. v. Hall36 where the Supreme Court of Alabama held

that an attached property is perishable "if it is shown that, by keeping the article, it will necessarily

become, or is likely to become, worthless to the creditor, and by consequence to the debtor, then it is

embraced by the statute. It matters not, in our opinion, what the subject matter is. It may be cotton

bales, live stock, hardware provisions or dry goods." Although the statute under which Millards was

decided used the words "likely to waste or be destroyed by keeping," instead of the word "perishable,"

the reasons given for the construction placed on the statute apply equally to the Alabama Code which

uses the term "perishable."37

In the Motion for Leave for Grant of Authority to Sell Attached Properties38 filed before the CA, China

Bank alleged that the attached properties are placed in locations where they are totally exposed to the

natural elements and adverse weather conditions since their attachment in 1999;39 that as a result, the

attached properties have gravely deteriorated with corrosions eating them up, with weeds germinatingand growing thereon and their engines and motors stock up;40 and that the same holds true to the

office furniture, office equipment, accessories and supplies.41 No evidence, however, were submitted

by China Bank to support and substantiate these claims before the CA.

Notably, in the Petition filed before the Court, China Bank, for the first time, included as annexes,42

photographs of the attached properties which were alleged to be recently taken, in an attempt to

convince the Court of the deteriorated condition of the attached properties.

The determination on whether the attached vehicles are properly cared for, and the burden to show

that, by keeping the attached office furniture, office equipment and supplies, it will necessarily become,

or is likely to become, worthless to China Bank, and by consequence to ACDC, are factual issues

requiring reception of evidence which the Court cannot do in a petition for certiorari. Factual issues are

beyond the scope of certiorari because they do not involve any jurisdictional issue.43


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As a rule, only jurisdictional questions may be raised in a petition for certiorari, including matters of

grave abuse of discretion which are equivalent to lack of jurisdiction.44 The office of the writ of

certiorari has been reduced to the correction of defects of jurisdiction solely and cannot legally be used

for any other purpose.45

Certiorari is truly an extraordinary remedy and, in this jurisdiction, its use is restricted to truly

extraordinary cases - cases in which the action of the inferior court is wholly void; where any further

steps in the case would result in a waste of time and money and would produce no result whatever;

where the parties, or their privies, would be utterly deceived; where a final judgment or decree would

be nought but a snare and delusion, deciding nothing, protecting nobody, a judicial pretension, a

recorded falsehood, a standing menace. It is only to avoid such results as these that a writ of certiorari is

issuable; and even here an appeal will lie if the aggrieved party prefers to prosecute it.46

Moreover, the Court held in JAM Transportation Co., Inc. v. Flores47 that it is well-settled, too well-

settled to require a citation of jurisprudence, that this Court does not make findings of facts specially on

evidence raised for the first time on appeal.48 The Court will not make an exception in the case at bar.

Hence, the photographs of the attached properties presented before the Court, for the first time on

appeal, cannot be considered by the Court.

China Bank argues that if the CA allowed the attached properties to be sold, whatever monetary valuewhich the attached properties still have will be realized and saved for both parties.49 China Bank further

claims that should ACDC prevail in the final judgment50 of the collection suit, ACDC can proceed with

the bond posted by China Bank.51 The Court finds said arguments to be specious and misplaced.

Section 4, Rule 57 of the Rules of Court provides:

Section 4. Condition of applicants bond. - The party applying for the order must thereafter give a bondexecuted to the adverse party in the amount fixed by the court in its order granting the issuance of the

writ, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all

the damages which he may sustain by reason of the attachment, if the court shall finally adjudge that

the applicant was not entitled thereto.


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It is clear from the foregoing provision that the bond posted by China Bank answers only for the

payment of all damages which ACDC may sustain if the court shall finally adjudge that China Bank was

not entitled to attachment. The liability attaches if "the plaintiff is not entitled to the attachment

because the requirements entitling him to the writ are wanting," or "if the plaintiff has no right to the

attachment because the facts stated in his affidavit, or some of them are untrue."52 Clearly, ACDC can

only claim from the bond for all the damages which it may sustain by reason of the attachment and not

because of the sale of the attached properties prior to final judgment.

Sale of attached property before final judgment is an equitable remedy provided for the convenience of

the parties and preservation of the property.53 To repeat, the Court finds that the issue of whether the

sale of attached properties is for the convenience of the parties and that the interests of all the parties

will be subserved by the said sale is a question of fact. Again, the foregoing issue can only be resolved

upon examination of the evidence presented by both parties which the Court cannot do in a petition for

certiorari under Rule 65 of the Rules of Court.

WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of Appeals dated October 14,

2002 and May 16, 2003 in CA-G.R. CV No. 72175 are hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION

[G.R. No. 123358. February 1, 2000]

FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs. THE COURT OF APPEALS, THE

HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional Trial Court, NCJR, Makati City, Metro

Manila, and LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, respondents.

D E C I S I O N

YNARES_SANTIAGO, J.:


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On June 29, 1993, private respondent Ley Construction and Development Corporation filed a Complaint

for collection of a sum of money with application for preliminary attachment against petitioner FCY

Construction Group, Inc. and Francis C. Yu with the Makati Regional Trial Court which was docketed as

Civil Case No. 93-2112. Private respondent alleged that it had a joint venture agreement with petitionerFCY Construction Group, Inc. (wherein petitioner Francis C. Yu served as President) over the Tandang

Sora Commonwealth Flyover government project for which it had provided funds and construction

materials. The Complaint was filed in order to compel petitioners to pay its half share in the collections

received in the project as well as those yet to be received therein. In support of its application for a writ

of attachment, private respondent alleged that petitioners were guilty of fraud in incurring the

obligation and had fraudulently misapplied or converted the money paid them, to which it had an equal

share.

On July 6, 1993, following an ex-parte hearing, the lower court issued an Order for the issuance of a writ

of preliminary attachment, conditioned upon the filing of a P7,000,000.00 attachment bond.

Petitioners moved for the lifting of the writ of preliminary attachment on the following grounds: (1) the

attachment was heard, issued and implemented even before service of summons upon them; (2) failure

of the attaching officer to serve a copy of the affidavit of merit upon them; and (3) that there was no

fraud in incurring the obligation. As an alternative prayer in their Motion, petitioners prayed that the

attachment be limited to their receivables with the Department of Public Works and Highways. This

alternative prayer was later withdrawn by petitioners in a Manifestation and Motion.

On May 25, 1994, the lower court issued another Order denying petitioners' Motion to Lift

Attachment.[1] It, however, reduced and confined the attachment to receivables due petitioners from

the Tandang Sora commonwealth Flyover project.

