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Preliminary attachment

PCL Industries v. CA. G.R. No. 147970, 486 SCRA 214, 31 March 2006

G.R. No. 147970 March 31, 2006 PCL Industries Manufacturing Corporation, Petitioner,

vs.The COURT OF APPEALS and ASA Color & Chemical Industries, Inc.,Respondents.D E C I S I O NAUSTRIA-MARTINEZ, J.: This resolves the petition for certiorari seeking the reversal of the Decision1 of the Courtof Appeals (CA) promulgated on February 21, 2001, which affirmed the Decision of theRegional Trial Court (RTC) of Quezon City, Branch 226; and the CA Resolution datedMay 9, 2001 denying petitioner’s motion for reconsideration.The antecedent facts are as follows:On October 10, 1995, private respondent filed a complaint with the RTC for Sum ofMoney with Preliminary Attachment against herein petitioner. Private respondent claims

that during the period from January 18, 1994 to April 14, 1994, petitioner purchased andreceived from it various printing ink materials with a total value of P504,906.00, payablewithin 30 days from the respective dates of invoices; and that petitioner, in bad faith,failed to comply with the terms of the sale and failed to pay its obligations despiterepeated verbal and written demands.Petitioner was served with summons together with the Writ of Preliminary Attachment onOctober 20, 1995. On October 23, 1995, petitioner filed a Motion to Dissolve and/orDischarge Writ of Preliminary Attachment. On November 20, 1995, the trial court issuedan Order denying petitioner’s motion to dissolve the writ of preliminary attachment.Petitioner’s motion for reconsideration of said order was also denied per Order datedJanuary 2, 1996. Petitioner no longer elevated to the higher courts the matter of thepropriety of the issuance of the writ of preliminary attachment.

In the meantime, on October 30, 1995, petitioner filed its Answer with Counterclaim.Petitioner claims that the various printing ink materials delivered to it by privaterespondent were defective and sometime in August, October, and November of 1993,they have returned ink materials to private respondent as shown by several TransmittalSlips. Nevertheless, petitioner admits that it continued to buy ink materials from privaterespondent in 1994 despite having rejected ink materials delivered by private respondentin 1993. Petitioner, however, insists that the ink materials delivered by privaterespondent in 1994 were also defective and they made known their complaints toFrankie, the authorized representative of private respondent. In a letter dated June 30,1995, petitioner informed private respondent that it had been complaining to its (privaterespondent’s) representative about the quality of the ink materials but nothing was doneto solve the matter. Private respondent replied through a letter dated July 16, 1995, that

it was giving petitioner the option to return the products delivered, "sealed and unused"within one week from receipt of said letter or pay the full amount of its obligation.Petitioner answered in a letter dated September 26, 1995, that private respondentshould pick up at its plant the remaining unused defective ink materials, and requestedto meet with private respondent to thresh out the matter. No meeting was ever held.Petitioner further claims that it suffered damages in the amount of P1,592,794.50because its customers rejected the finished plastic products it delivered, complaining ofthe bad smell, which, according to petitioner, was caused by the defective ink materialssupplied by private respondent.

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 After trial on the merits, the trial court rendered its Decision dated January 8, 1999, thedispositive portion of which reads thus:WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff.Defendant PCL Industries Manufacturing Corporation is hereby ordered to pay plaintiff:1) P504,906.00 plus 20% interest per annum from April 1994 until fully paid;2) 25% of the above amount as and for attorney’s fees; and

3) cost of suit.The counterclaim of defendant is hereby dismissed for insufficiency of evidence.SO ORDERED.2 The RTC Decision was appealed by herein petitioner to the CA. On February 21, 2001,the CA promulgated its Decision affirming the RTC judgment. The CA held that therewas sufficient evidence to prove that herein petitioner had the intention of defraudingprivate respondent when it contracted the obligation because it agreed to pay within 30days from the date of purchase but once the merchandise was in its possession, itrefused to pay. Furthermore, the CA ruled that the issue on the propriety of the issuanceof the writ of preliminary attachment should be laid to rest since petitioner no longerquestioned the trial court’s orders before the higher courts. As to the alleged defect of the ink delivered by private respondent, both the trial court

and the CA found that the evidence presented by petitioner was insufficient to prove thatit was indeed the ink from private respondent which caused the unwanted smell inpetitioner’s finished plastic products. The trial court’s analysis of the evidence led it tothe following conclusions, to wit:[D]efendant presented transmittal receipts, which allegedly represent the items returnedby defendant [herein petitioner] to plaintiff [herein respondent].x x x x A closer look at these three transmittal receipts would readily show that they are all fordeliveries made in 1993, whereas the items admittedly received by defendant and listedin paragraph 2 of the Complaint are all delivered and dated from January 18, 1994 to April 14, 1994.The items, therefore, returned for being defective and communicated by defendant to

plaintiff are for those printing ink materials delivered in 1993 and these are not the itemsleft unpaid and in issue in this present Complaint.There is no other proof of demand made by defendant to plaintiff corporation as tocommunicate to plaintiff any defect in the printing ink materials delivered in 1994 exceptthe demand letter (Exhibit "42") which is dated September 26, 1995. As admitted by defendant’s witness, Eleno Cayabyab, the demands made by Mr.Jovencio Lim to plaintiff had been oral or verbal only and made only on two occasions. Infact said witness cannot remember exactly when these oral demands were made by Mr.Jovencio Lim, x x xx x x x As regards the testimony of defendant’s witness Jovencio Lim that defendant’s end-users returned the plastic packaging materials to defendant and defendant had to

reimburse its clients of the amount paid by them and defendant allegedly suffereddamages, defendant failed to present sufficient evidence of this allegation. x x x3  Affirming the foregoing findings of the trial court, the CA further noted that: As may be observed, as early as January 31, 1994, the appellant [herein petitioner] hadreceived complaints from its customers about the alleged unwanted smell of their plasticproducts. However, no steps were taken to investigate which of its several suppliersdelivered the defective ink and, if indeed, the appellee’s ink materials were the cause ofthe smell, no immediate communications were sent to the latter. On the contrary, it(appellant) continued to place orders and receive deliveries from the appellee. Worse,

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the appellant failed to convincingly show that the appellant stopped using thesubject ink materials upon notice of its customers of the alleged unwanted smellof the products. Conversely, the appellant continued using the same in theirproduction of plastic materials which would only show that the cause of thealleged stinking smell cannot be attributed to the subject ink materials used. Theappellant tried to convince us that the subject ink materials were the same ink delivered

by the appellee and used in the products that were returned because of the unwantedsmell. However, its evidence fails to impress us.There is no indication that the plasticized pouches printed by the defendant-appellant and returned by its customers were printed with the use of the paintdelivered by the plaintiff-appellee. The former’s evidence on this point are eitherself-serving or unreliable, or totally unworthy of credence, as shown by thefollowing:1) The "work process" forms contain the names of two (2) or three (3) suppliers ,as shown by the following:Exh. "12" – STOCK/ASA"13" – SIMCOR/ASA"14" - SIMCOR/ASA

