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HomeProvisional Remedies Rule 57 Landmark Cases (Full Text)

Provisional Remedies Rule 57 Landmark Cases (Full Text)

G.R. No. 158271

April 8, 2008

CHINA BANKING CORPORATION, petitioner,


vs.
ASIAN CONSTRUCTION and DEVELOPMENT CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed
by petitioner China Banking Corporation (China Bank) seeking to annul the Resolution1 dated
October 14, 2002 and the Resolution2dated May 16, 2003 of the Court of Appeals (CA) in CAG.R. CV No. 72175.
The facts of the case:
On July 24, 1996, China Bank granted respondent Asian Construction and Development
Corporation (ACDC) an Omnibus Credit Line in the amount of P90,000,000.00.3
On April 12, 1999, alleging that ACDC failed to comply with its obligations under the Omnibus
Credit Line, China Bank filed a Complaint4 for recovery of sum of money and damages with
prayer for the issuance of writ of preliminary attachment before the Regional Trial Court (RTC) of
Makati, Branch 138, docketed as Civil Case No. 99-796. In the Complaint, China Bank claimed
that ACDC, after collecting and receiving the proceeds or receivables from the various
construction contracts and purportedly holding them in trust for China Bank under several Deeds
of Assignment, misappropriated, converted, and used the funds for its own purpose and benefit,
instead of remitting or delivering them to China Bank.5
On April 22, 1999, the RTC issued an Order6 granting China Banks prayer for writ of
preliminary attachment. Consequently, as shown in the Sheriffs Report7 dated June 14, 1999,
the writ of preliminary attachment was implemented levying personal properties of ACDC, i.e.,
vans, dump trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment and office
machines and fixtures.
On March 27, 2000, upon motion of China Bank, the RTC issued a Summary Judgment8 in favor
of China Bank. ACDC filed its Notice of Appeal9 dated April 24, 2000.
On June 15, 2000, China Bank filed a Motion to Take Custody of Attached Properties with Motion

for Grant of Authority to Sell to the Branch Sheriff10 with the RTC, praying that it be allowed to
take custody of ACDCs properties for the purpose of selling them in an auction.11 On June 20,
2000, ACDC filed its Opposition12 to the June 15, 2000 Motion arguing that there can be no sale
of the latters attached properties in the absence of a final and executory judgment against
ACDC.
On August 25, 2000, China Bank partially appealed the Summary Judgment for not awarding
interest on one of its promissory notes.13 Records of the case were elevated to the CA.14
On April 18, 2002, China Bank filed a Motion for Leave for Grant of Authority to Sell Attached
Properties15 which the CA denied in the herein assailed Resolution dated October 14, 2002.
According to the CA, selling the attached properties prior to final judgment of the appealed case is
premature and contrary to the intent and purpose of preliminary attachment for the following
reasons: first, the records reveal that the attached properties subject of the motion are not
perishable in nature; and second, while the sale of the attached properties may serve the interest of
China Bank, it will not be so for ACDC. The CA recognized China Banks apprehension that by
the time a final judgment is rendered, the attached properties would be worthless. However, the
CA also acknowledged that since ACDC is a corporation engaged in a construction business, the
preservation of the properties is of paramount importance; and that in the event that the decision of
the lower court is reversed and a final judgment rendered in favor ACDC, great prejudice will
result if the attached properties were already sold.
China Bank filed a Motion for Reconsideration16 which was denied in the herein assailed CA
Resolution17 dated May 16, 2003.
Hence, the present petition for review on certiorari, on the following ground:
THE HONORABLE COURT OF APPEALS RENDERED THE QUESTIONED RESOLUTIONS
(ANNEXES A and B) IN A MANNER NOT IN ACCORD WITH THE PROVISIONS
OF SECTION 11, RULE 57 OF THE RULES OF CIVIL PROCEDURE, AS IT SHELVED THE
DEMANDS OF EQUITY BY ARBITRARILY DISALLOWING THE SALE OF THE
ATTACHED PROPERTIES, UPHOLDING ONLY THE INTEREST OF RESPONDENT, IN
UTTER PARTIALITY.18
Considering that the herein assailed CA Resolutions are interlocutory in nature as they do not
dispose of the case completely but leave something to be done upon the merits,19 the proper
remedy should have been by way of petition for certiorari under Rule 65, as provided for in
Section 1 (b), Rule 41 of the Rules of Court, as amended by A.M. No. 07-7-12-SC,20 which
provides:
Section 1. Subject of appeal. An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these Rules to
be appealable.