Subsequently, petitioners filed a Motion for Reconsideration[2] as well as an Omnibus Motion for Leave

to file Amended Answer and/or to delete Francis C. Yu as party-defendant.[3]

With the denial of both Motions by the lower court on September 4, 1994,[4] petitioners filed a Petition

for Certiorari before the Court of Appeals on September 16, 1994.[5] The Petition was, however, denied

on July 31, 1995;[6] so was petitioners' Motion for Reconsideration.[7]


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Hence, the instant Petition.

It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of the

Revised Rules of Court, to wit -

"SECTION 1. Grounds upon which attachment may issue. - A plaintiff or any proper party may, at the

commencement of the action or at any time thereafter, have the property of the adverse party attached

as security for the satisfaction of any judgment that may be recovered in the following cases:

x x x x x x x x x.

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the

obligation upon which the action is brought, or in concealing or disposing of the property for the taking,

detention or conversion of which the action is brought;

x x x x x x x x x."

Petitioners, however, insist that the writ of preliminary attachment was irregularly issued inasmuch as

there was no evidence of fraud in incurring the obligations sued upon.

In support of their stand, petitioners alleged that private respondent's principal witness admitted that it

was the Department of Public Works and Highways (DPWH) that induced it to deliver materials and cash

for the Tandang Sora Commonwealth Flyover project, to wit -

COURT: Now . . . as of January 5, 1993 you delivered to him (referring to defendant FCY corporation) incash and in kind amounting to Fifteen Million Pesos (P15,000,000.00), now why did you keep on

delivering cash and materials to him if you were not paid a single centavo?

A Because of every need for the project, and the Public Works official assured me that I will be

given a new project after the Tandang Sora will be finished.


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Q Who is this public official that promised you?

A Director Pendosa, Teodoro Encarnacion and Secretary de Jesus your Honor. (TSN, 6 July 1993,

pp. 47-48)

x x x x x x x x x

Q What about these officials of the Department of Public Highways, what would they do to project

their sub alleged project?

A Secretary de Jesus is no longer connected there, your Honor.

Q At the time?

A At that time, he resigned.

Q Before he resigned.

A He gave me assurance that they will soon give assurance, they will soon give me another project

. . . (TSN, 6 July 1993, p. 55)[8]

A cursory reading of the above-cited testimony, however, readily shows that said reassurance from theDPWH officials came, not at the inception of the obligation or contract, but during its performance. On

the other hand, the fraud of which petitioners are accused of and which was the basis for the issuance

of the questioned attachment, is fraud alleged to have been committed upon contracting the obligation

sued upon. Thus, petitioners argument that "the inducement was the mouth-watering temptation of a

DPWH promise of a 'new project after the Tandang Sora Flyover project will be finished"' is clearly off-

tangent as such inducement, if any, came not at the inception of the obligation.


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Similarly, petitioners' arguments that it was private respondent who admittedly prepared the letter

embodying the alleged joint venture agreement[9] and had petitioner Francis Yu sign it must fail. The

written agreement referred to was signed by petitioner Francis Yu only on January 5, 1993, long after

the project had commenced. Thus, It was only a written confirmation of an arrangement that hadalready been existing and operational. Similarly then, such written confirmation did not occur at the

inception of the obligation sued upon.

In Liberty Insurance Corporation vs. Court of Appeals,[10] this Court, discussing Section 1(d), Rule 57,

cautioned as follows --

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or

incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the

agreement and must have been the reason which induced the other party into giving consent which he

would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the

Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is

fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention

not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but

may be inferred from the circumstances attendant in each case. (Republic v. Gonzales, 13 SCRA 633).

From the foregoing, therefore, the alleged inducement by the DPWH officials upon private respondentas well as the circumstances surrounding the execution of the joint venture agreement, both appear

immaterial as they were not committed upon contracting the obligation sued upon but occurred long

after the obligation has been established.

The fact that petitioners have paid a substantial amount of money to private respondent cannot save

the day for them either. As per their own accounting, such payments were for accounts payable for

labor supplied, construction materials and cash advances.[11] It is not denied that no payment of profits

has been given to private respondent, which is precisely what it is suing for.

Finally, considering that the writ of preliminary attachment has been issued on account of allegations of

fraud in contracting the obligation upon which the action is brought petitioners' efforts to have the writ

of preliminary attachment dissolved on the ground that it was improperly or irregularly issued is in vain.


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Indeed, in Liberty Insurance Corporation, supra, which cited Mindanao Savings and Loan Assoc. vs. Court

of Appeals (172 SCRA 480), we ruled -

"x x x, when the preliminary attachment is issued upon a ground which is at the same time the

applicant's cause of action: e.g., x x x an action against a party who has been guilty of fraud in

contracting the debt or incurring the obligation upon which the action is brought, the defendant is not

allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to show the

falsity of the factual averments in the plaintiffs application and affidavits on which the writ was based

and consequently that the writ based therein had been improperly or irregularly issued - the reason

being that the hearing on such motion for dissolution of the writ would be tantamount to a trial on the

merits. In other words, the merits of the action would be ventilated at a mere hearing of a motion;

instead of the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can

be dissolved is by a counterbond."

We now come to the issue of whether or not petitioner Francis Yu should remain as party-defendant.

Petitioners argue that since the transactions were corporation to corporation only, petitioner Francis Yu

should be dropped as party-defendant considering the hornbook law that corporate personality is a

shield against personal liability of its officers. We agree that petitioner Francis Yu cannot be made liable

in his individual capacity if he indeed entered into and signed the contract in his official capacity as

President, in the absence of stipulation to that effect, due to the personality of the corporation being

separate and distinct from the persons composing it.[12] However, while we agree that petitioner

Francis Yu cannot be held solidarily liable with petitioner corporation merely because he is the President

thereof and was involved in the transactions with private corporation, we also note that there existsinstances when corporate officers may be held personally liable for corporate acts. Such exceptions

were outlined in Tramat Mercantile, Inc. vs. Court of Appeals,[13] as follows --

"Personal liability of a corporate director, trustee or officer along (although not necessarily) with the

corporation may so validly attach, as a rule, only when -

1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence indirecting its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its

stockholders or other persons;

2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does not

forthwith file with the corporate secretary his written objection thereto;


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3. He agrees to hold himself personally and solidarily liable with the corporation; or

4. He is made, by a specific provision of law, to personally answer for his corporate action."

The attendance of these circumstances, however, cannot be determined at this stage and should

properly be threshed out during the trial on the merits. Stated differently, whether or not petitioner

Francis Yu should be held personally and solidarily liable with petitioner corporation is a matter that

should be left to the trial court's discretion, dependent as it is on evidence during trial.

WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No pronouncement asto costs.

SO ORDERED.

SECOND DIVISION

SECURITY PACIFIC ASSURANCE CORPORATION,

Petitioner,

- versus -

THE HON. AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge, Regional Trial Court, Branch

9, Manila; THE PEOPLE OF THE PHILIPPINES, represented by Spouses REYNALDO and ZENAIDA ANZURES;

and REYNALDO R. BUAZON, In his official capacity as Sheriff IV, Regional Trial Court, Branch 9, Manila,

Respondents.


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G.R. No. 144740

Present:

PUNO,

Chairman,

AUSTRIA-MARTINEZ,

CALLEJO, SR.,

TINGA, and

CHICO-NAZARIO, JJ.

Promulgated:

August 31, 2005

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

D E C I S I O N

CHICO-NAZARIO, J.:


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Before Us is a petition for review on certiorari, assailing the Decision[1] and Resolution[2] of the

Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000 and 22 August 2000, respectively. The

said Decision and Resolution declared that there was no grave abuse of discretion on the part of

respondent Judge in issuing the assailed order dated 31 March 2000, which was the subject in CA-G.R.

SP No. 58147.

THE FACTS

The factual milieu of the instant case can be traced from this Courts decision in G.R. No. 106214

promulgated on 05 September 1997.

On 26 August 1988, Reynaldo Anzures instituted a complaint against Teresita Villaluz (Villaluz) for

violation of Batas Pambansa Blg. 22. The criminal information was brought before the Regional Trial

Court, City of Manila, and raffled off to Branch 9, then presided over by Judge Edilberto G. Sandoval,

docketed as Criminal Case No. 89-69257.

An Ex-Parte Motion for Preliminary Attachment[3] dated 06 March 1989 was filed by Reynaldo

Anzures praying that pending the hearing on the merits of the case, a Writ of Preliminary Attachment be

issued ordering the sheriff to attach the properties of Villaluz in accordance with the Rules.

On 03 July 1989, the trial court issued an Order[4] for the issuance of a writ of preliminary

attachment upon complainants posting of a bond which is hereby fixed at P2,123,400.00 and the

Courts approval of the same under the condition prescribed by Sec. 4 of Rule 57 of the Rules of

Court.

An attachment bond[5] was thereafter posted by Reynaldo Anzures and approved by the court.

Thereafter, the sheriff attached certain properties of Villaluz, which were duly annotated on the

corresponding certificates of title.

On 25 May 1990, the trial court rendered a Decision[6] on the case acquitting Villaluz of the crime

charged, but held her civilly liable. The dispositive portion of the said decision is reproduced hereunder:


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WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the accused TERESITA E.

VILLALUZ with cost de oficio. As to the civil aspect of the case however, accused is ordered to pay

complainant Reynaldo Anzures the sum of TWO MILLION ONE HUNDRED TWENTY THREE THOUSAND

FOUR HUNDRED (P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fully

paid, the sum of P50,000.00 as attorneys fees and the cost of suit.*7+

Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the latter rendered

its Decision,[8] the dispositive portion of which partly reads:

WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court of Manila, Branch 9,

dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in all

respects.

The case was elevated to the Supreme Court (G.R. No. 106214), and during its pendency, Villaluz

posted a counter-bond in the amount of P2,500,000.00 issued by petitioner Security Pacific AssuranceCorporation.[9] Villaluz, on the same date[10] of the counter-bond, filed an Urgent Motion to Discharge

Attachment.[11]

On 05 September 1997, we promulgated our decision in G.R. No. 106214, affirming in toto the decision

of the Court of Appeals.

In view of the finality of this Courts decision in G.R. No. 106214, the private complainant moved

for execution of judgment before the trial court.[12]

On 07 May 1999, the trial court, now presided over by respondent Judge, issued a Writ of Execution.[13]


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Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but the latter no

longer resided in her given address. This being the case, the sheriff sent a Notice of Garnishment upon

petitioner at its office in Makati City, by virtue of the counter-bond posted by Villaluz with said insurance

corporation in the amount of P2,500,000.00. As reported by the sheriff, petitioner refused to assume its

obligation on the counter-bond it posted for the discharge of the attachment made by Villaluz.[14]

Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed with

Garnishment,[15] which was opposed by petitioner[16] contending that it should not be held liable on

the counter-attachment bond.

The trial court, in its Order dated 31 March 2000,[17] granted the Motion to Proceed with

Garnishment. The sheriff issued a Follow-Up of Garnishment[18] addressed to the President/General

Manager of petitioner dated 03 April 2000.

On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary Injunction and/or

Temporary Restraining Order*19+ with the Court of Appeals, seeking the nullification of the trial courts

order dated 31 March 2000 granting the motion to proceed with garnishment. Villaluz was also named

as petitioner. The petitioners contended that the respondent Judge, in issuing the order dated 31

March 2000, and the sheriff committed grave abuse of discretion and grave errors of law in proceeding

against the petitioner corporation on its counter-attachment bond, despite the fact that said bond was

not approved by the Supreme Court, and that the condition by which said bond was issued did not

happen.[20]

On 16 June 2000, the Court of Appeals rendered a Decision,[21] the dispositive portion of which

reads:

WHEREFORE, premises considered, the Court finds no grave abuse of discretion on the part of

respondent judge in issuing the assailed order. Hence, the petition is dismissed.

A Motion for Reconsideration[22] was filed by petitioner, but was denied for lack of merit by the

Court of Appeals in its Resolution[23] dated 22 August 2000.


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Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of Civil Procedure,

with Urgent Application for a Writ of Preliminary Injunction and/or Temporary Restraining Order.[24]

On 13 December 2000, this Court issued a Resolution[25] requiring the private respondents to file

their Comment to the Petition, which they did. Petitioner was required to file its Reply[26] thereafter.

Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and Zenaida Anzures

executed a Memorandum of Understanding (MOU).[27] In it, it was stipulated that as of said date, the

total amount garnished from petitioner had amounted to P1,541,063.85, and so the remaining amount

still sought to be executed was P958,936.15.[28] Petitioner tendered and paid the amount of

P300,000.00 upon signing of the MOU, and the balance of P658,936.15 was to be paid in installment at

P100,000.00 at the end of each month from February 2001 up to July 2001. At the end of August 2001,

the amount of P58,936.00 would have to be paid. This would make the aggregate amount paid to the

private respondents P2,500,000.00.[29] There was, however, a proviso in the MOU which states that

this contract shall not be construed as a waiver or abandonment of the appellate review pending

before the Supreme Court and that it will be subject to all such interim orders and final outcome of said

case.