"15" - SIMCOR/ASA"16" - SYNPAC/ASA"17" - SYNPAC/ASA"18" - SYNPAC/ASA"19" - SYNPAC/ASA"20" - SYNPAC/ASA/CDI"21" - SYNPAC/ASAThis is an indication that the supplier of the obnoxious paint materials has not beenproperly identified or pinpointed.2) The "Memorandum" to the appellant’s Production Department from itsRecords/Receiving Section is an internal memo that does not indicate which oftheir several suppliers delivered the "inferior quality of ink". No witness from the

appellant’s Production Department was presented to attest that the ink suppliedby the appellee was found defective. Not even the person who prepared the said"Work Process" sheets was presented to explain the entries thereon. 3) Exhibits "30", "31" and "32" are supposedly memos from Frank F. Tanos of theOmega Manufacturing (one of the appellant’s customers), alleging that they haverejected certain printed materials due to "unwanted smell". Again, these memos do notindicate the source of such unwanted smell. In any case, the memos were respectivelydated June 15, 1994, July 15, 1994 and March 30, 1995 - - which dates are too far awayfrom the deliveries made by the appellee.4) The defendant-appellant made returns of ink products to the appellee much earlier on August 3, 1993, August 6, 1993, October 13, 1993 and November 3, 1993 as shown bythe delivery receipts/return slips of such dates. According to the appellee, these were

samples that were really returnable if not acceptable. This explanation appears to beplausible, since the quantity involved appears to be unusually low, compared to thequestioned and unpaid deliveries. At any rate, no similar delivery receipts or return slipswere presented to show that the subject ink materials were indeed rejected and returnedby the appellant to the appellee. On the contrary, the appellant admits that they still havethem in their possession for the reason that they were not picked up by the appellee’srepresentative. Such reasoning appears to be shallow and unworthy of credence. For ifthe materials were indeed not picked up within a reasonable time by the appellee’srepresentative, the appellant should have taken steps to return them; otherwise they will

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be held liable for the value thereof.5) The defendant-appellant never made any written or formal complaint about thealleged inferior quality ink and no steps were taken to demand restitution or rectification.Its letter dated June 30, 1995 was the first time it made a communication to theappellee about the alleged inferior quality of the ink delivered by the latter. Thisletter was its answer to the appellee’s letter of demand for payment. Obviously,

the appellant’s letter was written to serve as an excuse for its failure to pay for itscontractual obligations.  In any case, as a reaction to such letter, the appellee daredthe appellant to return the materials within one week, through its letter of July 16, 1995.Obviously, no such return was made.4 (Emphasis supplied)Petitioner then filed the present petition for review on certiorari on the following grounds:I.THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OFDISCRETION IN ISSUING A WRIT OF PRELIMINARY ATTACHMENT EX PARTEWITHOUT ANY LEGAL BASIS AND ON GROUNDS NOT AUTHORIZED UNDER RULE57 OF THE RULES OF COURTII.THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF

DISCRETION AS ITS JUDGMENT WAS BASED ON A MISAPPREHENSION OFFACTS AND ITS FINDINGS ARE NOT SUPPORTED BY THE EVIDENCE EXTANT INTHE RECORDS OF THIS CASEIII.THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OFDISCRETION IN NOT REVERSING THE RULING OF THE TRIAL COURT 5 First of all, although the petition states that it is one for certiorari under Rule 65 of theRules of Court as it imputes grave abuse of discretion committed by the CA, the Courtshall treat the petition as one for review on certiorari  under Rule 45, considering that itwas filed within the reglementary period for filing a petition for review on certiorari  andthe issues and arguments raised basically seek the review of the CA judgment.Secondly, it should be pointed out that petitioner mistakenly stated that it was the CA

that issued the writ of preliminary attachment. Said writ was issued by the trial court. Onappeal, the CA merely upheld the trial court’s order, ruling that the applicant’s (hereinprivate respondent’s) affidavit was sufficient basis for the issuance of the writ because itstated that petitioner had the intention of defrauding private respondent by agreeing topay its purchases within 30 days but then refused to pay the same once in possession ofthe merchandise.The Court, however, finds the issuance of the Writ of Preliminary Attachment to beimproper. In Philippine Bank of Communications v. Court  of Appeals,6 the Court held thus:Petitioner cannot insist that its allegation that private respondents failed to remitthe proceeds of the sale of the entrusted goods nor to return the same issufficient for attachment to issue. We note that petitioner anchors its application upon

Section 1(d), Rule 57. This particular provision was adequately explained in LibertyInsurance Corporation v. Court of Appeals, as follows –To sustain an attachment on this ground, it must be shown that the debtor in contractingthe debt or incurring the obligation intended to defraud the creditor. The fraud mustrelate to the execution of the agreement and must have been the reason which inducedthe other party into giving consent which he would not have otherwise given. Toconstitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraudshould be committed upon contracting the obligation sued upon. A debt is fraudulentlycontracted if at the time of contracting it the debtor has a preconceived plan or

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intention not to pay, as it is in this case. Fraud is a state of mind and need not beproved by direct evidence but may be inferred from the circumstances attendant in eachcase (Republic v. Gonzales, 13 SCRA 633). (Emphasis ours)We find an absence of factual allegations as to how the fraud alleged by petitioner wascommitted. As correctly held by respondent Court of Appeals, such fraudulent intentnot to honor the admitted obligation cannot be inferred from the debtor’s inability

to pay or to comply with the obligations.7 (Emphasis supplied)More recently, in Philippine National Construction Corporation v. Dy,8  the Court ruledthat the following allegations in an affidavit to support the application for a Writ ofPreliminary Attachment is insufficient, to wit:Radstock grounded its application for a Writ of Preliminary Attachment on Section 1 (d)and (e) of Rule 57 of the Rules of Court which provides:SECTION 1. Grounds upon which attachment may issue. – A plaintiff or any proper partymay, at the commencement of the action or at any time thereafter, have the property ofthe adverse party attached as security for the satisfaction of any judgment that may berecovered in the following cases:. . .(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 the performance thereof;(e) In an action against a party who has removed or disposed of his property, or is aboutto do so, with intent to defraud his creditors;. . .In support of these grounds, the affidavit of merit alleged the following:3. Despite repeated demands and periodic statements of accounts sent to PNCC for thesettlement of the credit obligation Yen 5.46 Billion, its interests and penalties within three(3) days from demand in writing, and in the case of credit obligation for P20,000,000which PNCC had agreed to punctually liquidate the said advances to its subsidiary,PNCC failed to pay and honor its obligations herein stated.x x x x5. That PNCC knowing that it is bankrupt and that it does not have enough assets to

meet its existing obligations is now offering for sale its assets as shown in the reportspublished in newspapers of general circulation.6. That the above series of acts as enumerated in paragraphs 3, 4 and 5[,] Marubenibelieves, constitute fraud on the part of PNCC in contracting the obligations mentionedherein and will surely prejudice its creditors.x x x xWe do not see how the above allegations, even on the assumption they are all true, canbe considered as falling within sub-paragraphs (d) and (e). The first three assert, inessence, that PNCC has failed to pay its debt and is offering for sale its assets knowingthat it does not have enough to pay its obligations. As previously held, fraudulentintent cannot be inferred from a debtor’s inability to pay or comply withobligations. Also, the fact that PNCC has insufficient assets to cover its

obligations is no indication of fraud even if PNCC attempts to sell them because itis quite possible that PNCC was entering into a bona fide good faith sale where atleast fair market value for the assets will be received. In such a situation,Marubeni would not be in a worse position than before as the assets will still bethere but just liquidated. Also, that the Financial Statements do not reflect the loanobligation cannot be construed as a scheme to defraud creditors. As to the last two paragraphs, these merely stated that while PNCC continued toreceive revenues from toll charges and other loan obligations the debt toMarubeni remained unpaid. Again, no fraud can be deduced from these acts. While

