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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

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

JOSE DE BORJA, petitioner,vs.SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.

Vicente J. Francisco for petitioner. E. V. Filamor for respondents. No appearance for respondent judge

BOCOBO, J. :

Petitioner seeks the setting aside of an order of preliminary attachment issued on November 6, 1940, andreiterated on January 13, 1941, by the respondent Judge of the Court of First Instance against petitioner's

properties.

On August 12, 1936, petitioner brought a civil action in the Court of First Instance of Rizal against HermogenaRomero, Francisco de Borja, Josefa Tangco and Crisanto de Borja to annul a second sale by Francisco de Borjato Hermogena Romero, of a large estate known as the Hacienda Jalajala, and to recover damages in the amountof P25,000. On August 29, 1936, Francisco de Borja and his wife Josefa Tangco filed an answer with threecounterclaims, and on September 29, 1936, they presented two more counterclaims. Trial began September 30,1936. Under date of August 4, 1937, defendants Francisco de Borja, Josefa Tangco and Crisanto de Borjasubmitted their amended answer, consisting of a general denial, special defenses, and five counterclaims andcross-complaints. In these causes for counter-claim and cross-complaint, it was alleged that plaintiff, being a

son of defendants Francisco de Borja and Josefa Tangco, had been entrusted with the administration of theextensive interests of his parents, but had been unfaithful to his trust. Said defendants, therefore, prayed, interalia , that the spouses Borja and Tangco be declared owners of the Hacienda Jalajala in question; that plaintiff berequired to render an accounting of the products of said hacienda that he had received and to pay said spouses atleast P100,000 illegally retained by him; that plaintiff be ordered to account for the proceed of rice and bran andto pay at least P700,000 unlawfully retained by him; that plaintiff be made to deliver P20,000 which he hadcollected from a debtor of said spouses; that plaintiff be likewise ordered to pay another sum of P9,034collected by him from the same debtor; and that plaintiff be required to turn over to defendants Francisco deBorja and Josefa Tangco the amount of P40,000 collected by him as indemnity of an insurance policy on

property belonging to said spouses.

On July 27, 1940, Francisco de Borja and his wife filed their petition for preliminary attachment to cover theirthird, fourth, and fifth, grounds for cross-complaint, involving a total of P69,035. In said motion, the defendantsBorja and wife stated that they did not include the first and second causes for cross-complaint because thevisible property of plaintiff that could then be attached was only worth about P2,000. On August 21, 1940,

plaintiff presented an amended answer setting up a counterclaim against defendants Borja and wife in the sumof P99,175.46.

The order for preliminary attachment is questioned upon several grounds, among which are: (1) that no writ ofattachment can be issued in favor of a defendant who presents a counterclaim; (2) and the defendants' affidavitwas fatally defective.

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

As to be the second objection of petitioner, his counsel strenuously advances the theory that the affidavitattached to the petition for a writ of preliminary attachment was fatally defective because it failed to allege that

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"the amount due to the plaintiff is as much as the sum for which the order is granted above all legalcounterclaims" as required in section 426, Code of Civil Procedure and section 3, Rule 59, Rules of Court.Petitioner contends that his counterclaim against that of Francisco de Borja and wife being P99,175.46 whereasthe latter's counterclaim totalled only P69,035, the omission of the allegation referred to is a serious defect. Thetrial court found, however, that the counterclaim of Francisco de Borja and wife exceed those of the petitionerJose de Borja. It should be borne in mind that the aggregate counterclaims of Francisco de Borja and wifeamounted to P869,000, which exceeds petitioner's counterclaim by P769,000 in round figures. Moreover, as thetrial court had before it the evidence adduce by both sides, the petition for a writ of preliminary attachment

having been filed four years after the trial had begun, we presume that the lower court, having in mind suchevidence, ordered the attachment accordingly.

The order appealed from is hereby affirmed, with costs against the petitioner. So ordered.

Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.


Manila

SECOND DIVISION

G.R. No. 155504 June 26, 2009

PROFESSIONAL VIDEO, INC., Petitioner,vs.TECHNICAL EDUCATION AND SKILLS DEVELOPMENT AUTHORITY, Respondent.

D E C I S I O N

BRION, J.:

We resolve the petition filed by Professional Video, Inc. (PROVI )1 to annul and set aside the Decisio n2 of theCourt of Appeals (CA) in CA- G.R. SP No. 67599, and its subsequent Order denying PROVIs motion forreconsideration .3 The assailed CA decision nullified:

a. the Orde r 4 dated July 16, 2001 of the Regional Trial Court ( RTC ), Pasig City, in Civil Case No. 68527,directing the attachment/garnishment of the properties of respondent Technical Education and SkillsDevelopment Authority (TESDA) amounting to Thirty Five Million Pesos (P35,000,000.00); and

b. the RTCs August 24 , 2001 Orde r 5 denying respondent TESDAs motion to discharge/quash writ ofattachment.

THE FACTUAL BACKGROUND

PROVI is an entity engaged in the sale of high technology equipment, information technology products and broadcast devices, including the supply of plastic card printing and security facilities.

TESDA is an instrumentality of the government established under Republic Act ( R.A.) No. 7796 (the TESDAAct of 1994) and attached to the Department of Labor and Employment (DOLE) to "develop and establish anational system of skills standardization, testing, and certification in the country." 6 To fulfill this mandate, itsought to issue security-printed certification and/or identification polyvinyl (PVC) cards to trainees who have

passed the certification process.

TESDAs Pre -Qualification Bids Award Committee (PBAC) conducted two (2) public biddings on June 25,1999 and July 22, 1999 for the printing and encoding of PVC cards. A failure of bidding resulted in bothinstances since only two (2) bidders PROVI and Sirex Phils. Corp. submitted proposals.

Due to the failed bidding, the PBAC recommended that TESDA enter into a negotiated contract with PROVI.On December 29, 1999, TESDA and PROVI signed and executed their "Contract Agreement Project: PVC IDCard Issuance" (the Contract Agreement) for the provision of goods and services in the printing and encoding ofPVC cards .7 Under this Contract Agreement, PROVI was to provide TESDA with the system and equipmentcompliant with the specifications defined in the Technical Proposal. In return, TESDA would pay PROVI the
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amount of Thirty-Nine Million Four Hundred and Seventy-Five Thousand Pesos (P39,475,000) within fifteen(15) days after TESDAs acceptance of the contracted goods an d services.

On August 24, 2000, TESDA and PROVI executed an "Addendum to the Contract Agreement Project: PVC IDCard Issuance" (Addendum) ,8 whose terms bound PROVI to deliver one hundred percent (100%) of theenumerated supplies to TESDA consisting of five hundred thousand (500,000) pieces of security foil; five (5)

pieces of security die with TESDA seal; five hundred thousand (500,000) pieces of pre-printed and customizedidentification cards; one hundred thousand (100,000) pieces of scannable answer sheets; and five hundredthousand (500,000) customized TESDA holographic laminate. In addition, PROVI would install and maintainthe following equipment: one (1) unit of Micropoise, two (2) units of card printer, three (3) units of flatbedscanner, one (1) unit of OMR scanner, one (1) unit of Server, and seven (7) units of personal computer.