No appeal may be taken from:


xxxx
(b) An interlocutory order;
xxxx
In any of the foregoing instances, the aggrieved party may file an appropriate special civil action
as provided in Rule 65. (Emphasis supplied).
The present petition for review on certiorari should have been dismissed outright. However, in
many instances, the Court has treated a petition for review on certiorari under Rule 45 as a petition
for certiorari under Rule 65 of the Rules of Court, such as in cases where the subject of the
recourse was one of jurisdiction, or the act complained of was perpetrated by a court with grave
abuse of discretion amounting to lack or excess of jurisdiction.21 The present petition does not
involve any issue on jurisdiction, neither does it show that the CA committed grave abuse of
discretion in denying the motion to sell the attached property.
Section 11, Rule 57 of the Rules of Court provides:
Sec. 11. When attached property may be sold after levy on attachment and before entry of
judgment.-Whenever it shall be made to appear to the court in which the action is pending, upon
hearing with notice to both parties, that the property attached is perishable, or that the interests of
all the parties to the action will be subserved by the sale thereof, the court may order such property
to be sold at public auction in such manner as it may direct, and the proceeds of such sale to be
deposited in court to abide the judgment in the action. (Emphasis supplied)
Thus, an attached property may be sold after levy on attachment and before entry of judgment
whenever it shall be made to appear to the court in which the action is pending, upon hearing with
notice to both parties, that the attached property is perishable or that the interests of all the parties
to the action will be subserved by the sale of the attached property.
In its Memorandum,22 China Bank argues that the CAs notion of perishable property, which
pertains only to those goods which rot and decay and lose their value if not speedily put to their
intended use,23 is a strict and stringent interpretation that would betray the purpose for which the
preliminary attachment was engrafted.24 CitingWitherspoon v. Cross,25 China Bank invokes the
definition of perishable property laid down by the Supreme Court of California as goods
which decay and lose their value if not speedily put to their intended use; but where the time
contemplated is necessarily long, the term may embrace property liable merely to material
depreciation in value from other causes than such decay.
As stated in the Sheriffs Report26 and Notices of Levy on Properties,27 all of

ACDCs properties which were levied are personal properties consisting of used vehicles, i.e.,
vans, dump trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment and office
machines and fixtures. China Bank insists that the attached properties, all placed inside ACDCs
stockyard located at Silang, Cavite and the branch office in Mayamot, Antipolo City, are totally
exposed to natural elements and adverse weather conditions.28 Thus, China Bank argues, that
should the attached properties be allowed to depreciate, perish or rot while the main case is
pending, the attached properties will continue losing their worth thereby rendering the rules on
preliminary attachment nugatory.
The issue hinges on the determination whether the vehicles, office machines and fixtures are
perishable property under Section 11, Rules 57 of the Rules of Court, which is actually one of
first impression. No local jurisprudence or authoritative work has touched upon this matter. This
being so, an examination of foreign laws and jurisprudence, particularly those of the United States
where some of our laws and rules were patterned after, is in order.29
In Mossler Acceptance Co. v. Denmark,30 an order of the lower court in directing the sale of
attached properties, consisting of 20 automobiles and 2 airplanes, was reversed by the Supreme
Court of Louisiana. In support of its contention that automobiles are perishable, Mossler offered
testimony to the effect that automobile tires tend to dry-rot in storage, batteries to deteriorate,
crankcases to become damaged, paint and upholstery to fade, that generally automobiles tend to
depreciate while in storage.31 Rejecting these arguments, the Supreme Court of Louisiana held
that while there might be a depreciation in the value of a car during storage, depending largely on
existing economic conditions, there would be no material deterioration of the car itself or any of
its appurtenances if the car was properly cared for, and therefore it could not be said that
automobiles were of a perishable nature within the intendment of the statute, which could only be
invoked when the property attached and seized was of a perishable nature.32
With respect to the determination of the question on whether the attached office furniture, office
equipment, accessories and supplies are perishable properties, the Supreme Court of Alabama in
McCreery v. Berney National Bank33 discussed the perishable nature of the attached
properties, consisting of shelving, stock of drygoods and a complete set of store fixtures,
consisting of counters iron safe, desk and showcases, to be within the meaning of perishable
property under the Alabama Code which authorizes a court, on motion of either party, to order the
sale, in advance of judgment, of perishable property which had been levied on by a writ of
attachment.34
In McCreery, the Supreme Court of Alabama rejected the argument that the sale of the attached
property was void because the term perishable property, as used in the statute, meant only
such property as contained in itself the elements of speedy decay, such as fruits, fish, fresh meats,
etc.35 The Supreme Court of Alabama held that whatever may be the character of the property, if
the court is satisfied that, either by reason of its perishable nature, or because of the expense of
keeping it until the termination of the litigation, it will prove, or be likely to prove, fruitless to the
creditor, and that the purpose of its original seizure will probably be frustrated, the sale of the