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these may be sufficient averments to be awarded damages once substantiated bycompetent evidence and for which a writ of execution will issue, they are not sufficientto obtain the harsh provisional remedy of preliminary attachment which requiresmore than mere deliberate failure to pay a debt. (Emphasis supplied)Similarly, in this case, the bare allegations in the applicant’s affidavit, to wit:6. PCL Industries Manufacturing Corporation, after receiving the above printing ink

materials acted in bad faith when it failed to comply with the terms and conditions of thesale thereby prejudicing the interest of Asa Color & Chemical Industries, Inc.x x x x10. Defendant [herein petitioner] was guilty of fraud in contracting the obligation when he[sic] agreed to pay the purchases within 30 days from date of purchases but once inpossession of the merchandise, refused to pay his just and valid obligation thereby usingthe capital of plaintiff [herein private respondent] to the latter’s prejudices [sic]. 9 are insufficient to prove that petitioner was guilty of fraud in contracting the debt orincurring the obligation. The affidavit does not contain statements of other factualcircumstances to show that petitioner, at the time of contracting the obligation, had apreconceived plan or intention not to pay. Verily, in this case, the mere fact thatpetitioner failed to pay its purchases upon falling due and despite several demands

made by private respondent, is not enough to warrant the issuance of the harshprovisional remedy of preliminary attachment.However, with regard to the other issues raised in this petition, the Court finds the sameunmeritorious.This Court reiterated in Child Learning Center, Inc. v. Tagario,10 the well-settled rule that:Generally, factual findings of the trial court, affirmed by the Court of Appeals, arefinal and conclusive and may not be reviewed on appeal.   The establishedexceptions are: (1) when the inference made is manifestly mistaken, absurd orimpossible; (2) when there is grave abuse of discretion; (3) when the findings aregrounded entirely on speculations, surmises or conjectures; (4) when the judgment ofthe Court of Appeals is based on misapprehension of facts; (5) when the findings of factare conflicting; (6) when the Court of Appeals, in making its findings, went beyond the

issues of the case and the same is contrary to the admissions of both appellant andappellee; (7) when the findings of fact are conclusions without citation of specificevidence on which they are based; (8) when the Court of Appeals manifestly overlookedcertain relevant facts not disputed by the parties and which, if properly considered,would justify a different conclusion; and (9) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidenceon record. (Emphasis supplied)Petitioner insists that the CA should have given weight to its evidence, i.e., the workprocesses (Exhibits "12" to "21"), which supposedly proved that respondent ASAsupplied the ink that caused the unpleasant smell of petitioner’s finished products.Petitioner argues that the CA erred in concluding that the work processes failed to provethat the defective ink definitely came from respondent because said documents showed

not only the name of respondent ASA Color as supplier, but also the names of severalother suppliers. Petitioner now tries to explain that the other names of suppliersappearing on the work processes were suppliers of plastic materials, so the only supplierof ink appearing on said documents is respondent ASA. It is further pointed out that, astestified by Jovencio Lim (Lim), petitioner’s President, during the period covered by theWork Processes, they had only two suppliers of ink, CDI Sakada and respondent ASAColor.The Court subjected the records of this case to close scrutiny, but found that petitioner’sallegation that the CA judgment is based on misapprehension of facts, is absolutely

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unfounded.There is no testimonial evidence whatsoever to support petitioner’s belatedexplanation that the other names of suppliers appearing on the work processesare suppliers of plastic materials and not ink. Moreover, petitioner’s witnessescontradict each other. Lim claims that during the period covered by the work processes,they had only 2 suppliers of ink, namely, CDI Sakada and ASA Color.11 On the other

hand, contrary to Lim’s claim, Victor Montañez, petitioner’s Head of the AccountingDepartment, testified that at that time, they had three or four suppliers of ink materials.12 The work process form dated April 29, 1994 marked as Exhibit "20" also listed thesuppliers as "SYNPAC/ASA/ CDI," and the colors used as "Brown-ASA" and "Yellow-CDI." Hence, petitioner’s own evidence reveals that there were at least two suppliers ofink for that batch of production, as Lim has stated that both ASA and CDI are suppliersof ink materials.13 Hence, the CA was correct in ruling that petitioner’s evidence failed toprove that it was indeed respondent ASA Color who supplied the defective ink.Having failed to prove that the ink materials delivered by respondent were defective,petitioner does not have any basis for claiming the right to return and not pay for thematerials it purchased from respondent. It is, therefore, no longer necessary to discusswhether it was the obligation of respondent to pick-up the ink from petitioner’s

warehouse.Petitioner is likewise wrong in assuming that the CA totally disregarded the testimony ofFrank Tanos (Tanos) who withdrew his testimony on February 24, 1998, or almost ayear after testifying that petitioner’s plastic products were rejected by customers due tothe bad smell of paint. The CA made no ruling on the admissibility of Tanos’ testimony.The appellate court merely stated that the memos (Exhibits "30"-"32") from said witnessalso do not prove the source of the unwanted smell. Thus, the CA obviously consideredTanos’ testimony and the documents he identified for whatever they were worth, but stillfound them unconvincing to prove petitioner’s claim that it was respondent who delivereddefective ink materials.Clearly, the findings of fact of both the trial court and the CA, as quoted above, arestrongly rooted on testimonial and documentary evidence submitted by both parties. This

case evidently does not fall under any of the enumerated exceptions to the general rulethat factual findings of the trial court, affirmed by the CA, are final and conclusive andmay not be reviewed on appeal.IN VIEW OF THE FOREGOING, the petition is partly GRANTED. Insofar as theissuance of the Writ of Attachment is concerned, the Court finds the same improper,hence, the attachment over any property of petitioner by the writ of preliminaryattachment is ordered LIFTED effective upon the finality of this Decision. In all otherrespects, the Decision of the Court of Appeals dated February 21, 2001 and itsResolution dated May 9, 2001 are AFFIRMED. SO ORDERED.

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Metro Inc. et al v. Lara’s Gifts, G.R. No. 171741, 606 SCRA 175, 27 November 2009

METRO, INC. andSPOUSES FREDERICK JUAN and LIZA JUAN, 

Petitioners,

-  versus - 

LARA’S GIFTS AND DECORS, INC., LUIS VILLAFUERTE, JR. and LARA MARIA R. 

VILLAFUERTE, Respondents.

G.R. No. 171741 

Present:

CARPIO, J ., Chairperson,LEONARDO-DE CASTRO,* BRION,DEL CASTILLO, and ABAD, JJ .

Promulgated:

November 27, 2009x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N 

CARPIO, J.: 

The Case 

This is a petition for review[if !supportFootnotes][1][endif]

 of the 29 September 2004 Decision[if

!supportFootnotes][2][endif]  and 2 March 2006 Resolution[if !supportFootnotes][3][endif]  of the Court of Appeals in CA-G.R. SP No. 79475. In its 29 September 2004 Decision, the Court of Appeals granted the petition for certiorari of respondents Lara’s Gifts and Decors, Inc.,Luis Villafuerte, Jr., and Lara Maria R. Villafuerte (respondents). In its 2 March 2006Resolution, the Court of Appeals denied the motion for reconsideration of petitionersMetro, Inc., Frederick Juan and Liza Juan (petitioners).

The Facts 

Lara’s Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations engaged in thebusiness of manufacturing, producing, selling and exporting handicrafts. Luis Villafuerte,

Jr. and Lara Maria R. Villafuerte are the president and vice-president of LGDrespectively. Frederick Juan and Liza Juan are the principal officers of Metro, Inc.

Sometime in 2001, petitioners and respondents agreed that respondents wouldendorse to petitioners purchase orders received by respondents from their buyers in theUnited States of America in exchange for a 15% commission, to be shared equally byrespondents and James R. Paddon (JRP), LGD’s agent. The terms of the agreementwere later embodied in an e-mail labeled as the “2001 Agreement.”[if !supportFootnotes][4][endif] 

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  In May 2003, respondents filed with the Regional Trial Court, Branch 197, LasPiñas City (trial court) a complaint against petitioners for sum of money and damageswith a prayer for the issuance of a writ of preliminary attachment. Subsequently,respondents filed an amended complaint[if !supportFootnotes][5][endif] and alleged that, as of July2002, petitioners defrauded them in the amount of $521,841.62. Respondents alsoprayed for P1,000,000 as moral damages, P1,000,000 as exemplary damages and 10%

of the judgment award as attorney’s fees. Respondents also prayed for the issuance ofa writ of preliminary attachment.