On 13 August 2001, the instant petition was given due course, and the parties were obliged to

submit their respective Memoranda.[30]

ISSUES

The petitioner raises the following issues for the resolution of this Court:

Main Issue - WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMINGTHE 31 MARCH 2000 ORDER OF PUBLIC RESPONDENT JUDGE WHICH ALLOWED EXECUTION ON THE

COUNTER-BOND ISSUED BY THE PETITIONER.

Corollary Issues (1) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED THAT THE

ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED WITHOUT NEED OF COURT APPROVAL


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OF THE COUNTER-BOND POSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED

THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED BY THE MERE ACT OF

POSTING THE COUNTER-BOND.

THE COURTS RULING

Petitioner seeks to escape liability by contending, in the main, that the writ of attachment which

was earlier issued against the real properties of Villaluz was not discharged. Since the writ was not

discharged, then its liability did not accrue. The alleged failure of this Court in G.R. No. 106214 to

approve the counter-bond and to cause the discharge of the attachment against Villaluz prevented the

happening of a condition upon which the counter-bonds issuance was premised, such that petitioner

should not be held liable thereon.[31]

Petitioner further asserts that the agreement between it and Villaluz is not a suretyship agreement

in the sense that petitioner has become an additional debtor in relation to private respondents. It is

merely waiving its right of excussion[32] that would ordinarily apply to counter-bond guarantors as

originally contemplated in Section 12, Rule 57 of the 1997 Rules.

In their Comment,[33] the private respondents assert that the filing of the counter-bond by Villaluz

had already ipso facto discharged the attachment on the properties and made the petitioner liable on

the bond. Upon acceptance of the premium, there was already an express contract for surety between

Villaluz and petitioner in the amount of P2,500,000.00 to answer for any adverse judgment/decision

against Villaluz.

Petitioner filed a Reply*34+ dated 09 May 2001 to private respondents Comment, admitting the binding

effect of the bond as between the parties thereto. What it did not subscribe to was the theory that the

attachment was ipso facto or automatically discharged by the mere filing of the bond in court. Such

theory, according to petitioner, has no foundation. Without an order of discharge of attachment and

approval of the bond, petitioner submits that its stipulated liability on said bond, premised on their

occurrence, could not possibly arise, for to hold otherwise would be to trample upon the statutorily

guaranteed right of the parties to contractual autonomy.


21/47

Based on the circumstances present in this case, we find no compelling reason to reverse the ruling of

the Court of Appeals.

Over the years, in a number of cases, we have made certain pronouncements about counter-

bonds.

In Tijam v. Sibonghanoy,[35] as reiterated in Vanguard Assurance Corp. v. Court of Appeals,[36] we

held:

. . . *A+fter the judgment for the plaintiff has become executory and the execution is returnedunsatisfied, as in this case, the liability of the bond automatically attaches and, in failure of the surety to

satisfy the judgment against the defendant despite demand therefore, writ of execution may issue

against the surety to enforce the obligation of the bond.

In Luzon Steel Coporation v. Sia, et al.: [37]

. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to these bonds

being security for the payment of any judgment that the attaching party may obtain; they are thus mere

replacements of the property formerly attached, and just as the latter may be levied upon after final

judgment in the case in order to realize the amount adjudged, so is the liability of the countersureties

ascertainable after the judgment has become final. . . .

In Imperial Insurance, Inc. v. De Los Angeles,[38] we ruled:


22/47

. . . Section 17, Rule 57 of the Rules of Court cannot be construed that an execution against the

debtor be first returned unsatisfied even if the bond were a solidary one, for a procedural may not

amend the substantive law expressed in the Civil Code, and further would nullify the express stipulation

of the parties that the suretys obligation should be solidary with that of the defendant.

In Philippine British Assurance Co., Inc. v. Intermediate Appellate Court,[39] we further held that

the counterbond is intended to secure the payment of any judgment that the attaching creditor may

recover in the action.

Petitioner does not deny that the contract between it and Villaluz is one of surety. However, it

points out that the kind of surety agreement between them is one that merely waives its right of

excussion. This cannot be so. The counter-bond itself states that the parties jointly and severally bind

themselves to secure the payment of any judgment that the plaintiff may recover against the defendant

in the action. A surety is considered in law as being the same party as the debtor in relation to whatever

is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be

inseparable.[40]

Suretyship is a contractual relation resulting from an agreement whereby one person, the surety,

engages to be answerable for the debt, default or miscarriage of another, known as the principal. The

suretys obligation is not an original and direct one for the performance of his own act, but merely

accessory or collateral to the obligation contracted by the principal. Nevertheless, although the contract

of a surety is in essence secondary only to a valid principal obligation, his liability to the creditor or

promise of the principal is said to be direct, primary and absolute; in other words, he is directly and

equally bound with the principal. The surety therefore becomes liable for the debt or duty of another

although he possesses no direct or personal interest over the obligations nor does he receive any

benefit therefrom.[41]

In view of the nature and purpose of a surety agreement, petitioner, thus, is barred from

disclaiming liability.

Petitioners argument that the mere filing of a counter-bond in this case cannot automatically

discharge the attachment without first an order of discharge and approval of the bond, is lame.


23/47

Under the Rules, there are two (2) ways to secure the discharge of an attachment. First, the party

whose property has been attached or a person appearing on his behalf may post a security. Second,

said party may show that the order of attachment was improperly or irregularly issued.[42] The first

applies in the instant case. Section 12, Rule 57,[43] provides:

SEC. 12. Discharge of attachment upon giving counter-bond. After a writ of attachment has been

enforced, the party whose property has been attached, or the person appearing on his behalf, may

move for the discharge of the attachment wholly or in part on the security given. The court shall, after

due notice and hearing, order the discharge of the attachment if the movant makes a cash deposit, or

files a counter-bond executed to the attaching party with the clerk of the court where the application is

made, in an amount equal to that fixed by the court in the order of attachment, exclusive of costs. But if

the attachment is sought to be discharged with respect to a particular property, the counter-bond shall

be equal to the value of that property as determined by the court. In either case, the cash deposit or the

counter-bond shall secure the payment of any judgment that the attaching party may recover in the

action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an

attachment in accordance with the provisions of this section, the property attached, or the proceeds of

any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or to the

person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property

so released. Should such counter-bond for any reason be found to be or become insufficient, and the

party furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new

order of attachment.

It should be noted that in G.R. No. 106214, per our Resolution dated 15 January 1997,[44] we permitted

Villaluz to file a counter-attachment bond. On 17 February 1997,[45] we required the private

respondents to comment on the sufficiency of the counter-bond posted by Villaluz.