TESDA in turn undertook to pay PROVI thirty percent (30%) of the total cost of the supplies within thirty (30)days after receipt and acceptance of the contracted supplies, with the balance payable within thirty (30) daysafter the initial payment.

According to PROVI, it delivered the following items to TESDA on the dates indicated:

Date Particulars Amount

26 April 2000 48,500 pre-printed cards P 2,764,500.00

07 June 2000 330,000 pre-printed cards 18,810,000.00

07 August 2000 121,500 pre-printed cards 6,925,500.00

26 April 2000 100,000 scannable answer sheets 600,000.00

06 June 2000 5 Micro-Poise customized die 375,000.00

13 June 2000 35 boxes @ 15,000 imp/boxCustom hologram Foil

10,000,000.00

Total P 39,475,000.00

PROVI further alleged that out of TESDAs liability of P39,475,000.00, TESDA paid PROVI onlyP3,739,500.00, leaving an outstanding balance of P 35,735,500.00, as evidenced by PROVIs Statement ofAccount .9 Despite the two demand letters dated March 8 and April 27, 2001 that PROVI sent TESDA ,10 theoutstanding balance remained unpaid.

On July 11, 2001, PROVI filed with the RTC a complaint for sum of money with damages against TESDA.PROVI additionally prayed for the issuance of a writ of preliminary attachment/garnishment against TESDA.The case was docketed as Civil Case No. 68527. In an Order dated July 16, 2001, the RTC granted PROVIs

prayer and issued a writ of preliminary attachment against the properties of TESDA not exempt from executionin the amount of P35,000,000.00 .11

TESDA responded on July 24, 2001 by filing a Motion to Discharge/Quash the Writ of Attachment, arguingmainly that public funds cannot be the subject of garnishment .12 The RTC denied TESDAs motion, and subsequently ordered the manager of the Land Bank of the Philippines to produce TESDAs bank statement forthe garnishment of the covered amount .13

Faced with these rulings, TESDA filed a Petition for Certiorari with the CA to question the RTC orders,imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the trial court for issuing awrit of preliminary attachment against TESDAs publ ic funds .14

The CA set aside the RTCs orders after finding that: (a) TESDAs funds are public in nature and, therefore,exempt from garnishment; and (b) TESDA s purchase of the PVC cards was a necessary incident of itsgovernmental function; consequently, it ruled that there was no legal basis for the issuance of a writ of

preliminary attachment/garnishment .15 The CA subsequently denied PROVIs motion for reconsideration ;16 hence, the present petition.

THE PETITION
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The petition submits to this Court the single issue of whether or not the writ of attachment against TESDA andits funds, to cover PROVIs claim against TESDA, is valid. The issue involves a pure question of law andrequires us to determine whether the CA was correct in ruling that the RTC gravely abused its discretion inissuing a writ of attachment against TESDA.

PROVI argues that the CA should have dismissed TESDAs petition for certiorari as the RTC did not commitany grave abuse of discretion when it issued the Orders dated July 16, 2001 and August 24, 2001. According toPROVI, the RTC correctly found that when TESDA entered into a purely commercial contract with PROVI,TESDA went to the level of an ordinary private citizen and could no longer use the defense of state immunityfrom suit. PROVI further contends that it has alleged sufficient ultimate facts in the affidavit it submitted tosupport its application for a writ of preliminary attachment. Lastly, PROVI maintains that sufficient basisexisted for th e RTCs grant of the writ of preliminary attachment, since TESDA fraudulently misapplied orembezzled the money earmarked for the payment of the contracted supplies and services, as evidenced by theCertification as to Availability of Funds.

TESDA claims that it entered the Contract Agreement and Addendum in the performance of its governmentalfunction to develop and establish a national system of skills standardization, testing, and certification; in the

performance of this governmental function, TESDA is immune from suit. Even assuming that it had impliedlyconsented to be sued by entering into a contract with PROVI, TESDA posits that the RTC still did not have the

power to garnish or attach its funds since these are public funds. Lastly, TESDA points out that PROVI failed tocomply with the elements for the valid issuance of a writ of preliminary attachment, as set forth in Section 1,Rule 57 of the 1997 Rules of Civil Procedure.

THE COURTS RULING

We find, as the CA did, that the RTCs questioned order involved a gross misreading of the law and jurisprudence amounting to action in excess of its jurisdiction. Hence, we resolve to DENY PROVIs petitionfor lack of merit.

TESDA is an instrumentality of the government undertaking governmental functions.

R.A. No. 7796 created the Technical Education and Skills Development Authority or TESDA under thedeclared "policy of the State to provide relevant, accessible, high quality and efficient technical education andskills development in support of the development of high quality Filipino middle-level manpower responsive toand in accordance with Philippine development goals and priorities. "17 TESDA replaced and absorbed the

National Manpower and Youth Council, the Bureau of Technical and Vocational Education and the personneland functions pertaining to technical-vocational education in the regional offices of the Department ofEducation, Culture and Sports and the apprenticeship program of the Bureau of Local Employment of theDOLE .18 Thus, TESDA is an unincorporated instrumentality of the government operating under its own charter.

Among others, TESDA is empowered to: approve trade skills standards and trade tests as established and

conducted by private industries; establish and administer a system of accreditation of both public and privateinstitutions; establish, develop and support the institutions' trainors' training and/or programs; exact reasonablefees and charges for such tests and trainings conducted, and retain such earnings for its own use, subject toguidelines promulgated by the Authority; and perform such other duties and functions necessary to carry out the

provisions of the Act, consistent with the purposes of the creation of TESDA .19

Within TESDAs structure, as provided by R.A. No. 7769, is a Skills Standards and Certification Officeexpressly tasked, among others, to develop and establish a national system of skills standardization, testing andcertification in the country; and to conduct research and development on various occupational areas in order torecommend policies, rules and regulations for effective and efficient skills standardization, testing andcertification system in the country .20 The law likewise mandates that "[T]here shall be national occupational

skills standards to be established by TESDA-accredited industry committees. The TESDA shall develop andimplement a certification and accreditation program in which private groups and trade associations areaccredited to conduct approved trade tests, and the local government units to promote such trade testingactivities in their respective areas in accordance with the guidelines to be set by the TESDA. The Secretary ofLabor and Employment shall determine the occupational trades for mandatory certification. All certificatesrelating to the national trade skills testing and certification system shall be issued by the TESDA through itsSecretariat. "21

All these measures are undertaken pursuant to the constitutional command that "[T]he State affirms labor as a primary social economic force," and shall "protect the rights of workers and promote their welfare" ;22 that
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"[T]he State shall protect and promote the right of all citizens to quality education at all levels, and shall takeappropriate steps to make such education accessible to all" ;23 in order "to afford protection to labor" and"promote full employment and equality of employment opportunities for all. "24

Under these terms, both constitutional and statutory, we do not believe that the role and status of TESDA canseriously be contested: it is an unincorporated instrumentality of the government, directly attached to the DOLEthrough the participation of the Secretary of Labor as its Chairman, for the performance of governmentalfunctions i.e., the handling of formal and non-formal education and training, and skills development. As anunincorporated instrumentality operating under a specific charter, it is equipped with both express and implied

powers ,25 and all State immunities fully apply to it .26

TESDA, as an agency of the State, cannot be sued without its consent.