In its 23 June 2003 Order,[if !supportFootnotes][6][endif]  the trial court granted respondents’prayer and issued the writ of attachment against the properties and assets ofpetitioners. The 23 June 2003 Order provides:

WHEREFORE, let a Writ of Preliminary Attachment issue against the propertiesand assets of Defendant METRO, INC. and against the properties and assets ofDefendant SPOUSES FREDERICK AND LIZA JUAN not exempt from execution, asmay be sufficient to satisfy the applicants’ demand of US$521,841.62 US Dollars or itsequivalent in Pesos upon actual attachment, which is about P27 Million, unless suchDefendants make a deposit or give a bond in an amount equal to P27 Million to satisfy

the applicants’ demand exclusive of costs, upon posting by the Plaintiffs of a Bond forPreliminary Attachment in the amount of twenty five million pesos (P25,000,000.00),subject to the approval of this Court.

SO ORDERED.[if !supportFootnotes][7][endif] 

On 26 June 2003, petitioners filed a motion to discharge the writ ofattachment. Petitioners argued that the writ of attachment should be discharged on the

following grounds: (1) that the 2001 agreement was not a valid contract because it didnot show that there was a meeting of the minds between the parties; (2) assuming thatthe 2001 agreement was a valid contract, the same was inadmissible becauserespondents failed to authenticate it in accordance with the Rules on ElectronicEvidence; (3) that respondents failed to substantiate their allegations of fraud withspecific acts or deeds showing how petitioners defrauded them; and (4) thatrespondents failed to establish that the unpaid commissions were already due anddemandable.

 After considering the arguments of the parties, the trial court granted petitioners’motion and lifted the writ of attachment. The 12 August 2003 Order [if !supportFootnotes][8][endif] of the trial court provides:

Premises considered, after having taken a second hard look at the Order datedJune 23, 2003 granting plaintiff’s application for the issuance of a writ of preliminaryattachment, the Court holds that the issuance of a writ of preliminary attachment in thiscase is not justified.

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  WHEREFORE, the writ of preliminary attachment issued in the instantcase is hereby ordered immediately discharged and/or lifted.

SO ORDERED.[if !supportFootnotes][9][endif] 

Respondents filed a motion for reconsideration. In its 10 September 2003 Order,

the trial court denied the motion.

Respondents filed a petition for certiorari before the Court of Appeals. Respondents alleged that the trial court gravely abused its discretion when itordered the discharge of the writ of attachment without requiring petitioners to post acounter-bond.

In its 29 September 2004 Decision, the Court of Appeals granted respondents’petition. The 29 September 2004 Decision provides:

WHEREFORE, finding merit in the petition, We GRANT the same. The assailedOrders are hereby ANNULLED and SET ASIDE. However, the issued Writ of

Preliminary Attachment may be ordered discharged upon the filing by the privaterespondents of the proper counter-bond pursuant to Section 12, Rule 57 of the Rules ofCivil Procedure.

SO ORDERED.[if !supportFootnotes][10][endif] 

Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, theCourt of Appeals denied the motion.

Hence, this petition.

The 12 August 2003 Order of the Trial Court 

 According to the trial court, respondents failed to sufficiently show that petitionerswere guilty of fraud either in incurring the obligation upon which the action was brought,or in the performance thereof. The trial court found no proof that petitioners weremotivated by malice in entering into the 2001 agreement. The trial court also declared

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that petitioners’ failure to fully comply with their obligation, absent other facts orcircumstances to indicate evil intent, does not automatically amount tofraud. Consequently, the trial court ordered the discharge of the writ of attachment forlack of evidence of fraud.

The 29 September 2004 Decision of the Court of Appeals 

 According to the Court Appeals, the trial court gravely abused its discretion when itordered the discharge of the writ of attachment without requiring petitioners to post acounter-bond. The Court of Appeals said that when the writ of attachment is issuedupon a ground which is at the same time also the applicant’s cause of action, courts areprecluded from hearing the motion for dissolution of the writ when such hearing wouldnecessarily force a trial on the merits of a case on a mere motion.[if!supportFootnotes][11][endif]  The Court of Appeals pointed out that, in this case, fraud was notonly alleged as the ground for the issuance of the writ of attachment, but was actuallythe core of respondents’ complaint. The Court of Appeals declared that the only waythat the writ of attachment can be discharged is by posting a counter-bond inaccordance with Section 12,[if !supportFootnotes][12][endif] Rule 57 of the Rules of Court.

The Issue 

Petitioners raise the question of whether the writ of attachment issued by the trialcourt was improperly issued such that it may be discharged without the filing of acounter-bond.

The Ruling of the Court 

The petition has no merit.

Petitioners contend that the writ of attachment was improperly issued because

respondents’ amended complaint failed to allege specific acts or circumstancesconstitutive of fraud. Petitioners insist that the improperly issued writ of attachment maybe discharged without the necessity of filing a counter-bond. Petitioners also argue thatrespondents failed to show that the writ of attachment was issued upon a ground whichis at the same time also respondents’ cause of action. Petitioners maintain thatrespondents’ amended complaint was not an action based on fraud but was a simplecase for collection of sum of money plus damages.

On the other hand, respondents argue that the Court of Appeals did not err inruling that the writ of attachment can only be discharged by filing a counter-bond. According to respondents, petitioners cannot avail of Section 13,[if!supportFootnotes][13][endif]  Rule 57 of the Rules of Court to have the attachment set aside

because the ground for the issuance of the writ of attachment is also the basis ofrespondents’ amended complaint. Respondents assert that the amended complaint is acomplaint for damages for the breach of obligation and acts of fraud committed bypetitioners.

In this case, the basis of respondents’ application for the issuance of a writ ofpreliminary attachment is Section 1(d), Rule 57 of the Rules of Court which provides:

SEC. 1. Grounds upon which attachment may issue. — At the commencement of

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the action or at any time before entry of judgment, a plaintiff or any proper party mayhave the property of the adverse party attached as security for the satisfaction of any judgment that maybe recovered in the following cases: x x x

(d) In an action against a party who has been guilty of fraud in contracting thedebt or incurring the obligation upon which the action is brought, or in the performance

thereof; x x x

In Liberty Insurance Corporation v. Court of Appeals,[if !supportFootnotes][14][endif]  weexplained:

To sustain an attachment on this ground, it must be shown that the debtor incontracting the debt or incurring the obligation intended to defraud the creditor. Thefraud must relate to the execution of the agreement and must have been the reasonwhich induced the other party into giving consent which he would not have otherwisegiven. To constitute a ground for attachment in Section 1(d), Rule 57 of the Rules ofCourt, 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 planor intention not to pay, as it is in this case. [if !supportFootnotes][15][endif] 

The applicant for a writ of preliminary attachment must sufficiently show the factualcircumstances of the alleged fraud because fraudulent intent cannot be inferred from thedebtor’s mere non-payment of the debt or failure to comply with his obligation.[if!supportFootnotes][16][endif] 

In their amended complaint, respondents alleged the following in support of theirprayer for a writ of preliminary attachment:

5. Sometime in early 2001, defendant Frederick Juan approached plaintiff spouses

and asked them to help defendants’ export business. Defendants enticed plaintiffs toenter into a business deal. He proposed to plaintiff spouses the following:

a. That plaintiffs transfer and endorse to defendant Metro someof the Purchase Orders (PO’s) they will receive from their USbuyers;

b. That defendants will sell exclusively and “only thru” plaintiffs for their USbuyer ;

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x x x

6. After several discussions on the matter and further inducement on the part ofdefendant spouses, plaintiff spouses agreed. Thus, on April 21, 2001, defendantspouses confirmed and finalized the agreement in a letter-document entitled “2001

 Agreement” they emailed to plaintiff spouses, a copy of which is hereto attached asAnnex “A”.

x x x

20. Defendants are guilty of fraud committed both at the inception ofthe agreement and in the performance of the obligation. Throughmachinations and schemes, defendants successfully enticedplaintiffs to enter into the 2001 Agreement. In order to secureplaintiffs’ full trust in them and lure plaintiffs to endorse morePOs and increase the volume of the orders, defendants during theearly part, remitted to plaintiffs shares under the Agreement.