It is quite palpable that the necessary steps in the discharge of an attachment upon giving counter-

bond have been taken. To require a specific order for the discharge of the attachment when this Court,

in our decision in G.R. No. 106214, had already declared that the petitioner is solidarily bound with

Villaluz would be mere surplusage. Thus:


24/47

During the pendency of this petition, a counter-attachment bond was filed by petitioner Villaluz before

this Court to discharge the attachment earlier issued by the trial court. Said bond amounting to P2.5

million was furnished by Security Pacific Assurance, Corp. which agreed to bind itself jointly and

severally with petitioner for any judgment that may be recovered by private respondent against the

former.[46]

We are not unmindful of our ruling in the case of Belisle Investment and Finance Co., Inc. v. State

Investment House, Inc.,[47] where we held:

. . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbond does not

automatically discharge the writ of attachment. It is only after hearing and after the judge has ordered

the discharge of the attachment if a cash deposit is made or a counterbond is executed to the attaching

creditor is filed, that the writ of attachment is properly discharged under Section 12, Rule 57 of the

Rules of Court.

The ruling in Belisle, at first glance, would suggest an error in the assailed ruling of the Court of Appeals

because there was no specific resolution discharging the attachment and approving the counter-bond.

As above-explained, however, consideration of our decision in G.R. No. 106214 in its entirety will readily

show that this Court has virtually discharged the attachment after all the parties therein have been

heard on the matter.

On this score, we hew to the pertinent ratiocination of the Court of Appeals as regards the heretofore

cited provision of Section 12, Rule 57 of the 1997 Rules of Civil Procedure, on the discharge of

attachment upon giving counter-bond:

. . . The filing of the counter-attachment bond by petitioner Villaluz has discharged the

attachment on the properties and made the petitioner corporation liable on the counter-attachment

bond. This can be gleaned from the DEFENDANTS BOND FOR THE DISSOLUTION OF ATTACHMENT,

which states that Security Pacific Assurance Corporation, as surety, in consideration of the dissolution of


25/47

the said attachment jointly and severally, binds itself with petitioner Villaluz for any judgment that may

be recovered by private respondent Anzures against petitioner Villaluz.

The contract of surety is only between petitioner Villaluz and petitioner corporation. The

petitioner corporation cannot escape liability by stating that a court approval is needed before it can be

made liable. This defense can only be availed by petitioner corporation against petitioner Villaluz but not

against third persons who are not parties to the contract of surety. The petitioners hold themselves out

as jointly and severally liable without any conditions in the counter-attachment bond. The petitioner

corporation cannot impose requisites before it can be made liable when the law clearly does not require

such requisites to be fulfilled.[48] (Emphases supplied.)

Verily, a judgment must be read in its entirety, and it must be construed as a whole so as to bring all of

its parts into harmony as far as this can be done by fair and reasonable interpretation and so as to give

effect to every word and part, if possible, and to effectuate the intention and purpose of the Court,

consistent with the provisions of the organic law.[49]

Insurance companies are prone to invent excuses to avoid their just obligation.[50] It seems that this

statement very well fits the instant case.

WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court of Appeals

dated 16 June 2000 and 22 August 2000, respectively, are both AFFIRMED. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO

Associate Justice


26/47

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

DANTE O. TINGA

Associate Justice


27/47

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case

was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO

Associate Justice

Chairman, Second Division

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans Attestation, it is

hereby certified that the conclusions in the above Decision were reached in consultation before the case

was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice


28/47

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 88379 November 15, 1989

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,

vs.

COURT OF APPEALS, GATES LEARJET CORPORATION and GATES LEARJET EXPORT CORPORATION,

respondents.

T.J. Sumawang & Associates for petitioner.

Quasha, Asperilla, Ancheta, Pea & Nolasco for private respondents.

NARVASA, J.:

In December, 1981, Learjet Phil. Inc. commenced suit in the Regional Trial Court at Pasig against Gates

Learjet Corporation and Gates Learjet Export Corporation. 1 On said plaintiffs application, and upon the

posting of an attachment bond in its behalf by Philippine Charter Insurance Corporation (then known as

Phil-Am Assurance Co., Inc.), the Court issued a writ of preliminary attachment directed against the

defendants' properties. On the strength of the writ, the sheriff seized a twin engine airplane, a Learjet

35-A-3799, belonging to the defendants.


29/47

After due proceedings, judgment was rendered by the Trial Court in plaintiffs' favor, sentencing the

defendants to pay US$2,250,000.00 as actual damages, P200,000.00 as moral damages, P100,000.00 as

exemplary damages, as well as attorney's fees and costs. On appeal to the Court of Appeals by the

defendants, 2 however, this judgment was reversed. The decision of the Appellate Tribunal,promulgated on December 10, 1986, disposed as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and Civil Case No. 43874

of the Regional Trial Court of Pasig is DISMISSED for lack of merit. For the wrongful attachment of

Learjet aircraft 35A-44 owned by defendant-appellant Gates Learjet Corporation, plaintiff-appellee

Learjet Philippines, Inc. is hereby ordered to pay to the former by way of actual damages the amount of

$73,179-36, P50,000.00 as exemplary damages, and the costs of the suit.

On December 16, 1986 four days after notice of the judgment was served on the defendants, they filed

with the Court of Appeals an "Urgent Petition to have Damages Awarded on Account of Illegal

Attachment Executed Against Attachment Bond Issued by the T.J. Philippine American Assurance Co.,

Inc., Now Pan-Philippines General Insurance Corporation." The petition adverted to the attachment

bond posted by the surety firm in the amount of P2,000,000.00, and asked that the "damages awarded

defendants- appellants by reason of the wrongful attachment be enforced, after proper notice to

plaintiff and its bondsman and hearing of ... (the) application, jointly and severally against both the

plaintiff and the bonds-man-surety ... ." A copy of the petition was furnished the surety. The plaintiff, in

its turn, filed a motion for reconsideration of the decision of December 10, 1986.

By Resolution dated March 10, 1987, the Court of Appeals: 3 (1) denied the plaintiffs motion for

reconsideration for lack of merit; and (2) NOTED "defendants-appellants' application or claim for

damages against the surety" and RESOLVED "to refer the Said claim or application to the trial court and

allow the latter to hear and decide the same pursuant to Section 20, Rule 57 of the Rules of Court."

The plaintiff tried to have the Appellate Court's decision reviewed and reversed by us, but failed. 4 We

denied its petition for review by resolution dated August 10, 1987; and entry of the resolution was made

on February 26, 1988.