attached property is justified.


McCreery applied the doctrine in Millards Admrs. v. Hall36 where the Supreme Court of
Alabama held that an attached property is perishable if it is shown that, by keeping the article, it
will necessarily become, or is likely to become, worthless to the creditor, and by consequence to
the debtor, then it is embraced by the statute. It matters not, in our opinion, what the subject matter
is. It may be cotton bales, live stock, hardware provisions or dry goods. Although the statute
under which Millards was decided used the words likely to waste or be destroyed by
keeping, instead of the word perishable, the reasons given for the construction placed on
the statute apply equally to the Alabama Code which uses the term perishable.37
In the Motion for Leave for Grant of Authority to Sell Attached Properties38 filed before the CA,
China Bank alleged that the attached properties are placed in locations where they are totally
exposed to the natural elements and adverse weather conditions since their attachment in 1999;39
that as a result, the attached properties have gravely deteriorated with corrosions eating them up,
with weeds germinating and growing thereon and their engines and motors stock up;40 and that
the same holds true to the office furniture, office equipment, accessories and supplies.41 No
evidence, however, were submitted by China Bank to support and substantiate these claims before
the CA.
Notably, in the Petition filed before the Court, China Bank, for the first time, included as
annexes,42 photographs of the attached properties which were alleged to be recently taken, in an
attempt to convince the Court of the deteriorated condition of the attached properties.
The determination on whether the attached vehicles are properly cared for, and the burden to show
that, by keeping the attached office furniture, office equipment and supplies, it will necessarily
become, or is likely to become, worthless to China Bank, and by consequence to ACDC, are
factual issues requiring reception of evidence which the Court cannot do in a petition for
certiorari. Factual issues are beyond the scope of certioraribecause they do not involve any
jurisdictional issue.43
As a rule, only jurisdictional questions may be raised in a petition for certiorari, including matters
of grave abuse of discretion which are equivalent to lack of jurisdiction.44 The office of the writ
of certiorari has been reduced to the correction of defects of jurisdiction solely and cannot legally
be used for any other purpose.45
Certiorari is truly an extraordinary remedy and, in this jurisdiction, its use is restricted to truly
extraordinary cases cases in which the action of the inferior court is wholly void; where any
further steps in the case would result in a waste of time and money and would produce no result
whatever; where the parties, or their privies, would be utterly deceived; where a final judgment or
decree would be nought but a snare and delusion, deciding nothing, protecting nobody, a judicial
pretension, a recorded falsehood, a standing menace. It is only to avoid such results as these that a
writ of certiorari is issuable; and even here an appeal will lie if the aggrieved party prefers to
prosecute it.46