21. However, soon thereafter, just when the orders increased and theamount involved likewise increased, defendants suddenly, withoutany justifiable reasons and in pure bad faith and fraud, abandonedtheir contractual obligations to remit to plaintiffs theirshares.  And worse, defendants transacted directly with plaintiffs’ foreign buyer to the latter’s exclusion anddamage.  Clearly, defendants planned everything from thebeginning, employed ploy and machinations to defraud plaintiffs,

and consequently take from them a valuable client.

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  22. Defendants are likewise guilty of fraud by violating the trustand confidence reposed upon them by plaintiffs. Defendantsreceived the proceeds of plaintiffs’ LCs with the clearobligation of remitting 15% thereof to the plaintiffs. Theirrefusal and failure to remit the said amount despite demandconstitutes a breach of trust amounting to malice and fraud.[if

!supportFootnotes][17][endif]  (Emphasis and underscoring in the original)(Boldfacing and italicization supplied)

We rule that respondents’ allegation that petitioners undertook to sell exclusivelyand only through JRP/LGD for Target Stores Corporation but that petitioners transacteddirectly with respondents’ foreign buyer is sufficient allegation of fraud to support theirapplication for a writ of preliminary attachment. Since the writ of preliminary attachment

was properly issued, the only way it can be dissolved is by filing a counter-bond inaccordance with Section 12, Rule 57 of the Rules of Court.

Moreover, the reliance of the Court of Appeals in the cases of Chuidian v.Sandiganbayan,[if !supportFootnotes][18][endif] FCY Construction Group, Inc. v. Court of Appeals,[if!supportFootnotes][19][endif]  and Liberty Insurance Corporation v. Court of Appeals[if!supportFootnotes][20][endif] is proper. The rule that “when the writ of attachment is issued upon aground which is at the same time the applicant’s cause of action, the only other way thewrit can be lifted or dissolved is by a counter-bond”[if !supportFootnotes][21][endif] is applicable inthis case. It is clear that in respondents’ amended complaint of fraud is not only allegedas a ground for the issuance of the writ of preliminary attachment, but it is also the coreof respondents’ complaint. The fear of the Court of Appeals that petitioners could force

a trial on the merits of the case on the strength of a mere motion to dissolve theattachment has a basis.

WHEREFORE, we DENY  the petition. We AFFIRM  the 29 September2004 Decision and 2 March 2006 Resolution of the Court of Appeals in CA-G.R. SP No.79475.

SO ORDERED. 

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Davao Light and Power Co., Inc. vs. CA,  G.R. No. 93262, 204 SCRA 343, 29

November 1991

G.R. No. 93262 December 29, 1991DAVAO LIGHT & POWER CO., INC., petitioner,

vs.THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLANDTOURIST 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 asidethe writ of preliminary attachment issued by the Regional Trial Court of Davao City 2 inCivil 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 AppellateTribunal's judgment of May 4, 1990.1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed averified complaint for recovery of a sum of money and damages against QueenslandHotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaintcontained 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 the ex parte application and fixing the attachment bond atP4,600,513.37.3. 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 ofattachment and a copy of the attachment bond, were served on defendants Queenslandand 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 todischarge the attachment for lack of jurisdiction to issue the same because at the timethe 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 overthe persons of the defendants.6. On September 14, 1989, Davao Light filed an opposition to the motion to dischargeattachment.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 May4, 1990. The Appellate Court's decision closed with the following disposition:. . . the Orders dated May 3, 1989 granting the issuance of a writ of preliminaryattachment, dated September 19, 1989 denying the motion to discharge attachment;dated November 7, 1989 denying petitioner's motion for reconsideration; as well as allother orders emanating therefrom, specially the Writ of Attachment dated May 11, 1989

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and Notice of Levy on Preliminary Attachment dated May 11, 1989, are hereby declarednull 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 maybe included m the complaint, as is usually done, it is likewise true that the Court does notacquire 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 confersaid jurisdiction before actual summons had been made, nor retroact jurisdiction uponsummons being made. . . .It went on to say, citing Sievert v . Court of Appeals, 3  that "in a proceedings inattachment," the "critical time which must be identified is . . . when the trial courtacquires 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 personof the defendant in the main case."Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Lightseeks 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 thatconsequently, 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 theacquisition 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 theplaintiff or the court. It is wrong to assume that the validity of acts done during this periodshould be defendant on, or held in suspension until, the actual obtention of jurisdictionover the defendant's person. The obtention by the court of jurisdiction over the person ofthe defendant is one thing; quite another is the acquisition of jurisdiction over the personof 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 initiatorypleading. 4 By that act, the jurisdiction of the court over the subject matter or nature ofthe action or proceeding is invoked or called into activity; 5 and it is thus that the courtacquires jurisdiction over said subject matter or nature of the action. 6 And it is by thatself-same act of the plaintiff (or petitioner) of filing the complaint (or other appropriatepleading) — 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, jurisdictionover the person of the defendant is obtained, as above stated, by the service ofsummons or other coercive process upon him or by his voluntary submission to theauthority 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 thentransmitted to the sheriff, and finally, service of the summons is effected on thedefendant in any of the ways authorized by the Rules of Court. There is thus ordinarilysome appreciable interval of time between the day of the filing of the complaint and theday of service of summons of the defendant. During this period, different acts may bedone 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 ofauthority to the plaintiff to prosecute the suit as a pauper litigant, 10  the amendment ofthe complaint by the plaintiff as a matter of right without leave of court, 11 authorization

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by the Court of service of summons by publication, 12 the dismissal of the action by theplaintiff 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 properlyapplied 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 commencementof the action or at any time thereafter, have the property of the adverse party taken intothe custody of the court as security for the satisfaction of any judgment that may berecovered. 15 It is a remedy which is purely statutory in respect of which the law requiresa strict construction of the provisions granting it. 16  Withal no principle, statutory or jurisprudential, prohibits its issuance by any court before acquisition of jurisdiction overthe person of the defendant.Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action orat any time thereafter." 17 The phase, "at the commencement of the action," obviouslyrefers to the date of the filing of the complaint — which, as above pointed out, is the datethat marks "the commencement of the action;" 18 and the reference plainly is to a timebefore 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 filingof the complaint and the payment of all requisite docket and other fees — the plaintiffmay apply for and obtain a writ of preliminary attachment upon fulfillment of the pertinentrequisites laid down by law, and that he may do so at any time, either before or afterservice of summons on the defendant. And this indeed, has been the immemorialpractice sanctioned by the courts: for the plaintiff or other proper party to incorporate theapplication 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 thecommencement of the action if it finds the application otherwise sufficient in form andsubstance.In Toledo v . Burgos,  19  this Court ruled that a hearing on a motion or application forpreliminary 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 Courtdeclared that "(n)othing in the Rules of Court makes notice and hearing indispensableand mandatory requisites for the issuance of a writ of attachment." The only pre-requisiteis that the Court be satisfied, upon consideration of "the affidavit of the applicant or ofsome other person who personally knows the facts, that a sufficient cause of actionexists, that the case is one of those mentioned in Section 1 . . . (Rule 57), that there isno other sufficient security for the claim sought to be enforced by the action, and that theamount due to the applicant, or the value of the property the possession of which he isentitled to recover, is as much as the sum for which the order (of attachment) is grantedabove all legal counterclaims." 22  If the court be so satisfied, the "order of attachmentshall be granted," 23  and the writ shall issue upon the applicant's posting of "a bondexecuted 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 tothe adverse party and all damages which he may sustain by reason of the attachment, ifthe 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 requiredon an application for preliminary attachment, with notice to the defendant, for the reasonthat this "would defeat the objective of the remedy . . . (since the) time which such ahearing would take, could be enough to enable the defendant to abscond or dispose ofhis property before a writ of attachment issues." As observed by a former member of this

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Court, 26  such a procedure would warn absconding debtors-defendants of thecommencement 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 dangerof 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 ismatched and paralleled by the relative facility with which the attachment may legitimatelybe prevented or frustrated. These modes of recourse against preliminary attachmentsgranted by Rule 57 were discussed at some length by the separate opinion in MindanaoSavings & 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 orirregular issuance.1.0. The submission of a counterbond is an efficacious mode of lifting an attachmentalready enforced against property, or even of  preventing its enforcement altogether .1.1. When property has already been seized under attachment, the attachment may bedischarged upon counterbond in accordance with Section 12 of Rule 57.