On remand of the case to the Trial Court, the defendants filed an "Urgent Petition to Have Damages

Awarded on Account of Illegal Attachment Executed Against Attachment Bond Issued by the Surety


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Philippine American Assurance Co., Inc., now Pan-Philippines General Insurance Corporation" dated

December 16, 1986. The Court ordered execution of the judgment "against the plaintiff at Suite 10

Prescon Strata 100 Emerald Avenue, Pasig, Metro Manila" in accordance with the Rules. The writ issued

on April 8, 1988.

Evidently, the sheriff sought to enforce the writ also against the surety, "Philippine Charter Insurance

Corporation ... (formerly Pan-Philippines General Insurance Corporation)." Said surety thereupon filed

with the Trial Court an "Urgent Motion to Recall against Nullify Sheriffs Notice of Enforcement of Writ of

Execution, and for Issuance of Restraining Order/Writ of Restraining Injunction." It contended that there

was in truth no judgment against it "due to the wrongful attachment of ... (the defendants') Learjet

Aircraft 35A-44," that since neither Section 20, Rule 57 of the Rules of Court nor the Resolution of the

Court of Appeals of March 10, 1987 had been complied with, there existed no award of damages against

it under its attachment bond, and enforcement of execution against said bond would be contrary to due

process.

The Trial Court forthwith restrained enforcement of the writ of execution against the surety and set the

surety's motion for hearing in the morning of May 27, 1988. After receiving the parties' arguments, the

Court promulgated an Order on June 14, 1988 overruling the movant surety's argument that it (the

Court) had lost competence to hear and determine the application or damages against the attachment

bond because the judgment of the Court of Appeals had become final and executory. The Court

observed that:

What is contemplated under Section 20, Rule 57, is that if no application for damages is made before

the entry of the final judgment the surety on the bond is relieved from liability therefor. (Visayan Surety

and Insurance Corporation v. Pascual [85 Phil. 779], citing Facundo vs. Tan and Facundo vs. Lim). In the

case at bar, an application was made before the entry of final judgment ... . What was merely deferred

was the hearing of said application before the trial court. In fact, said application was duly noted by the

Honorable Court of Appeals in its resolution. Hence, an application for damages was filed in time.

Considering the foregoing, and in order to determine the extent of the liability of both principal and

surety on the attachment bond, a hearing is necessary.

The Court also resolved to issue, upon a bond of Pl,000,000.00, a writ of preliminary injunction

restraining the sheriffs from enforcing the writ of execution or otherwise executing the judgment


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against the surety "until the application for damages on the attachment bond is heard and decided;"

and set the hearing on the matter on August 9, 1988.

The surety moved for reconsideration, but its motion was denied by Order handed down on October 13,

1988. The surety then went to the Court of Appeals again, where it sought annulment of the Trial

Court's Orders of June 14, 1988 and October 13, 1988. Its petition for certiorari, prohibition and

preliminary injunction, filed on November 3, 1988, was docketed as CA-G.R. No. SP No. 15987. In it the

surety argued that it had been denied its day in court when, without its being present at the trial, the

defendants had "adduced evidence in support of ... (the) damages" eventually awarded by the Court of

Appeals; that said defendants had "fatally failed to file an application for damages on account of the

wrongful attachment," and consequently, the Court had "no more jurisdiction to set for hearing ... (the)

urgent petition" (to have damages awarded on account of illegal attachment executed against

attachment bond, etc.).

The Appellate Court's verdict however again went against the surety. By Decision promulgated on March

8, 1 989, 5 the petition was "DENIED DUE COURSE." According to the Court, (1) the "general prayer" in

the petition (to hold surety liable on its bond) dated December 16,1986 "for such further reliefs justified

in the premises" was "broad enough to include and embrace an application or claim for whatever

damages movants sustained during the pendency of the appeal, by reason of ... "the wrongful

attachment ...", (2) such a finding was consistent with "Supreme Court rulings' and the earlier

"Resolution of March 10, 1987" noting "defendants-appellants' application or claim for damages against

the surety" and referring it "to the, trial court ... pursuant to Section 20, Rule 57 of the Rules of Court;"

and (3) "what must have been contemplated ... (in said application or claim for damages) were not thedamages awarded in CA-G.R. CV No. 08585, 6 but the damages which applicants or claimants could have

suffered during the pendency of said appeal, as a consequence of the wrongful attachment found by

final judgment," for otherwise "there would have been no need for this Court to allow and, in effect,

direct the trial court a quo 'to hear and decide' subject post-judgment petition in CA-G.R. CV No. 08585."

The surety's motion for reconsideration dated March 28, 1989 was denied by Resolution dated May 17,

1989.

The surety is once again before us, 7 this time praying for reversal of the Appellate Tribunal's aforesaid

judgment of March 8, 1989. Once again it will fail, no merit being discerned in its petition for review on

certiorari.

By settled rule a writ of preliminary attachment may issue once the Court is satisfied, on consideration

ex parte of the application and its supporting affidavits and documents, 8 or after healing, as the court


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may in its discretion consider proper, that any of the grounds specified by law exists, and an acceptable

bond is given by the applicant 9

... executed to the adverse party in an amount ... fixed by the judge, not exceeding the applicant's claim,

conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all

damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the

applicant was not entitled thereto.

The filing of the attachment bond by a surety undoubtedly connotes and operates as a voluntary

submission by it to the Court's jurisdiction, and of course binds it to faithfully comply with its specific

obligations under its bond.

The surety does not, to be sure, become liable on its bond simply because judgment is subsequently

rendered against the party who obtained the preliminary attachment. The surety becomes liable only

when and if "the court shall finally adjudge that the applicant was not entitled to the attachment." This

is so regardless of the nature and character of the judgment on the merits of the principal claims,

counterclaims or cross-claims, etc. asserted by the parties against each other. Indeed, since an

applicant's cause of action may be entirely different from the ground relied upon by him for a

preliminary attachment, 10 it may well be that although the evidence warrants judgment in favor of said

applicant, the proofs may nevertheless also establish that said applicant's proferred ground for

attachment was inexistent or specious and hence, the writ should not have issued at all; i.e., he was not

entitled thereto in the first place. In that event, the final verdict should logically award to the applicant

the relief sought in his basic pleading, but at the same time sentence him usually on the basis of a

counterclaim to pay damages caused to his adversary by the wronful attachment. 11

When the final judgment declares that the party at whose instance an attachment had issued was not

entitled thereto, there is no question about the eminent propriety of condemning that party to the

payment of all the damages that the wrongful attachment had caused to the party whose property had

been seized under the attachment writ.