The rule that a state may not be sued without its consent is embodied in Section 3, Article XVI of the 1987Constitution and has been an established principle that antedates this Constitution .27 It is as well a universallyrecognized principle of international law that exempts a state and its organs from the jurisdiction of anotherstate .28 The principle is based on the very essence of sovereignty, and on the practical ground that there can beno legal right as against the authority that makes the law on which the right depends .29 It also rests on reasons of

public policy that public service would be hindered, and the public endangered, if the sovereign authority

could be subjected to law suits at the instance of every citizen and, consequently, controlled in the uses anddispositions of the means required for the proper administration of the government .30

The proscribed suit that the state immunity principle covers takes on various forms, namely: a suit against theRepublic by name; a suit against an unincorporated government agency; a suit against a government agencycovered by a charter with respect to the agencys performance of governmental functions; and a suit that on itsface is against a government officer, but where the ultimate liability will fall on the government. In the presentcase, the writ of attachment was issued against a government agency covered by its own charter. As discussedabove, TESDA performs governmental functions, and the issuance of certifications is a task within its functionof developing and establishing a system of skills standardization, testing, and certification in the country. Fromthe perspective of this function, the core reason for the existence of state immunity applies i.e., the public

policy reason that the performance of governmental function cannot be hindered or delayed by suits, nor canthese suits control the use and disposition of the means for the performance of governmental functions. InProvidence Washington Insurance Co. v. Republic of the Philippines ,31 we said:

[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the inconveniencethat may be caused private parties, the loss of governmental efficiency and the obstacle to the performance of itsmultifarious functions are far greater if such a fundamental principle were abandoned and the availability of

judicial remedy were not thus restricted. With the well known propensity on the part of our people to go tocourt, at the least provocation, the loss of time and energy required to defend against law suits, in the absence ofsuch a basic principle that constitutes such an effective obstacle, could very well be imagined.

PROVI argues that TESDA can be sued because it has effectively waived its immunity when it entered into acontract with PROVI for a commercial purpose. According to PROVI, since the purpose of its contract withTESDA is to provide identification PVC cards with security seal which TESDA will thereafter sell to TESDAtrainees, TESDA thereby engages in commercial transactions not incidental to its governmental functions.

TESDAs response to this position is to point out that it is not engaged in business, and there is nothing in therecords to show that its purchase of the PVC cards from PROVI is for a business purpose. While TESDAadmits that it will charge the trainees with a fee for the PVC cards, it claims that this fee is only to recover theircosts and is not intended for profit.

We agree with TESDA. As the appellate court found, the PVC cards purchased by TESDA from PROVI are

meant to properly identify the trainees who passed TESDAs National Skills Certification Program the program that immediately serves TESDAs mandated function of developing and establishing a nati onal systemof skills standardization, testing, and certification in the country .32 Aside from the express mention of thisfunction in R.A. No. 7796, the details of this function are provided under DOLE Administrative Order No. 157,S. 1992, as supplemented by Department Order Nos. 3 thru 3-F, S. 1994 and Department Order No. 13, S.1994 .33

Admittedly, the certification and classification of trainees may be undertaken in ways other than the issuance ofidentification cards, as the RTC stated in its assailed Order .34 How the mandated certification is to be done,however, lies within the discretion of TESDA as an incident of its mandated function, and is a properly
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delegated authority that this Court cannot inquire into, unless its exercise is attended by grave abuse ofdiscretion.

That TESDA sells the PVC cards to its trainees for a fee does not characterize the transaction as industrial or business; the sale, expressly authorized by the TESDA Act ,35 cannot be considered separately from TESDAsgeneral governmental functions, as they are undertaken in the discharge of these functions. Along this line ofreasoning, we held in Mobil Philippines v. Customs Arrastre Services :36

Now, the fact that a non-corporate government entity performs a function proprietary in nature does notnecessarily result in its being suable. If said non-governmental function is undertaken as an incident to itsgovernmental function, there is no waiver thereby of the sovereign immunity from suit extended to suchgovernment entity.

TESDAs funds are public in character, hence exempt from attachment or garnishment.

Even assuming that TESDA entered into a proprietary contract with PROVI and thereby gave its impliedconsent to be sued, TESDAs funds are still public in nature and, thus, cannot be the valid subject of a writ ofgarnishment or attachment. Under Section 33 of the TESDA Act, the TESDA budget for the implementation ofthe Act shall be included in the annual General Appropriation Act; hence, TESDA funds, being sourced from

the Treasury, are moneys belonging to the government, or any of its departments, in the hands of publicofficials .37 We specifically spoke of the limits in dealing with this fund in Republic v. Villaso r 38 when we said:

This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It istherein expressly provided, The State may not be sued without its consent. A corollary, both dictated by logicand sound sense, from such a basic concept, is that public funds cannot be the object of garnishment

proceedings even if the consent to be sued had been previously granted and the state liability adjudged. Thus inthe recent case of Commissioner of Public Highways vs. San Diego, such a well-settled doctrine was restated inthe opinion of Justice Teehankee:

The universal rule that where the State gives its consent to be sued by private parties either by general or special

law, it may limit claimant's action 'only up to the completion of proceedings anterior to the stage of execution'and that the power of the Courts ends when the judgment is rendered, since government funds and propertiesmay not be seized under writs of execution or garnishment to satisfy such judgments, is based on obviousconsiderations of public policy. Disbursements of public funds must be covered by the correspondingappropriation as required by law. The functions and public services rendered by the State cannot be allowed to

be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, asappropriated by law. [Emphasis supplied.]

We reiterated this doctrine in Traders Royal Bank v. Intermediate Appellate Court ,39 where we said:

The NMPCs implied consen t to be sued notwithstanding, the trial court did not have the power to garnish

NMPC deposits to answer for any eventual judgment against it. Being public funds, the deposits are not withinthe reach of any garnishment or attachment proceedings. [Emphasis supplied.]

As pointed out by TESDA in its Memorandum ,40 the garnished funds constitute TESDAs lifeblood ingovernment parlance, its MOOE 41 whose withholding via a writ of attachment, even on a temporary basis,would paralyze TESDAs functions and services. As well, these funds also include TESDAs Personal Service sfunds from which salaries of TESDA personnel are sourced. Again and for obvious reasons, the release of thesefunds cannot be delayed.

PROVI has not shown that it is entitled to the writ of attachment.