Moreover, the Court held in JAM Transportation Co., Inc. v. Flores47 that it is well-settled, too
well-settled to require a citation of jurisprudence, that this Court does not make findings of facts
specially on evidence raised for the first time on appeal.48 The Court will not make an exception
in the case at bar. Hence, the photographs of the attached properties presented before the Court,
for the first time on appeal, cannot be considered by the Court.
China Bank argues that if the CA allowed the attached properties to be sold, whatever monetary
value which the attached properties still have will be realized and saved for both parties.49 China
Bank further claims that should ACDC prevail in the final judgment50 of the collection suit,
ACDC can proceed with the bond posted by China Bank.51 The Court finds said arguments to be
specious and misplaced.
Section 4, Rule 57 of the Rules of Court provides:
Section 4. Condition of applicants bond. The party applying for the order must thereafter
give a bond executed to the adverse party in the amount fixed by the court in its order granting the
issuance of the writ, conditioned that the latter will pay all the costs which may be adjudged to the
adverse party and all the damages which he may sustain by reason of the attachment, if the court
shall finally adjudge that the applicant was not entitled thereto.
It is clear from the foregoing provision that the bond posted by China Bank answers only for the
payment of all damages which ACDC may sustain if the court shall finally adjudge that China
Bank was not entitled to attachment. The liability attaches if the plaintiff is not entitled to the
attachment because the requirements entitling him to the writ are wanting, or if the plaintiff
has no right to the attachment because the facts stated in his affidavit, or some of them are
untrue.52 Clearly, ACDC can only claim from the bond for all the damages which it may
sustain by reason of the attachment and not because of the sale of the attached properties prior to
final judgment.
Sale of attached property before final judgment is an equitable remedy provided for the
convenience of the parties and preservation of the property.53 To repeat, the Court finds that the
issue of whether the sale of attached properties is for the convenience of the parties and that the
interests of all the parties will be subserved by the said sale is a question of fact. Again, the
foregoing issue can only be resolved upon examination of the evidence presented by both parties
which the Court cannot do in a petition for certiorari under Rule 65 of the Rules of Court.
WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court of Appeals dated
October 14, 2002 and May 16, 2003 in CA-G.R. CV No. 72175 are hereby AFFIRMED.
SO ORDERED.

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


FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs. THE COURT OF
APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional Trial
Court, NCJR, Makati City, Metro Manila, and LEY CONSTRUCTION AND DEVELOPMENT
CORPORATION, respondents.
DECISION
YNARES_SANTIAGO, J.:
On June 29, 1993, private respondent Ley Construction and Development Corporation filed a
Complaint for collection of a sum of money with application for preliminary attachment against
petitioner FCY Construction Group, Inc. and Francis C. Yu with the Makati Regional Trial Court
which was docketed as Civil Case No. 93-2112. Private respondent alleged that it had a joint
venture agreement with petitioner FCY Construction Group, Inc. (wherein petitioner Francis C. Yu
served as President) over the Tandang Sora Commonwealth Flyover government project for which
it had provided funds and construction materials. The Complaint was filed in order to compel
petitioners to pay its half share in the collections received in the project as well as those yet to be
received therein. In support of its application for a writ of attachment, private respondent alleged
that petitioners were guilty of fraud in incurring the obligation and had fraudulently misapplied or
converted the money paid them, to which it had an equal share.
On July 6, 1993, following an ex-parte hearing, the lower court issued an Order for the issuance of
a writ of preliminary attachment, conditioned upon the filing of a P7,000,000.00 attachment bond.
Petitioners moved for the lifting of the writ of preliminary attachment on the following grounds:
(1) the attachment was heard, issued and implemented even before service of summons upon
them; (2) failure of the attaching officer to serve a copy of the affidavit of merit upon them; and
(3) that there was no fraud in incurring the obligation. As an alternative prayer in their Motion,
petitioners prayed that the attachment be limited to their receivables with the Department of Public
Works and Highways. This alternative prayer was later withdrawn by petitioners in a
Manifestation and Motion.
On May 25, 1994, the lower court issued another Order denying petitioners Motion to Lift
Attachment.[1] It, however, reduced and confined the attachment to receivables due petitioners
from the Tandang Sora commonwealth Flyover project.
Subsequently, petitioners filed a Motion for Reconsideration[2] as well as an Omnibus Motion for
Leave to file Amended Answer and/or to delete Francis C. Yu as party-defendant.[3]
With the denial of both Motions by the lower court on September 4, 1994,[4] petitioners filed a