Sec. 12. Discharge of attachment upon giving counterbond. — At any time after an orderof attachment has been granted, the party whose property has been attached or theperson appearing in his behalf, may, upon reasonable notice to the applicant, apply tothe judge who granted the order, or to the judge of the court in which the action ispending, 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 judgeto secure the payment of any judgment that the attaching creditor may recover in theaction. . . .1.2. But even before actual levy on property, seizure under attachment may beprevented also upon counterbond. The defendant need not wait until his property isseized before seeking the discharge of the attachment by a counterbond. This is madepossible by Section 5 of Rule 57.

Sec. 5. Manner of attaching property . — The officer executing the order shall withoutdelay attach, to await judgment and execution in the action, all the properties of the partyagainst whom the order is issued in the province, not exempt from execution, or so muchthereof as may be sufficient to satisfy the applicant's demand, unless the former makesa deposit with the clerk or judge of the court from which the order issued, or gives acounter-bond executed to the applicant, in an amount sufficient to satisfy such demandbesides 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 ordischarged on the ground that it has been irregularly or improperly issued, in accordancewith 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 ofafter property has been released from a levy on attachment, as is made clear by saidSection 13, viz .:Sec. 13. Discharge of attachment for improper or irregular issuance. — The party whoseproperty has been attached may also, at any time either BEFORE or AFTER the releaseof the attached property, or before any attachment shall have been actually levied , uponreasonable notice to the attaching creditor, apply to the judge who granted the order, orto the judge of the court in which the action is pending, for an order to discharge theattachment on the ground that the same was improperly or irregularly issued. If the

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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 orother evidence in addition to that on which the attachment was made. . . . (Emphasissupplied)This is so because "(a)s pointed out in Calderon v . I . A.C ., 155 SCRA 531 (1987), Theattachment 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 ofdischarging the attachment writ maliciously sought out by the attaching creditor insteadof the other way, which, in most instances . . . would require presentation of evidence ina fullblown trial on the merits, and cannot easily be settled in a pending incident of thecase." 27 It may not be amiss to here reiterate other related principles dealt with in MindanaoSavings & 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 improperissuance: . . . (W)hen the preliminary attachment is issued upon a ground which is at the sametime 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 acorporation, or an attorney, factor, broker, agent, or clerk, in the course of hisemployment as such, or by any other person in a fiduciary capacity, or for a willfulviolation of duty." (Sec. 1 [b], Rule 57), or "an action against a party who has been guiltyof fraud m contracting the debt or incurring the obligation upon which the action isbrought" (Sec. 1 [d], Rule 57), the defendant is not allowed to file a motion to dissolvethe attachment under Section 13 of Rule 57 by offering to show the falsity of the factualaverments in the plaintiff's application and affidavits on which the writ was based — andconsequently that the writ based thereon had been improperly or irregularly issued (SEEBenitez v. I.A.C., 154 SCRA 41) — the reason being that the hearing on such a motionfor dissolution of the writ would be tantamount to a trial of the merits of the action. Inother 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, theonly 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 itsirregular or improper issuance, does not of course operate to discharge the sureties onplaintiff's own attachment bond. The reason is simple. That bond is "executed to theadverse party, . . . conditioned that the . . . (applicant) will pay all the costs which may beadjudged to the adverse party and all damages which he may sustain by reason of theattachment, 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'sentitlement 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 thesame: they may also issue ex parte. 29 It goes without saying that whatever be the acts done by the Court prior to theacquisition of jurisdiction over the person of defendant, as above indicated — issuanceof summons, order of attachment and writ of attachment (and/or appointments ofguardian ad litem, or grant of authority to the plaintiff to prosecute the suit as a pauperlitigant, or amendment of the complaint by the plaintiff as a matter of right without leaveof court 30 — and however valid and proper they might otherwise be, these do not andcannot bind and affect the defendant until and unless jurisdiction over his person is

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eventually obtained by the court, either by service on him of summons or other coerciveprocess or his voluntary submission to the court's authority. Hence, when the sheriff orother proper officer commences implementation of the writ of attachment, it is essentialthat he serve on the defendant not only a copy of the applicant's affidavit and attachmentbond, and of the order of attachment, as explicity required by Section 5 of Rule 57, butalso 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 onlyfor the acquisition of jurisdiction over the person of the defendant, but also uponconsiderations of fairness, to apprise the defendant of the complaint against him, of theissuance of a writ of preliminary attachment and the grounds therefor and thus accordhim the opportunity to prevent attachment of his property by the posting of acounterbond in an amount equal to the plaintiff's claim in the complaint pursuant toSection 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaintitself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of theapplicant'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 ofsummons 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 Corporationv . Court of Appeals, et al . 32 In contrast to the case at bar — where the summons and acopy of the complaint, as well as the order and writ of attachment and the attachmentbond were served on the defendant — in Sievert , levy on attachment was attemptednotwithstanding that only the petition for issuance of the writ of preliminary attachmentwas served on the defendant, without any prior or accompanying summons and copy ofthe complaint; and in BAC Manufacturing and Sales Corporation, neither the summonsnor the order granting the preliminary attachment or the writ of attachment itself wasserved 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 thatwrits 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 itsdiscretion, require prior hearing on the application with notice to the defendant; but thatlevy on property pursuant to the writ thus issued may not be validly effected unlesspreceded, or contemporaneously accompanied, by service on the defendant ofsummons, 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 thecomplaint), 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 inCivil Case No. 19513-89 against Queensland Hotel or Motel or Queensland Tourist Innand Teodorico Adarna are hereby REINSTATED. Costs against private respondents.

SO ORDERED. 

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Onate v. Abrogar, G.R. No. 107303, 241 SCRA 659, 23 February 1995

G.R. No. 107303 February 21, 1994EMMANUEL C. OÑATE and ECON HOLDINGS CORPORATION, petitioners,vs.HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional Trial

Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents.G.R. No. 107491 February 21, 1994BRUNNER DEVELOPMENT CORPORATION, petitioner,vs.HON. ZUES C. ABROGAR, as Presiding Judge of Branch 150 of the Regional TrialCourt of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA, respondents.Florante A. Bautista for petitioner in G.R. No. 107303.

 Andin & Andin Law Offices for Brunner Development Corporation.Quasha, Asperilla, Ancheta, Pena & Nolasco for Sun Life Assurance Company of

Canada.

NOCON, J.: 

These are separate petitions for certiorari with a prayer for temporary restraining orderfiled by Emmanuel C. Oñate and Econ Holdings Corporation (in G.R. No. 107303), andBrunner Development Corporation (in G.R. No. 107491), both of which assail severalorders issued by respondent Judge Zues C. Abrogar in Civil Case No. 91-3506.The pertinent facts are as follows: On December 23, 1991, respondent Sun Life Assurance Company of Canada (Sun Life, for brevity) filed a complaint for a sum ofmoney with a prayer for the immediate issuance of a writ of attachment againstpetitioners, and Noel L. Diño, which was docketed as Civil Case No. 91-3506 and raffledto Branch 150 of the RTC Makati, presided over by respondent Judge. The followingday, December 24, 1991, respondent Judge issued an order granting the issuance of awrit of attachment, and the writ was actually issued on December 27, 1991.On January 3, 1992, upon Sun Life's ex-parte motion, the trial court amended the writ of

attachment to reflect the alleged amount of the indebtedness. That same day, DeputySheriff Arturo C. Flores, accompanied by a representative of Sun Life, attempted toserve summons and a copy of the amended writ of attachment upon petitioners at theirknown office address at 108 Aguirre St., Makati but was not able to do so since therewas no responsible officer to receive the same.  1 Nonetheless, Sheriff Flores proceeded,over a period of several days, to serve notices of garnishment upon several commercialbanks and financial institutions, and levied on attachment a condominium unit and a realproperty belonging to petitioner Oñate.Summons was eventually served upon petitioners on January 9, 1992, while defendantDiño was served with summons on January 16, 1992.On January 21, 1992, petitioners filed an "Urgent Motion to Discharge/Dissolve Writ of Attachment." That same day, Sun Life filed an ex-parte motion to examine the books of

accounts and ledgers of petitioner Brunner Development Corporation (Brunner, forbrevity) at the Urban Bank, Legaspi Village Branch, and to obtain copies thereof, whichmotion was granted by respondent Judge. The examination of said account took placeon January 23, 1992. Petitioners filed a motion to nullify the proceedings taken thereatsince they were not present.On January 30, 1992, petitioners and their co-defendants filed a memorandum insupport of the motion to discharge attachment. Also on that same day, Sun Life filedanother motion for examination of bank accounts, this time seeking the examination of Account No. 0041-0277-03 with the Bank of Philippine Islands (BPI) — which,