Even without the benefit of any immunity from suit, the attachment of TESDA funds should not have beengranted, as PROVI failed to prove that TESDA "fraudulently misapplied or converted funds allocated under theCertificate as to Availability of Funds." Section 1, Rule 57 of the Rules of Court sets forth the grounds forissuance of a writ of preliminary attachment, as follows:

SECTION 1. Grounds upon which attachment may issue . A plaintiff or any proper party may, at thecommencement of the action or at any time thereafter, have the property of the adverse party attached assecurity for the satisfaction of any judgment that may be recovered in the following cases:
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(a) In an action for recovery of a specified amount of money or damages, other than moral andexemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a

party who is about to depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent or clerk, in the courseof his employment as such, or by any other person in a fiduciary capacity, or for a willful violation ofduty;

(c) In an action to recover the possession of property unjustly or fraudulently taken, detained orconverted, when the property or any part thereof, has been concealed, removed or disposed of to preventits being found or taken by the applicant or an authorized person;

(d) In an action against a party who has been guilty of fraud in contracting the debt or incurring theobligation upon which the action is brought, or in concealing or disposing of the property for the taking,detention or conversion of which the action is brought;

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

(f) In an action against a party who does not reside and is not found in the Philippines, or on whomsummons may be served by publication. [Emphasis supplied.]

Jurisprudence teaches us that the rule on the issuance of a writ of attachment must be construed strictly in favorof the defendant. Attachment, a harsh remedy, must be issued only on concrete and specific grounds and not ongeneral averments merely quoting the words of the pertinent rules .42 Thus, the applicants affidavit must containstatements clearly showing that the ground relied upon for the attachment exists.

Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon, applies only where money or property has been embezzled or converted by a public officer, an officer of a corporation, or some other person who took

advantage of his fiduciary position or who willfully violated his duty.

PROVI, in this case, never entrusted any money or property to TESDA. While the Contract Agreement issupported by a Certificate as to Availability of Funds (Certificate) issued by the Chie f of TESDAs AccountingDivision, this Certificate does not automatically confer ownership over the funds to PROVI. Absent any actualdisbursement, these funds form part of TESDAs public funds, and TESDAs failure to pay PROVI the amountstated in the Certificate cannot be construed as an act of fraudulent misapplication or embezzlement. In thisregard, Section 86 of Presidential Decree No. 1445 (The Accounting Code) provides:

Section 86. Certificate showing appropriation to meet contract . Except in a case of a contract for personalservice, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption

for three months, or banking transactions of government-owned or controlled banks, no contract involving theexpenditure of public funds by any government agency shall be entered into or authorized unless the properaccounting official or the agency concerned shall have certified to the officer entering into the obligation thatfunds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contractfor the current fiscal year is available for expenditure on account thereof, subject to verification by the auditorconcerned. The certification signed by the proper accounting official and the auditor who verified it, shall beattached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter beavailable for expenditure for any other purpose until the obligation of the government agency concerned underthe contract is fully extinguished. [Emphasis supplied.]

By law, therefore, the amount stated in the Certification should be intact and remains devoted to its purpose

since its original appropriation. PROVI can rebut the presumption that necessarily arises from the cited provision only by evidence to the contrary. No such evidence has been adduced.

Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty of fraud in contracting a debt orincurring an obligation, or in concealing or disposing of the property for the taking, detention or conversion ofwhich the action is brought. In Wee v. Tankiansee ,43 we held that for a writ of attachment to issue under thisRule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulentintent cannot be inferred from the debtors mere non -payment of the debt or failure to comply with hisobligation. The affidavit, being the foundation of the writ, must contain particulars showing how the imputedfraud was committed for the court to decide whether or not to issue the writ. To reiterate, a writ of attachment
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can only be granted on concrete and specific grounds and not on general averments merely quoting the words ofthe rules .44

The affidavit filed by PROVI through Elmer Ramiro, its President and Chief Executive Officer, only containeda general allegation that TESDA had fraudulent misapplied or converted the amount of P10,975,000.00 that wasallotted to it. Clearly, we cannot infer any finding of fraud from PROVIs vague assertion, and the CA correctlyruled that the lower court acted with grave abuse of discretion in granting the writ of attachment despite want ofany valid ground for its issuance. 1avvphi1

For all these reasons, we support the appellate courts conclusion that no valid ground exists to support th e grantof the writ of attachment against TESDA. The CAs annulment and setting aside of the Orders of the RTC weretherefore fully in order.

WHEREFORE , premises considered, we hereby DENY the petition filed by petitioner Professional Video,Inc., and AFFIRM the Court of Appeals Decision dated July 23, 2002, and Resolution of September 27, 2002,in CA-G.R. SP No. 67599. Costs against the petitioner.

SO ORDERED.


Manila

THIRD DIVISION

G.R. No. 104405 May 13, 1993

LIBERTY INSURANCE CORPORATION, petitioner,

vs.THE HONORABLE COURT OF APPEALS, HON. NAPOLEON K. FLOJO, Presiding Judge of BranchII, RTC Manila; ATILLA ARKIN, the CITY SHERIFF OF MANILA, the REGISTER OF DEEDS OFMANILA and the REGISTER OF DEEDS OF MAKATI, METRO MANILA, respondents.

Cochico, Lopez, Delgado , Aquino & De la Merced for petitioner.

Edgar Dennis A. Padernal for private respondent.

BIDIN, J.:

This is a petition for review on certiorari seeking to set aside and to declare null and void the decision datedSeptember 17, 1991 of the respondent Court of Appeals dismissing petitioner's petition for review and itsresolution dated February 7, 1992 denying petitioner's Motion for Reconsideration.

On May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty. Jose H. Imperial entered into an agreementwith Coca-Cola Bottlers Philippines to promote two concerts featuring a group known as "Earth, Wind andFire" on June 12 and 13, 1988 with Coca-Cola sponsoring the concerts and the former promoting the same.

To ensure compliance with the terms of the agreement, Coca-Cola required Imperial Organizations to put up a

performance bond. Petitioner Liberty Insurance, upon application of Imperial Organization put up the performance bond in the amount of Three Million Pesos (P3,000,000.00), the principal condition of which wasto "fully and faithfully guarantee the terms and conditions" of the agreement dated May 24, 1988 entered into

between Coca-Cola and Imperial Organizations. More particularly, the bond was to guarantee the return toCoca-Cola of "whatever portion of the cash sponsorship and cash advances to be made by Coca-Cola to financethe holding of the concerts on the dates aforesaid . . . ." ( Rollo , pp. 37)

In turn, and as a condition for the issuance of said performance bond, petitioner required ImperialOrganizations, Jose H. Imperial, Atilla Arkin, and Carmen Madlangbayan to execute an indemnity agreement in
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its favor to indemnify it for any and all damages including attorney's fees which the petitioner may incur byreason of the issuance of the bond.