Petition for Certiorari before the Court of Appeals on September 16, 1994.[5] The Petition was,
however, denied on July 31, 1995;[6] so was petitioners Motion for Reconsideration.[7]
Hence, the instant Petition.
It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of the
Revised Rules of Court, to wit
SECTION 1. Grounds upon which attachment may issue. A plaintiff or any proper party
may, at the commencement of the action or at any time thereafter, have the property of the adverse
party attached as security for the satisfaction of any judgment that may be recovered in the
following cases:
xxx

xxx

x x x.

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

xxx

x x x.

Petitioners, however, insist that the writ of preliminary attachment was irregularly issued
inasmuch as there was no evidence of fraud in incurring the obligations sued upon.
In support of their stand, petitioners alleged that private respondents principal witness admitted
that it was the Department of Public Works and Highways (DPWH) that induced it to deliver
materials and cash for the Tandang Sora Commonwealth Flyover project, to wit
COURT: Now . . . as of January 5, 1993 you delivered to him (referring to defendant FCY
corporation) in cash and in kind amounting to Fifteen Million Pesos (P15,000,000.00), now why
did you keep on delivering cash and materials to him if you were not paid a single centavo?
A
Because of every need for the project, and the Public Works official assured me that I
will be given a new project after the Tandang Sora will be finished.
Q

Who is this public official that promised you?

A
Director Pendosa, Teodoro Encarnacion and Secretary de Jesus your Honor. (TSN, 6 July
1993, pp. 47-48)
xxx

xxx

xxx

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

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

At the time?

At that time, he resigned.

Before he resigned.

A
He gave me assurance that they will soon give assurance, they will soon give me another
project . . . (TSN, 6 July 1993, p. 55)[8]
A cursory reading of the above-cited testimony, however, readily shows that said reassurance from
the DPWH officials came, not at the inception of the obligation or contract, but during its
performance. On the other hand, the fraud of which petitioners are accused of and which was the
basis for the issuance of the questioned attachment, is fraud alleged to have been committed upon
contracting the obligation sued upon. Thus, petitioners argument that the inducement was the
mouth-watering temptation of a DPWH promise of a new project after the Tandang Sora
Flyover project will be finished is clearly off-tangent as such inducement, if any, came not at
the inception of the obligation.
Similarly, petitioners arguments that it was private respondent who admittedly prepared the
letter embodying the alleged joint venture agreement[9] and had petitioner Francis Yu sign it must
fail. The written agreement referred to was signed by petitioner Francis Yu only on January 5,
1993, long after the project had commenced. Thus, It was only a written confirmation of an
arrangement that had already been existing and operational. Similarly then, such written
confirmation did not occur at the inception of the obligation sued upon.
In Liberty Insurance Corporation vs. Court of Appeals,[10] this Court, discussing Section 1(d),
Rule 57, cautioned as follows
To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt
or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution
of the agreement and must have been the reason which induced the other party into giving consent
which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d),
Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued
upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a
preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not
be proved by direct evidence but may be inferred from the circumstances attendant in each case.
(Republic v. Gonzales, 13 SCRA 633).
From the foregoing, therefore, the alleged inducement by the DPWH officials upon private
respondent as well as the circumstances surrounding the execution of the joint venture agreement,
both appear immaterial as they were not committed upon contracting the obligation sued upon but

occurred long after the obligation has been established.