But what of the surety's liability? The surety on an attachment bond, as already pointed out, assures

that the applicant "will pay all the costs which may be adjudged to the adverse party and all damages

which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant

was not entitled thereto." 12 In other words the surety, by submitting its attachment bond, binds itself

solidarily to make the same payments which its principal the party at whose instance the attachment


33/47

issues may be condemned to make, to compensate for the damages resulting from the wrongful

attachment, although unlike its principal, its liability is limited to the amount stated in its bond.

The final adjudication "that the applicant was not entitled" to the attachment, standing alone, does not

suffice to make the surety liable. It is necessary, in addition, that the surety be accorded due process,

i.e., that it be given an opportunity to be heard on the question of its solidarily liability for damages

arising from wrongful attachment. This, by established rule and practice, is accorded to the surety at a

summary hearing, scheduled after, judgment on presentation of an application to hold it answerable on

its bond. Evidently, such a summary hearing is not rendered unnecessary or superfluous by the fact that

the matter of damages was among the issues tried during the hearings on the merits, unless of course,

the surety had previously been duly impleaded as a party, or otherwise earlier notified and given

opportunity to be present and ventilate its side on the matter during the trial. The procedure for the

rendition of a binding directive on the surety upon its solidarily liability for damages for wrongful

attachment is indicated in Section 20, Rule 5'7 of the Rules of Court. The section reads as follows:

Sec. 20. Claim for damages on account of illegal attachment. If the judgment on

the action be in favor of the party against whom attachment was issued, he may recover upon the bond

given or deposit made by the attaching creditor,, any damages resulting from the attachment. Such

damages may be awarded only upon application and after proper hearing, and shall be included in the

final judgment. The application must be filed before the trial or before appeal is perfected or before the

judgment becomes executory, with due notice to the attaching creditor and his surety or sureties,

setting forth the facts showing his right to damages and the amount thereof.

If the judgment of the appellate court be favorable to the party against whom the attachment was

issued, he must claim damages sustained during the pendency of the appeal by filing an application with

notice to the party in whose favor the attachment was issued or his surety or sureties. before the

judgment of the appellate court becomes executory. The appellate court may allow the application to be

heard and decided by the trial court.

Certain principles are derived from this provision of the Rules. A party against whom a writ ofpreliminary attachment issues may impugn the writ by alleging and proving inter alia that the applicant

was not entitled thereto, i.e., that the asserted ground for attachment was inexistent, or the amount for

which the writ was sought was excessive, etc., this, by appropriate motion. He may also claim damages

on account of the wrongful attachment through an appropriate pleading, such as a counterclaim, or

other form of application. What is important is that the "application must be filed before the trial or

before appeal is perfected or before the judgment becomes executory, with due notice to the attaching


34/47

creditor and his surety or sureties, setting forth the facts showing his right to damages and the amount

thereof."

In the case at bar, since the Trial Court's decision had gone against the defendants, and no irregularity

had been adjudged as regards the preliminary attachment, the latter obviously had no occasion to apply

for damages from wrongful attachment although they could have so applied therefor because, as

already pointed out, it is entirely possible under the law that an applicant for preliminary attachment be

adjudged entitled to relief on his basic claim and at the same time pronounced as not entitled to the

attachment.

As things turned out, the Trial Court's judgment was reversed by the Court of Appeals; the latter

dismissed the complaint, declared the plaintiff not entitled to the attachment and sentenced it to pay to

the defendants damages on account thereof And it was only at this time that the defendants could havepresented and did actually present their petition to enforce the surety's liability on its bond. This

petition, as aforestated, the Court of Appeals (a) noted and (b) referred to the Trial Court with

instructions "to hear and decide ... pursuant to Section 20, Rule 57 of the Rules of Court." Under the

circumstances, and in the light of the explicit provisions of said Section 20, Rule 57, there can be no

debate about the seasonablenes of the defendants' application for damages and the correctness of the

referral by the Court of Appeals of the application for damages to the Trial Court for hearing and

determination.

Under the circumstances, too, there can be no gainsaying the surety's full awareness of its undertakings

under its bond: that, as the law puts it: "the plaintiff will pay all costs which may be adjudged to the

defendant(s), and all damages which may be sustained by reason of the attachment, if the same shall

finally be adjudged to have been wrongful and without cause," and that those damages plainly

comprehended not only those sustained during the trial of the action but also those during the

pendency of the appeal. This is the law, 13 and this is how the surety's liability should be understood.

The surety's liability may be enforced whether the application for damages for wrongful attachment be

submitted in the original proceedings before the Trial Court, or on appeal, so long as the judgment has

not become executory. The surety's liability is not and cannot be limited to the damages caused by the

improper attachment only during the pendency of the appeal. That would be absurb. The plain and

patent intendment of the law is that the surety shall answer for all damages that the party may suffer as

a result of the illicit attachment, for all the time that the attachment was in force; from levy to

dissolution. The fact that the attachment was initially (and erroneously) deemed correct by the Trial

Court, and it was only on appeal that it was pronounced improper, cannot restrict recovery on the bond

only to such damages as might have been sustained during the appeal. The declaration by the appellate

court that the applicant for attachment "was not entitled thereto," signifies that the attachment should

not have issued in the first place, that somehow the Trial Court had been misled into issuing the writ


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although no proper ground existed therefor. The logical and inevitable conclusion is that the applicant

for attachment and the surety on the attachment bond are solidarily liable for all the damages suffered

by the party against whom the writ is enforced, except only that the surety's liability is limited to the

amount set forth in its bond.

The fact that the second paragraph of the rule speaks only of "damages sustained during the pendency

of the appeal" is of no moment; it obviously proceeds from the assumption in the first paragraph that

the award for the damages suffered during the pendency of the case in the trial court was in fact

"included in the final judgment" (or applied for therein before the appeal was perfected or the judgment

became executory); hence, it states that the damages additionally suffered thereafter, i.e., during the

pendency of the appeal, should be claimed before the judgment of the appellate tribunal becomes

executory. It however bears repeating that where, as in the case at bar, the judgment of the Trial Court

has expressly or impliedly sustained the attachment and thus has given rise to no occasion to speak of,

much less, file an application for damages for wrongful attachment, and it is only in the decision of the

Court of Appeals that the attachment is declared wrongful and that the applicant "was not entitled

thereto," the rule is, as it should be, that it is entirely proper at this time for the application for damages

for such wrongful attachment to be filed i.e., for all the damages sustained thereby, during all the

time that it was in force, not only during the pendency of the appeal. And the application must be filed

"with notice to the party in whose favor the attachment was issued or his surety or sureties, before the

judgment of the appellate court becomes executory." In such a situation, the appellate court may

resolve the application itself or allow it "to be heard and decided by the trial court."