It appears that while the concerts took place, Imperial Organizations and private respondents failed to complywith their obligations to Coca Cola, as a result of which petitioner became liable upon its performance bond

paying Coca-Cola Three Million Pesos. Petitioner, demanded reimbursement from Imperial, Arkin AndMadlangbayan based on their indemnity bond but to no avail.

On August 7, 1988 petitioner filed with the Regional Trial Court, National Capital Region, Branch 2, Manila acomplaint for damages with application for the issuance of a writ of preliminary attachment against privaterespondents.

On September 20, 1988, the Trial Court thru the Hon. Rosario A. de Leon, issued an order allowing the issuanceof the writ, stating that.:

. . . There could have been fraud committed by the defendants Arkin and Madlangbayan in promising to give as security or collateral to their Indemnity Agreement, which caused the plaintiff to release the security bond, when as it turned out, the Transfer Certificate of Title of a parcel of land supposedly issued by the Register of Deeds of Rizal turned out to be fake, as the

true land title number was issued over a different parcel of land issued in the name of a personother than defendant Madlangbayan, while defendant Atilla Arkin delivered an official receipt inthe name of a third party but which vehicle was allegedly sold to him free from lien andencumbrance, when it turned out that the car was heavily mortgaged to a third party, . . . .

The conclusion of fraud is inevitable in view of the above circumstances, for any ( sic ) rate fraudis a state of mind that maybe inferred from the circumstances extant in the case (Republic vs. Gonzales, 13 SCRA 633).

In addition to the fact that these representations/promises of Arkin and Madlangbayan weremade prior to the release of the bond (the bond by then had already been executed), it can still be

said that this fraud existed when the obligation was contracted in line with Sec. 1, par (d), Rule57, which reads: An attachment may issue in an action against a party who has been guilty offraud in contracting or incurring the obligation upon which the action is brought.

A debt is fraudulently contracted if at the time of contracting it, the debtor entertained anintention not to pay, or an intention not to keep a collateral agreement regarding the dispositionof a property purchased on credit. (Francisco, Rules of Court, Second [1985] Edition, p. 21) . . .( Rollo , pp. 38-39)

On May 10, 1989 respondent Arkin filed a motion to Quash/ Recall Writ of Attachment. On October 19, 1989,the trial court, this time presided by respondent judge Napoleon K. Flojo, denied the motion, reasoning out as

follows:

Defendant Atilla Arkin posits that no ground existed for the issuance of the preliminaryattachment because he was not guilty of fraud in incurring the obligation under the indemnityagreement.

The Court granted the prayer for a writ of preliminary attachment after a finding of fraud fromthe evidence adduced by the parties. This conclusion was supported by substantial evidence. There is no cogent reason from the arguments posed by the movant to warrant and/or recall ofthe writ.

Furthermore, the complaint invokes another ground for the grant of the writ and that is, "in anaction against a party who has removed be ( sic ) disposed of his property, or is about to do so,with the intent to defraud his creditors," . . ., evidenced by three conveyances or disposals of

properties by defendant Atilla Arkin though made before the institution of the action, is acircumstance tending to show fraudulent conveyance with intent to defraud his creditors.

Especially so, when the payment of herein claim which the action is brought is not secured byany mortgage or pledge of real (sic) personal property and plaintiff had no other sufficient

security for the enforcement of the claim. ( Rollo , p. 58; emphasis supplied).

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After more than a year, or on December 14, 1990, Arkin filed a Motion for Reconsideration of theaforementioned order of denial.

On March 6, 1991, respondent judge reversed his earlier ruling and instead issued two orders, (1) grantingArkin's Motion for Reconsideration and directing the lifting of the writ of preliminary attachment earlier issued,and (2) ordering the deputy sheriff assigned to said court to immediately discharge or lift said writ. The firstorder, among other things, states:

xxx xxx xxx

The Court, presided at the time by Judge Rosalio De Leon, found that the defendant has beenguilty of fraud in inveigling the plaintiff to issue the surety bond by offering false collaterals.The ground relied upon by the Court to issue the attachment was based on Section 1 (d) of Rule57 of the Rules of Court , which states:

"Sec. 1. Grounds upon which attachment may issue. A plaintiff or any partymay, at the commencement of the action or at anytime thereafter, have the

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

xxx xxx xxx

(d) In action ( sic ) against a party who has been guilty of fraud in contracting theobligation upon which the action is brought, . . . ."

To constitute a ground for attachment, fraud should be committed prior to or simultaneous withthe birth of the obligation sued upon, which in this case is the May 30, 1988 surety bond.

xxx xxx xxx

A close examination of the evidence on record shows that the delivery of the fake collateralswere made to Eduardo Cunanan on June 1, 1988, or two (2) days after the issuance by the

plaintiff of the surety bond. Thus, the offering of the fake Transfer Certificate of Title andencumbered Mercedes Benz car was not prior to or simultaneous with the execution of theSurety Bond. Such being the case, the offer of the collaterals were not the cause which inducedthe plaintiff to issue the surety bond. It is therefore clear that the issuance of the surety bond onMay 30, 1988 was not based on the alleged fraud of the defendant Arkin offering the fakecollaterals.

xxx xxx xxx

With regards ( sic ) to the allegations that the defendant Arkin has removed or disposed of his property, with intent to defraud his creditors, suffice it to say that (when) the law authorizes theissuance of a writ preliminary attachment (it) should be construed in favor of the defendant and

before issuing an Order to that effect, the judge should require that all the requisites prescribed by law be complied (with), without which a judge acquires no jurisdiction to issue the writ.

xxx xxx xxx

Furthermore, allegations that debtors were removing or disposing some of the properties withintent to defraud creditors must be specific.

xxx xxx xxx

In the present case the plaintiff did not prove the intent of defendant Arkin to defraud creditors.Aside From the fact that the alleged dispositions were made long prior to the filing of the case,the alleged dispositions were made of conjugal partnership property which were then the subjectsof partition between Arkin and his estranged wife. . . . ( Rollo , pp. 42-43).

Aggrieved, petitioner filed a special civil action for certiorari with respondent Court of Appeals to set aside theabove orders of respondent judge.

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Respondent court dismissed the petition on the ground that the filing of the said petition was prematureconsidering that there was yet a remedy available in the ordinary course of law, i.e., filing a motion forreconsideration of the challenged orders. Hence, this petition with the following assignment of errors:

I. A MOTION FOR RECONSIDERATION IS NOT ALWAYS A CONDITION PRECEDENTTO THE FILING OF A SPECIAL CIVIL ACTION FOR CERTIORARI , AS THERE IS NOAPPEAL OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARYCOURSE OF LAW AVAILABLE TO HEREIN PETITIONER;

II. RESPONDENT HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THEDISSOLUTION OF THE WRIT OF PRELIMINARY ATTACHMENT ON THE BASIS OFSECTION 13, RULE 57, OF THE RULES OF THE COURT SUPPORTED ( SIC ) BY ANYEVIDENCE;

III. RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW INCONCLUDING THAT HEREIN PETITIONER FAILED TO RAISE AS AN ISSUE THEDELAYED FILING OF PRIVATE RESPONDENT'S MOTION FOR RECONSIDERATIONDATED DECEMBER 14, 1990, IN PETITIONER'S OPPOSITION THERETO.