The fact that petitioners have paid a substantial amount of money to private respondent cannot
save the day for them either. As per their own accounting, such payments were for accounts
payable for labor supplied, construction materials and cash advances.[11] It is not denied that no
payment of profits has been given to private respondent, which is precisely what it is suing for.
Finally, considering that the writ of preliminary attachment has been issued on account of
allegations of fraud in contracting the obligation upon which the action is brought petitioners
efforts to have the writ of preliminary attachment dissolved on the ground that it was improperly
or irregularly issued is in vain. Indeed, in Liberty Insurance Corporation, supra, which cited
Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480), we ruled
x x x, when the preliminary attachment is issued upon a ground which is at the same time the
applicants cause of action: e.g., x x x an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the action is brought, the defendant is
not allowed to file a motion to dissolve the attachment under Section 13 of Rule 57 by offering to
show the falsity of the factual averments in the plaintiffs application and affidavits on which the
writ was based and consequently that the writ based therein had been improperly or irregularly
issued the reason being that the hearing on such motion for dissolution of the writ would be
tantamount to a trial on the merits. In other words, the merits of the action would be ventilated at a
mere hearing of a motion; instead of the regular trial. Therefore, when the writ of attachment is of
this nature, the only way it can be dissolved is by a counterbond.
We now come to the issue of whether or not petitioner Francis Yu should remain as partydefendant. Petitioners argue that since the transactions were corporation to corporation only,
petitioner Francis Yu should be dropped as party-defendant considering the hornbook law that
corporate personality is a shield against personal liability of its officers. We agree that petitioner
Francis Yu cannot be made liable in his individual capacity if he indeed entered into and signed
the contract in his official capacity as President, in the absence of stipulation to that effect, due to
the personality of the corporation being separate and distinct from the persons composing it.[12]
However, while we agree that petitioner Francis Yu cannot be held solidarily liable with petitioner
corporation merely because he is the President thereof and was involved in the transactions with
private corporation, we also note that there exists instances when corporate officers may be held
personally liable for corporate acts. Such exceptions were outlined in Tramat Mercantile, Inc. vs.
Court of Appeals,[13] as follows
Personal liability of a corporate director, trustee or officer along (although not necessarily) with
the corporation may so validly attach, as a rule, only when
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross
negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;

2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does
not forthwith file with the corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action.
The attendance of these circumstances, however, cannot be determined at this stage and should
properly be threshed out during the trial on the merits. Stated differently, whether or not petitioner
Francis Yu should be held personally and solidarily liable with petitioner corporation is a matter
that should be left to the trial courts discretion, dependent as it is on evidence during trial.
WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No
pronouncement as to costs.
SO ORDERED.

SECURITY PACIFIC ASSURANCE CORPORATION,


Petitioner,

versus

THE HON. AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge, Regional Trial
Court, Branch 9, Manila; THE PEOPLE OF THE PHILIPPINES, represented by Spouses
REYNALDO and ZENAIDA ANZURES; and REYNALDO R. BUAZON, In his official capacity
as Sheriff IV, Regional Trial Court, Branch 9, Manila,

G.R. No. 144740

Present:

PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

Promulgated:

August 31, 2005


x-
-x

DECISION

CHICO-NAZARIO, J.:

Before Us is a petition for review on certiorari, assailing the Decision[1] and Resolution[2]
of the Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000 and 22 August 2000,
respectively. The said Decision and Resolution declared that there was no grave abuse of
discretion on the part of respondent Judge in issuing the assailed order dated 31 March 2000,
which was the subject in CA-G.R. SP No. 58147.

THE FACTS

The factual milieu of the instant case can be traced from this Courts decision in G.R. No.
106214 promulgated on 05 September 1997.

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


(Villaluz) for violation of Batas Pambansa Blg. 22. The criminal information was brought before
the Regional Trial Court, City of Manila, and raffled off to Branch 9, then presided over by Judge
Edilberto G. Sandoval, docketed as Criminal Case No. 89-69257.

An Ex-Parte Motion for Preliminary Attachment[3] dated 06 March 1989 was filed by
Reynaldo Anzures praying that pending the hearing on the merits of the case, a Writ of
Preliminary Attachment be issued ordering the sheriff to attach the properties of Villaluz in
accordance with the Rules.