WHEREFORE, the petition is DISMISSED for lack of merit, the costs against the petitioner.

SO ORDERED.

THIRD DIVISION

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES, INC.,

Petitioners,


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- versus -

NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN

SATSATIN,

Respondents.

G.R. No. 166759

Present:

CORONA, J., Chairperson,

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA, and

PERALTA, JJ.

Promulgated:

November 25, 2009

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


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DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision[1] dated November 23, 2004 of the Court

of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution[2] dated January 18, 2005, denying

petitioners motion for reconsideration.

The factual and procedural antecedents are as follows:

The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own

adjacent 20,000 square meters track of land situated at Barrio Lankaan, Dasmarias, Cavite, covered by

Transfer Certificate of Title (TCT) Nos. 251267,[3] 251266,[4] and 251265,[5] respectively.

Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners mother, Agripina Aledia, if she

wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren,

Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power of

Attorney, to negotiate for the sale of the properties.[6]

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar

allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter property

owned by a certain Rustica Aledia, for P35,000,000.00. Petitioners alleged that Nicanor was supposed to

remit to them the total amount of P28,000,000.00 or P9,333,333.00 each to Sofia, Fructosa, and the

heirs of Mario.

Petitioners claimed that Solar has already paid the entire purchase price of P35,000,000.00 to

Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their respective

due dates. Petitioners added that they also learned that during the period from January 2000 to April

2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village, Las Pias City and a

car, which he registered in the names of his unemployed children, Nikki Normel Satsatin and Nikki Norlin

Satsatin. However, notwithstanding the receipt of the entire payment for the subject property, Nicanor

only remitted the total amount of P9,000,000.00, leaving an unremitted balance of P19,000,000.00.


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Despite repeated verbal and written demands, Nicanor failed to remit to them the balance of

P19,000,000.00.

Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a

Complaint[7] for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel Satsatin,

and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to RTC, Branch

90, Dasmarias, Cavite.

On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of

Attachment,[8] alleging among other things: that respondents are about to depart the Philippines; that

they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount

due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the claim

sought to be enforced; and that they are willing to post a bond fixed by the court to answer for all costswhich may be adjudged to the respondents and all damages which respondents may sustain by reason

of the attachment prayed for, if it shall be finally adjudged that petitioners are not entitled thereto.

On October 30, 2002, the trial court issued an Order[9] directing the petitioners to post a bond in

the amount of P7,000,000.00 before the court issues the writ of attachment, the dispositive portion of

which reads as follows:

WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form and

substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3, Rule 57

of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00), before the

Writ of Attachment issues.[10]

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,[11] informing the

court that they have already filed an attachment bond. They also prayed that a sheriff be deputized to

serve the writ of attachment that would be issued by the court.

In the Order[12] dated November 15, 2002, the RTC granted the above motion and deputized the

sheriff, together with police security assistance, to serve the writ of attachment.


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Thereafter, the RTC issued a Writ of Attachment[13] dated November 15, 2002, directing the sheriff to

attach the estate, real or personal, of the respondents, the decretal portion of which reads:

WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution, of the

said defendants, in your province, to the value of said demands, and that you safely keep the same

according to the said Rule, unless the defendants give security to pay such judgment as may be

recovered on the said action, in the manner provided by the said Rule, provided that your legal fees and

all necessary expenses are fully paid.

You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the date

of receipt hereof.

GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for

Dasmarias, Cavite, Philippines.[14]

On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the

same date, the sheriff levied the real and personal properties of the respondent, including household

appliances, cars, and a parcel of land located at Las Pias, Manila.[15]

On November 21, 2002, summons, together with a copy of the complaint, was served upon the

respondents.[16]

On November 29, 2002, respondents filed their Answer.[17]

On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of

Attachment[18] anchored on the following grounds: the bond was issued before the issuance of the writ

of attachment; the writ of attachment was issued before the summons was received by the

respondents; the sheriff did not serve copies of the application for attachment, order of attachment,

plaintiffs affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriffs

return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and

devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the writ

of attachment.[19]


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On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an Order[20]

denying the motion, but at the same time, directing the respondents to file a counter-bond, to wit:

WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken into

account, the herein defendants are hereby directed to file a counter-bond executed to the attaching

party, in the amount of Seven Million Pesos (P7,000,000.00), to secure the payment of any judgment

that the attaching party may recover in the action, with notice on the attaching party, whereas, the

Motion to Discharge Writ of Attachment is DENIED.

SO ORDERED.[21]

Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above

order. On April 3, 2003, the RTC issued another Order[22] which reads:

In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this

Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the

defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is

denied until after the defendants have posted the counter-bond in the amount of Seven Million Pesos

(P7,000,000.00).

The defendants, once again, is directed to file their counter-bond of Seven Million Pesos

(P7,000,000.00), if it so desires, in order to discharge the Writ of Attachment.

SO ORDERED.

On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March [11],

2003,[23] which the RTC denied in an Order[24] of even date, the dispositive portion of which reads:

WHEREFORE, premises considered, defendants Urgent Motion to Lift/Set Aside Order Dated March 23,

2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of Merit.


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SO ORDERED.

Respondents filed an Urgent Motion for Reconsideration,[25] but it was denied in the Order[26] dated

March 3, 2004.

Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with

Preliminary Injunction and Temporary Restraining Order[27] under Rule 65 of the Rules of Court,

docketed as CA-G.R. SP No. 83595, anchored on the following grounds:

(1) public respondents committed grave abuse of discretion amounting to lack of or in excess ofjurisdiction in failing to notice that the lower court has no jurisdiction over the person and subject

matter of the complaint when the subject Writ of Attachment was issued;

(2) public respondents committed grave abuse of discretion amounting to lack of or in excess of

jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with the formal

requisites for the issuance of the bond and the Writ of Attachment.[28]

Respondents argued that the subject writ was improper and irregular having been issued and enforced

without the lower court acquiring jurisdiction over the persons of the respondents. They maintained

that the writ of attachment was implemented without serving upon them the summons together with

the complaint. They also argued that the bond issued in favor of the petitioners was defective, because

the bonding company failed to obtain the proper clearance that it can transact business with the RTC of

Dasmarias, Cavite. They added that the various clearances which were issued in favor of the bonding

company were applicable only in the courts of the cities of Pasay, Pasig, Manila, and Makati, but not in

the RTC, Imus, Cavite.[29]

On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding grave

abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in issuing the

Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the Decision reads:


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WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are hereby

nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of Attachment

issued by the lower court is hereby LIFTED.

SO ORDERED.[30]

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