IV. THE APPREHENSION OF THE HEREIN PETITIONER REGARDING THEPROPENSITY OF PRIVATE RESPONDENT TO DISPOSE OF HIS PROPERTIES INFRAUD OF HIS CREDITORS TURNED OUT TO BE TRUE AND CORRECT. ( Rollo , pp. 24-26, 30).

In brief, the questions posited by the instant petition may be consolidated into two issues, namely:

1) Whether or not the writ of preliminary attachment in question was properly or regularly issued and 2)Whether or not petitioner's failure to file a motion for reconsideration of the questioned orders of the court aquo bars the filing of a special civil action for certiorari before the respondent court.

In an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation uponwhich the action is brought, Section 1 (d) of Rule 57 authorizes the plaintiff or any proper party to have the

property of the adverse party attached as security for the satisfaction of any judgment that may be recoveredtherein. Thus:

Rule 57, Sec. 1. Grounds upon which attachment mayissue.

(d): In an action against a party who has been guilty of a fraud of contracting the debt orincurring 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;

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurringthe obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and musthave been the reason which 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 of Court, fraud should becommitted upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time ofcontracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state ofmind and need not be proved by direct evidence but may be inferred from the circumstances attendant in eachcase (Republic v. Gonzales, 13 SCRA 633 [1965]).

Here, it has been established that all the collaterals given by the respondent Arkin as security for the bond were

either fraudulent or heavily encumbered. Records show that Transfer Certificate of Title No. 300011 supposedlyissued by the Register of Deeds of Rizal covering a parcel of land with an area of 25,750 square meters locatedat Muntinlupa, Las Pias, M.M. and registered in the name of Carmen Madlangbayan, used as one of thecollaterals, turned out to be fake and spurious as the genuine TCT No. 300011 of the Office of the Register ofDeeds of Rizal covers a parcel of land located inAngono, Rizal with an area of 514 square meters registered in the name of persons other than respondentsImperial, Arkin, and Madlangbayan. Likewise, the supposed lien-free motor vehicle offered as collateral turnedout to be heavily mortgaged and was even disposed of without informing petitioner. Furthermore, it has also

been proven that subsequent to the issuance of the May 30, 1988 surety bond, respondent Arkin starteddisposing of his other properties. Prior to the filing of the complaint, respondent not only had sold the motor

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vehicle given as collateral but that his two other condominium units were also alienated in favor of a companyof which respondent Arkin is the president. All these circumstances unerringly point to the devious scheme ofrespondent Arkin to defraud petitioner.

It is therefore clear that fraud was present when private respondent, among others, entered into an indemnityagreement with petitioner. The actuations of respondent Arkin indubitably lead to the conclusion that he neverentertained the idea of fulfilling his obligations under the agreement and was bent on defrauding petitioner fromthe very beginning.

Under the circumstances, we perceive no impropriety or irregularity in the issuance of the writ of attachmentespecially so where petitioner has fully complied with the requirements for the issuance thereof.

On the contrary, what we see as having been attended by irregularity is the assailed order of respondent judgelifting the writ of attachment based on grounds which are contradicted by the evidence on record. It is a fact thatrespondent Arkin gave fake land titles as collaterals and even disposed of real properties in his obvious attemptto defraud petitioner. And yet, respondent judge concluded that petitioner's allegation that respondent Arkin'sfraudulent alienation of his properties has no foundation in fact. This is plain absurdity. As respondent judgehimself noted in his earlier order denying respondent Arkin's motion to quash writ of attachment, the latter'sthree (3) conveyances, "though made before the institution of the action, is a circumstance tending to show

fraudulent conveyance with intent to defraud his creditors. Especially so, when the payment of herein claimupon which the action is brought is not secured by any mortgage or pledge of real (or) personal property and

plaintiff had no other sufficient security for the enforcement of the claim" ( Rollo, p. 58). Such being the case,respondent Arkin's claim that the writ of attachment has been irregularly issued should not have merited seriousconsideration by respondent judge.

Be that as it may, the instant case being "an action against a party who has been guilty of fraud in contractingthe obligation upon which the action is brought", respondent Arkin is not allowed to file a motion to dissolvethe attachment on the ground that the writ has been improperly or irregularly issued. As we held in MindanaoSavings and Loan Assoc. vs. Court of Appeals (172 SCRA 480 [1989]):

. . ., when the preliminary attachment is issued upon a ground which is at the same time theapplicant's cause of action: e.g., . . . an action against a party who has been guilty of fraud incontracting the debt or incurring the obligation upon which the action is brought, the defendant isnot allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering toshow the falsity of the factual averments in the plaintiff's application and affidavits on which thewrit 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 betantamount to a trial on the merits. In other words, the merits of the action would be ventilated ata mere hearing of a motion, instead of the regular trial. Therefore, when the writ of attachment isof this nature, the only way it can be dissolved is by a counterbond.

Petitioner next contends that motion for reconsideration need not at all times be resorted to before a special civilaction for certiorari may be instituted before respondent court.

Ordinarily, certiorari will not lie unless an inferior court, through a motion for reconsideration, had been givenan opportunity to correct the imputed errors. However, this rule admits of exceptions such as 1) when the issueraised is one purely, of law; 2) where public interest is involved; 3) in cases of urgency (Quirino vs. Grospe,169 SCRA 702 [1989]); or 4) where special circumstances warrant immediate or more direct action (People vs.Dacudao, 170 SCRA 489 [1989]).

In the case at bar, petitioner's failure to file a motion for reconsideration in the trial court before commencingcertiorari proceedings in the Court of Appeals is not fatal considering the existence of special circumstances

that warrant immediate and more direct action (Saldaa vs. CA, 190 SCRA 396 [1990]).

The indecent haste with which respondent Arkin had been disposing of his properties demonstrates theimperative need for a more adequate relief requiring an immediate and more direct action. There was anurgency which caused the present case to fall under one of the exceptions thereby allowing petitioner to file a

petition for certiorari without the need of first filing a motion for reconsideration.

Filing a motion for reconsideration would have served no useful purpose nor can it be considered a plain,speedy and adequate remedy since the order directing the sheriff to discharge or lift the writ of attachment wasissued on the same day the order granting the quashal was made. It would not have automatically forestalled

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Arkin from further disposing of his properties. It is rather disturbing how respondent judge, after ruling in hisorder of October 19, 1989, denying respondent's motion to quash, that the trial court's finding of fraud inincurring the obligation under the indemnity agreement was supported by substantial evidence, would, in hisorder of March 6, 1991 granting the motion for reconsideration, based on the same substantial evidencesupporting a finding of fraud, later reverse himself and declare that "the plaintiff (petitioner herein) did not

prove the intent of defendant Arkin to defraud creditors."