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incidentally, petitioners claim not to be owned by them — and the records of PhilippineNational Bank (PNB) with regard to checks payable to Brunner. Sun Life asked the courtto order both banks to comply with the notice of garnishment.On February 6, 1992, respondent Judge issued an order (1) denying petitioners' and theco-defendants' motion to discharge the amended writ of attachment, (2) approving SunLife's additional attachment, (3) granting Sun Life's motion to examine the BPI account,

and (4) denying petitioners' motion to nullify the proceedings of January 23, 1992.On March 12, 1992, petitioners filed a motion for reconsideration of the February 6, 1992order. On September 6, 1992, respondent Judge denied the motion for reconsideration.Hence, the instant petitions. Petitioners' basic argument is that respondent Judge hadacted with grave abuse of discretion amounting to lack or in excess of jurisdiction in (1)issuing ex parte  the original and amended writs of preliminary attachment and thecorresponding notices of garnishment and levy on attachment since the trial court hadnot yet acquired jurisdiction over them; and (2) allowing the examination of the bankrecords though no notice was given to them.We find both petitions unmeritorious.Petitioners initially argue that respondent Judge erred in granting Sun Life's prayer for awrit of preliminary attachment on the ground that the trial court had not acquired

 jurisdiction over them. This argument is clearly unavailing since it is well-settled that awrit of preliminary attachment may be validly applied for and granted even before thedefendant is summoned or is heard from. 2 The rationale behind this rule was stated bythe Court in this wise: A preliminary attachment may be defined, paraphrasing the Rules of Court, as theprovisional remedy in virtue of which a plaintiff or other proper party may, at thecommencement of the action or any time thereafter, have the property of the adverseparty taken into the custody of the court as security for the satisfaction of any judgmentthat may be recovered. It is a remedy which is purely statutory in respect of which thelaw requires a strict construction of the provisions granting it. 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 orat any time thereafter." The phrase "at the commencement of the action," obviouslyrefers to the date of the filing of the complaint — which, as abovepointed out, its the datethat marks "the commencement of the action;" and the reference plainly is to a timebefore summons is served on the defendant or even before summons issues. What therule is saying quite clearly is that after an action is properlycommenced — by the filing of the complaint and the payment of all requisite docket andother fees — the plaintiff may apply for and obtain a writ of preliminary attachment uponfulfillment 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 beenthe immemorial practice sanctioned by the courts: for the plaintiff or other proper party toincorporate the application for attachment in the complaint or other appropriate pleading

(counterclaim, 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 inform and substance. 3 Petitioners then contended that the writ should have been discharged since the groundon which it was issued — fraud in contracting the obligation — was not present. Thiscannot be considered a ground for lifting the writ since this delves into the very complaintof the Sun Life. As this Court stated in Cuatro v . Court of Appeals: 4 Moreover, an attachment may not be dissolved by a showing of its irregular or improperissuance if it is upon a ground which is at the same time the applicant's cause of action

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in the main case since an anomalous situation would result if the issues of the main casewould be ventilated and resolved in a mere hearing of the motion (Davao Light andPower Co., Inc. vs. Court of Appeals, supra, The Consolidated Bank and Trust Corp.(Solidbank) vs. Court of Appeals, 197 SCRA 663 [1991]).In the present case, one of the allegation in petitioner's complaint below is that thedefendant spouses induced the plaintiff to grant the loan by issuing postdated checks to

cover the installment payments and a separate set of postdated checks for payment ofthe stipulated interest (Annex "B"). The issue of fraud, then, is clearly within thecompetence of the lower court in the main action. 5 The fact that a criminal complaint for estafa filed by Sun Life against the petitioners wasdismissed by the Provincial Prosecutor of Rizal for Makati on April 21, 1992 and wasupheld by the Provincial Prosecutor on July 13, 1992 is of no moment since the samecan be indicative only of the absence of criminal liability, but not of civil liability. Besides,Sun Life had elevated the case for review to the Department of Justice, where the caseis presently pending.Finally, petitioners argue that the enforcement of the writ was invalid since itundisputedly preceded the actual service of summons by six days at most. Petitionerscite the decisions in Sievert vs. Court of Appeals, et al . 6 and BAC Manufacturing and

Sales Corp. vs. Court of Appeals, et al ., 7 wherein this Court held that enforcement of thewrit of attachment can not bind the defendant in view of the failure of the trial court toacquire jurisdiction over the defendant through either summons or his voluntaryappearance.We do not agree entirely with petitioners. True, this Court had held in a recent decisionthat the enforcement of writ of attachment may not validly be effected until and unlessproceeded or contemporaneously accompanied by service of summons. 8 But we must distinguish the case at bar from the Sievert and BAC Manufacturing cases.In those two cases, summons was never served upon the defendants. The plaintiffstherein did not even attempt to cause service of summons upon the defendants, right upto the time the cases went up to this Court. This is not true in the case at bar. Therecords reveal that Sheriff Flores and Sun Life did attempt a contemporaneous service

of both summons and the writ of attachment on January 3, 1992, but we stymied by theabsence of a responsible officer in petitioners' offices. Note is taken of the fact thatpetitioners Oñate and Econ Holdings admitted in their answer  9  that the offices of bothBrunner Development Corporation and Econ Holdings were located at the same addressand that petitioner Oñate is the President of Econ Holdings while petitioner Diño is thePresident of Brunner Development Corporation as well as a stockholder and director ofEcon Holdings.Thus, an exception to the established rule on the enforcement of the writ of attachmentcan be made where a previous attempt to serve the summons and the writ of attachmentfailed due to factors beyond the control of either the plaintiff or the process server,provided that such service is effected within a reasonable period thereafter.Several reasons can be given for the exception. First, there is a possibility that a

defendant, having been alerted of plaintiffs action by the attempted service of summonsand the writ of attachment, would put his properties beyond the reach of the plaintiffwhile the latter is trying to serve the summons and the writ anew. By the time the plaintiffmay have caused the service of summons and the writ, there might not be any propertyof the defendant left to attach.Second, the court eventually acquired jurisdiction over the petitioners six days later. Tonullify the notices of garnishment issued prior thereto would again open the possibilitythat petitioners would transfer the garnished monies while Sun Life applied for newnotices of garnishment.

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Third, the ease by which a writ of attachment can be obtained is counter-balanced by theease by which the same can be discharged: the defendant can either make a cashdeposit or post a counter-bond equivalent to the value of the property attached. 10 Thepetitioners herein tried to have the writ of attachment discharged by posting a counter-bond, the same was denied by respondent Judge on the ground that the amount of thecounter-bond was less than that of Sun Life's bond.

II.Petitioners' second ground assail the acts of respondent Judge in allowing theexamination of Urban Banks' records and in ordering that the examination of the bankrecords of BPI and PNB as invalid since no notice of said examinations were ever giventhem. Sun Life grounded its requests for the examination of the bank accounts onSection 10, Rule 57 of the Rules of Court, which provided, to wit:Sec. 10. Examination of party whose property is attached and persons indebted to himor controlling his property; delivery of property to officer . — Any person owing debts tothe party whose property is attached or having in his possession or under his control anycredit or other personal property belonging to such party, may be required to attendbefore the court in which the action is pending, or before a commissioner appointed bythe court and be examined on oath respecting the same. The party whose property is

attached may also be required to attend for the purpose of giving information respectinghis property, and may be examined on oath. The court may, after such examination,order personal property capable of manual delivery belonging to him, in the possessionof the person so required to attend before the court, to be delivered to the clerk or court,sheriff, or other proper officer on such terms as may be just, having reference to any lienthereon or claim against the same, to await the judgment in the action.It is clear from the foregoing provision that notice need only be given to the garnishee,but the person who is holding property or credits belonging to the defendant. Theprovision does not require that notice be furnished the defendant himself, except whenthere is a need to examine said defendant "for the purpose of giving informationrespecting his property.Furthermore, Section 10 Rule 57 is not incompatible with Republic Act No. 1405, as

amended, "An Act Prohibiting Disclosure or Inquiry Into, Deposits With Any BankingInstitution and Providing Penalty Therefore," for Section 2 therefore provides anexception "in cases where the money deposited or invested is the subject matter of thelitigation."The examination of the bank records is not a fishing expedition, but rather a method bywhich Sun Life could trace the proceeds of the check it paid to petitioners.WHEREFORE, the instant petitions are hereby DISMISSED. The temporary restrainingorder issued on June 28, 1993 is hereby lifted.SO ORDERED. 

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Security Pacific Assurance v. Hon. Judge Tria-Infante, G.R. No. 144740, 468 SCRA

526, 31 August 2005

G.R. No. 144740 August 31, 2005 SECURITY PACIFIC ASSURANCE CORPORATION, Petitioners,

vs.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.D E C I S I O NCHICO-NAZARIO, J .: Before Us is a petition for review on certiorari , assailing the Decision1 and Resolution2 ofthe Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000 and 22 August2000, respectively. The said Decision and Resolution declared that there was no graveabuse 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 Court’s 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 broughtbefore the Regional Trial Court, City of Manila, and raffled off to Branch 9, then presidedover by Judge Edilberto G. Sandoval, docketed as Criminal Case No. 89-69257. An Ex-Parte  Motion for Preliminary Attachment3  dated 06 March 1989 was filed byReynaldo Anzures praying that pending the hearing on the merits of the case, a Writ ofPreliminary Attachment be issued ordering the sheriff to attach the properties of Villaluzin accordance with the Rules.

On 03 July 1989, the trial court issued an Order 4

 for the issuance of a writ of preliminaryattachment "upon complainant’s posting of a bond which is hereby fixed atP2,123,400.00 and the Court’s approval of the same under the condition prescribed bySec. 4 of Rule 57 of the Rules of Court!." An attachment bond5 was thereafter posted by Reynaldo Anzures and approved by thecourt. Thereafter, the sheriff attached certain properties of Villaluz, which were dulyannotated on the corresponding certificates of title.On 25 May 1990, the trial court rendered a Decision6 on the case acquitting Villaluz ofthe crime charged, but held her civilly liable. The dispositive portion of the said decisionis reproduced hereunder:WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING theaccused 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 TWOMILLION ONE HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED(P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fullypaid, the sum of P50,000.00 as attorney’s fees and the cost of suit.7 Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the latterrendered 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 ofManila, Branch 9, dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in all respects!.

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The case was elevated to the Supreme Court (G.R. No. 106214), and during itspendency, Villaluz posted a counter-bond in the amount of P2,500,000.00 issued bypetitioner Security Pacific Assurance Corporation.9  Villaluz, on the same date10  of thecounter-bond, filed an Urgent Motion to Discharge Attachment.11 On 05 September 1997, we promulgated our decision in G.R. No. 106214, affirming intoto the decision of the Court of Appeals.

In view of the finality of this Court’s decision in G.R. No. 106214, the private complainantmoved for execution of judgment before the trial court.12 On 07 May 1999, the trial court, now presided over by respondent Judge, issued a Writof Execution.13 Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but thelatter no longer resided in her given address. This being the case, the sheriff sent aNotice 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 withGarnishment,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 withGarnishment. The sheriff issued a Follow-Up of Garnishment18  addressed to thePresident/General Manager of petitioner dated 03 April 2000.On 07 April 2000, petitioner filed a Petition for Certiorari   with Preliminary Injunctionand/or Temporary Restraining Order 19 with the Court of Appeals, seeking the nullificationof the trial court’s order dated 31 March 2000 granting the motion to proceed withgarnishment. Villaluz was also named as petitioner. The petitioners contended that therespondent Judge, in issuing the order dated 31 March 2000, and the sheriff committedgrave abuse of discretion and grave errors of law in proceeding against the petitionercorporation on its counter-attachment bond, despite the fact that said bond was notapproved 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 ofwhich reads:WHEREFORE, premises considered, the Court finds no grave abuse of discretion on thepart of respondent judge in issuing the assailed order. Hence, the petition is dismissed. A Motion for Reconsideration22 was filed by petitioner, but was denied for lack of merit bythe Court of Appeals in its Resolution23 dated 22 August 2000.Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of CivilProcedure, with Urgent Application for a Writ of Preliminary Injunction and/or TemporaryRestraining Order.24 On 13 December 2000, this Court issued a Resolution25  requiring the privaterespondents to file their Comment to the Petition, which they did. Petitioner was required

to file its Reply26

 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 thatas of said date, the total amount garnished from petitioner had amounted toP1,541,063.85, and so the remaining amount still sought to be executed wasP958,936.15.28 Petitioner tendered and paid the amount of P300,000.00 upon signing ofthe MOU, and the balance of P658,936.15 was to be paid in installment at P100,000.00at the end of each month from February 2001 up to July 2001. At the end of August2001, the amount of P58,936.00 would have to be paid. This would make the aggregate

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amount paid to the private respondents P2,500,000.00.29 There was, however, a provisoin the MOU which states that "this contract shall not be construed as a waiver orabandonment of the appellate review pending before the Supreme Court and that it willbe 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 wereobliged 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 errorin affirming the 31 march 2000 order of public respondent judge which allowed executionon the counter-bond issued by the petitioner.Corollary Issues – (1) WHETHER OR NOT THE COURT OF APPEALS CORRECTLYRULED THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WASDISCHARGED WITHOUT NEED OF COURT APPROVAL OF THE COUNTER-BONDPOSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS CORRECTLYRULED THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WASDISCHARGED BY THE MERE ACT OF POSTING THE COUNTER-BOND.THE COURT’S RULING 

Petitioner seeks to escape liability by contending, in the main, that the writ of attachmentwhich was earlier issued against the real properties of Villaluz was not discharged. Sincethe writ was not discharged, then its liability did not accrue. The alleged failure of thisCourt in G.R. No. 106214 to approve the counter-bond and to cause the discharge of theattachment against Villaluz prevented the happening of a condition upon which thecounter-bond’s issuance was premised, such that petitioner should not be held liablethereon.31 Petitioner further asserts that the agreement between it and Villaluz is not a suretyshipagreement in the sense that petitioner has become an additional debtor in relation toprivate respondents. It is merely waiving its right of excussion32  that would ordinarilyapply to counter-bond guarantors as originally contemplated in Section 12, Rule 57 ofthe 1997 Rules.

In their Comment,33

 the private respondents assert that the filing of the counter-bond byVillaluz had already ipso facto discharged the attachment on the properties and madethe petitioner liable on the bond. Upon acceptance of the premium, there was already anexpress contract for surety between Villaluz and petitioner in the amount ofP2,500,000.00 to answer for any adverse judgment/decision against Villaluz.Petitioner filed a Reply34 dated 09 May 2001 to private respondents’ Comment, admittingthe binding effect of the bond as between the parties thereto. What it did not subscribe towas the theory