Through the order for the "immediate" lifting of the writ, respondent Judge, in one swift stroke, completelysubverted the valid order of attachment issued after a finding of fraud, which finding he himself has declared assupported by substantial evidence. We hold that respondent judge in issuing the contested orders has actedcapriciously, whimsically and arbitrarily and with grave abuse of discretion amounting to lack or in excess of

jurisdiction correctible by the special writ of certiorari .

WHEREFORE, the petition is GRANTED. The assailed order of respondent judge dated March 6, 1991 is SETASIDE and the order dated October 19, 1989 is hereby REINSTATED. Costs against private respondent.

SO ORDERED.

Feliciano, Davide, Jr., Romero and Melo, JJ., concur.

G.R. No. 23237, Walter E. Olsen & Co. v. Olsen, 48 Phil. 238


Manila

EN BANC

November 14, 1925

G.R. No. 23237WALTER E. OLSEN & CO., plaintiff-appellee,vs.WALTER E. OLSEN, defendant-appellant.

Ross, Lawrence and Selph and Antonio T. Carrascoso, Jr., for appellant.Gibbs and McDonough for appellee.

VILLA-REAL, J.:

This is an appeal taken by the defendant from a judgment of the Court of First Instance of Manila, sentencing

him to pay plaintiff corporation the sum of P66,207.62 with legal interest thereon at the rate of 6 per cent perannum from February 1, 1923, the date of the filing of the complaint, until full payment and the costs, anddismissing the cross-complaint and counterclaim set up by him.

As ground of his appeal, the defendant assigns four errors as committed by the trial court, to wit: (1) Theholding that the defendant-appellant contracted fraudulently the debt which the plaintiff-appellee seeks torecover in its complaint; (2) its failure to set aside the writ of preliminary attachment issued by it ex parte ; (3)the fact of it not having absolved the defendant from the complaint of the plaintiff corporation and of not havinggiven judgment for the defendant and against the plaintiff for the amount of his counterclaim, after deducing thedebt due from him to the plaintiff corporation in the sum of P66,207.62; and (4) its action in denying the motionfor new trial of the defendant.

As the first two supposed errors are intimately connected with each other, we will discuss them jointly.

The first question that arises is whether or not an order denying a motion for the annulment of a preliminaryattachment may be reviewed through an appeal.

The preliminary attachment is an auxiliary remedy the granting of which lies within the sound discretion of the judge taking cognizance of the principal case upon whose existence it depends. The order of the judge denyinga motion for the annulment of a writ of preliminary attachment, being of an incidental or interlocutory andauxiliary character, cannot be the subject of an appeal independently from the principal case, because our

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procedural law now in force authorizes an appeal only from a final judgement which gives an end to thelitigation. (Section 143, Act No. 190: 3 C. J., 549 par. 389.) This lack of ordinary remedy through an appealdoes not mean, however, that any excess a lower court may commit in the exercise of its jurisdiction is withoutremedy; because there are the especial remedies, such as certiorari, for the purpose. (Leung Ben vs. O'Brien, 38Phil., 182. )

While it is true that an order denying a motion for the annulment of a preliminary attachment is not subject toreview through an appeal independently from the principal case, it not consisting a final order, yet when the writof preliminary attachment becomes final by virtue of a final judgment rendered in the principal case, said writ issubject to review jointly with the judgment rendered in the principal case through an ordinary appeal. Theappellate court has the power to revoke or confirm said order, in like manner as a judgment on the merits;

because it is a ruling to which an exception may be taken, and therefore is subject to review in an appeal by billof exceptions. (Secs. 141-143, Act No. 190. ) The fact that section 441 of the Code of Civil Procedure does not

provide any remedy against the granting or denial of a motion for the annulment of a writ of preliminaryattachment, except in case of excess of jurisdiction, does not confer upon said order a final and irrevocablecharacter, taking it out from the general provisions as to appeal and review, for a special provision is necessaryfor that purpose.

Having arrived at the conclusion that an order denying a motion for the annulment of a preliminary attachment

may be reviewed in an appeal taken from a final judgment rendered in the principal case, in which said orderwas entered as an auxiliary remedy, we will now turn to consider the question whether or not the trial courtcommitted error in denying the motion for the annulment of the preliminary attachment levied upon the

property of the defendant-appellant.

It is admitted by the defendant-appellant that he is indebted to the plaintiff-appellee corporation in the sum ofP66,207.62, but denies that he has contracted said debt fraudulently.

The evidence shows that the defendant-appellant was president-treasurer and general manager of the plaintiff-appellee corporation and exercised direct and almost exclusive supervision over its function, funds and books ofaccount until about the month of August, 1921. During that time he has been taking money of the corporation

without being duly authorized to do so either by the board of directors or by the by-laws, the money taken byhim having amounted to the considerable sum of P66,207.62. Of this sum, P19,000 was invested in the purchaseof the house and lot now under attachment in this case, and P50,000 in the purchase of 500 shares of stock ofPrising at the price of P100 per share for himself and Marker. A few days afterwards he began to sell theordinary shares of the corporation for P430 each. The defendant-appellant attempted to justify his conduct,alleging that the withdrawal of the funds of the corporation for his personal use was made in his current accountwith said corporation, in whose treasury he deposited his own money and the certificates of title of his shares, aswell as of his estate, and that at the first meeting of the stockholders, which took place on February 1, 1919, astatement of his account with a debit balance was submitted and approved.

Having, as he had, absolute and almost exclusive control over the function of the corporation and its funds by

virtue of his triple capacity as president, treasurer and general manager, the defendant-appellant should have been more scrupulous in the application of the funds of said corporation to his own use. As a trustee of saidcorporation, it was his duty to see by all legal means possible that the interests of the stockholders were

protected, and should not abuse the extraordinary opportunity which his triple position offered him to dispose ofthe funds of the corporation. Ordinary delicacy required that in the disposition of the funds of the corporationfor his personal use, he should be very careful, so as to do it in such a way as would be compatible with theinterest of the stockholders and his fiduciary character. And let it not also be said that he did every thing openlyand with the security of his shares of stock, because as he could dispose of the funds of the corporation so hecould dispose of his won shares and with greater freedom. And let it not also be said that other officers of thecorporation, such as the vice-president, the secretary and other chiefs and employees, were doing the samething, because that does not show but that his bad example had spread among his subordinates and all believed

themselves with the same right as their chief to dispose of the funds of the corporation for their personal use,although it were merely by way of loan, without any security of whatever kind of course. The approval of hisaccount at the first meeting of the stockholders cannot be considered as a justification of his conduct, nor does itremove every suspicion of bad faith, because the corporation was constituted exclusively by the defendant-appellant himself and his cospeculator, Marker, and nothing else could be expected from it. As to the debt heowed to the corporation, Walter E. Olsen was in effect a lender and a borrower at the same time. The conduct ofthe defendant-appellant in connection with the funds of the corporation he represented was more than anirregularity; and while it is not sufficiently serious to constitute a criminal fraud, it is undoubtedly a fraud of acivil character, because it is an abuse of confidence to the damage of the corporation and its stockholders, andconstitutes one of the grounds enumerated in section 424, in connection with section 412, of the Code of Civil
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Procedure for the issuance of a preliminary attachment, and the order of the Court of First Instance of Manila,denying the motion for the annulment of the injunction in question, is in accordance with law.

As to the counterclaim set up by the defendant-appellant, we have nothing to add to the considerations of thetrial court which we make ours.

For the foregoing, and no error having been found in the judgment appealed from, the same is hereby affirmed,with the costs against the defendant-appellant. So ordered.

Avancea, C. J., Street, Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concur. Johnson, J., took no part.


Manila

THIRD DIVISION

G.R. No. 171124 February 13, 2008

ALEJANDRO NG WEE, petitioner,vs.MANUEL TANKIANSEE, respondent.

D E C I S I O N

NACHURA, J .:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing theSeptember 14, 2005 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 90130 and its January 6, 2006

Resolutio n2 denying the motion for reconsideration thereof.

The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now UnitedOverseas Bank), made several money placements totaling P210,595,991.62 with the bank's affiliate, WestmontInvestment Corporation (Wincorp), a domestic entity engaged in the business of an investment house with theauthority and license to extend credit .3

Sometime in February 2000, petitioner received disturbing news on Wincorp's financial condition promptinghim to inquire about and investigate the company's operations and transactions with its borrowers. He thendiscovered that the company extended a loan equal to his total money placement to a corporation [PowerMerge] with a subscribed capital of only P37.5M. This credit facility originated from another loan of about

P1.5B extended by Wincorp to another corporation [Hottick Holdings]. When the latter defaulted in itsobligation, Wincorp instituted a case against it and its surety. Settlement was, however, reached in whichHottick's president, Luis Juan L. Virata (Virata), assumed the obligation of the surety .4

Under the scheme agreed upon by Wincorp and Hottick's president, petitioner's money placements weretransferred without his knowledge and consent to the loan account of Power Merge through an agreement thatvirtually freed the latter of any liability. Allegedly, through the false representations of Wincorp and its officersand directors, petitioner was enticed to roll over his placements so that Wincorp could loan the same toVirata/Power Merge .5

Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp's officers and

directors to fraudulently obtain for his benefit without any intention of paying the said placements, petitionerinstituted, on October 19, 2000, Civil Case No. 00-99006 for damages with the Regional Trial Court (RTC) ofManila .6 One of the defendants impleaded in the complaint is herein respondent Manuel Tankiansee, Vice-Chairman and Director of Wincorp .7

On October 26, 2000, on the basis of the allegations in the complaint and the October 12, 2000 Affidavi t8 of petitioner, the trial court ordered the issuance of a writ of preliminary attachment against the properties notexempt from execution of all the defendants in the civil case subject, among others, to petitioner's filing of aP50M-bond. 9 The writ was, consequently, issued on November 6, 2000 .10
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Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient, respondent, onDecember 22, 2000, moved for the discharge of the attachment .11 The other defendants likewise filed similarmotions .12 On October 23, 2001, the RTC, in an Omnibus Order ,13 denied all the motions for the discharge ofthe attachment. The defendants, including respondent herein, filed their respective motions for reconsideration 14

but the trial court denied the same on October 14, 2002 .15

Incidentally, while respondent opted not to question anymore the said orders, his co-defendants, Virata andUEM-MARA Philippines Corporation (UEM-MARA), assailed the same via certiorari under Rule 65 beforethe CA [docketed as CA-G.R. SP No. 74610]. The appellate court, however, denied the certiorari petition onAugust 21, 2003 ,16 and the motion for reconsideration thereof on March 16, 2004 .17 In a petition for review oncertiorari before this Court, in G.R. No. 162928, we denied the petition and affirmed the CA rulings on May19, 2004 for Virata's and UEM-MARA's failure to sufficiently show that the appellate court committed anyreversible error .18 We subsequently denied the petition with finality on August 23, 2004 .19

On September 30, 2004, respondent filed before the trial court another Motion to Discharge Attachment ,20 re- pleading the grounds he raised in his first motion but raising the following additional grounds: (1) that he wasnot present in Wincorp's board meetings approving the questionable transactions ;21 and (2) that he could nothave connived with Wincorp and the other defendants because he and Pearlbank Securities, Inc., in which he isa major stockholder, filed cases against the company as they were also victimized by its fraudulent schemes .22

Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the CA andthis Court, and that the additional grounds were respondent's affirmative defenses that properly pertained to themerits of the case, the trial court denied the motion in its January 6, 2005 Order .23

With the denial of its motion for reconsideration ,24 respondent filed a certiorari petition before the CA docketedas CA-G.R. SP No. 90130. On September 14, 2005, the appellate court rendered the assailed Decisio n25 reversing and setting aside the aforementioned orders of the trial court and lifting the November 6, 2000 Writ ofPreliminary Attachmen t26 to the extent that it concerned respondent's properties. Petitioner moved for thereconsideration of the said ruling, but the CA denied the same in its January 6, 2006 Resolution .27

Thus, petitioner filed the instant petition on the following grounds:

A.

IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS SHOULD NOT HAVEGIVEN DUE COURSE TO THE PETITION FOR CERTIORARI FILED BY RESPONDENT, SINCEIT MERELY RAISED ERRORS IN JUDGMENT, WHICH, UNDER PREVAILINGJURISPRUDENCE, ARE NOT THE PROPER SUBJECTS OF A WRIT OF CERTIORARI.

B.

MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALSCOMMITTED SERIOUS LEGAL ERROR IN RESOLVING FAVORABLY THE GROUNDSALLEGED BY RESPONDENT IN HIS PETITION AND (SIC) LIFTING THE WRIT OFPRELIMINARY ATTACHMENT, SINCE THESE GROUNDS ALREADY RELATE TO THEMERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER PREVAILING JURISPRUDENCE,CANNOT BE USED AS BASIS (SIC) FOR DISCHARGING A WRIT OF PRELIMINARYATTACHMENT.

C.

LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS ERRED IN

SUSTAINING THE ERRORS IN JUDGMENT ALLEGED BY RESPONDENT, NOT ONLYBECAUSE THESE ARE BELIED BY THE VERY DOCUMENTS HE SUBMITTED AS PROOF OFSUCH ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER BEEN RESOLVED WITHFINALITY BY THE LOWER COURT .28

For his part, respondent counters, among others, that the general and sweeping allegation of fraud againstrespondent in petitioner's affidavit-respondent as an officer and director of Wincorp allegedly connived with theother defendants to defraud petitioner-is not sufficient basis for the trial court to order the attachment ofrespondent's properties. Nowhere in the said affidavit does petitioner mention the name of respondent and anyspecific act committed by the latter to defraud the former. A writ of attachment can only be granted on concrete
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rule 57 cases 2014

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