On 03 July 1989, the trial court issued an Order[4] for the issuance of a writ of preliminary
attachment upon complainants posting of a bond which is hereby fixed atP2,123,400.00 and
the Courts approval of the same under the condition prescribed by Sec. 4 of Rule 57 of the
Rules of Court.

An attachment bond[5] was thereafter posted by Reynaldo Anzures and approved by the
court. Thereafter, the sheriff attached certain properties of Villaluz, which were duly annotated on
the corresponding certificates of title.

On 25 May 1990, the trial court rendered a Decision[6] on the case acquitting Villaluz of the
crime charged, but held her civilly liable. The dispositive portion of the said decision is
reproduced hereunder:

WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the accused


TERESITA E. VILLALUZ with cost de oficio. As to the civil aspect of the case however, accused
is ordered to pay complainant Reynaldo Anzures the sum of TWO MILLION ONE HUNDRED
TWENTY THREE THOUSAND FOUR HUNDRED (P2,123,400.00) PESOS with legal rate of
interest from December 18, 1987 until fully paid, the sum of P50,000.00 as attorneys fees and
the cost of suit.[7]

Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the latter
rendered its Decision,[8] the dispositive portion of which partly reads:

WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court of Manila,
Branch 9, dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby
AFFIRMED, in all respects.

The case was elevated to the Supreme Court (G.R. No. 106214), and during its pendency,
Villaluz posted a counter-bond in the amount of P2,500,000.00 issued by petitioner Security
Pacific Assurance Corporation.[9] Villaluz, on the same date[10] of the counter-bond, filed an
Urgent Motion to Discharge Attachment.[11]

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

In view of the finality of this Courts decision in G.R. No. 106214, the private
complainant moved for execution of judgment before the trial court.[12]

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

Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but the latter
no longer resided in her given address. This being the case, the sheriff sent a Notice of
Garnishment upon petitioner at its office in Makati City, by virtue of the counter-bond posted by
Villaluz with said insurance corporation in the amount ofP2,500,000.00. As reported by the
sheriff, petitioner refused to assume its obligation on the counter-bond it posted for the discharge
of the attachment made by Villaluz.[14]

Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed with
Garnishment,[15] which was opposed by petitioner[16] contending that it should not be held liable
on the counter-attachment bond.

The trial court, in its Order dated 31 March 2000,[17] granted the Motion to Proceed with
Garnishment. The sheriff issued a Follow-Up of Garnishment[18] addressed to the
President/General Manager of petitioner dated 03 April 2000.

On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary Injunction
and/or Temporary Restraining Order[19] with the Court of Appeals, seeking the nullification of
the trial courts order dated 31 March 2000 granting the motion to proceed with garnishment.
Villaluz was also named as petitioner. The petitioners contended that the respondent Judge, in
issuing the order dated 31 March 2000, and the sheriff committed grave abuse of discretion and
grave errors of law in proceeding against the petitioner corporation on its counter-attachment
bond, despite the fact that said bond was not approved by the Supreme Court, and that the
condition by which said bond was issued did not happen.[20]

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

WHEREFORE, premises considered, the Court finds no grave abuse of discretion on the part of
respondent judge in issuing the assailed order. Hence, the petition is dismissed.

A Motion for Reconsideration[22] was filed by petitioner, but was denied for lack of merit
by the Court of Appeals in its Resolution[23] dated 22 August 2000.

Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of Civil
Procedure, with Urgent Application for a Writ of Preliminary Injunction and/or Temporary
Restraining Order.[24]

On 13 December 2000, this Court issued a Resolution[25] requiring the private respondents
to file their Comment to the Petition, which they did. Petitioner was required to file its Reply[26]
thereafter.

Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and Zenaida Anzures
executed a Memorandum of Understanding (MOU).[27] In it, it was stipulated that as of said date,
the total amount garnished from petitioner had amounted to P1,541,063.85, and so the remaining
amount still sought to be executed was P958,936.15.[28] Petitioner tendered and paid the amount
of P300,000.00 upon signing of the MOU, and the balance of P658,936.15 was to be paid in
installment at P100,000.00 at the end of each month from February 2001 up to July 2001. At the
end of August 2001, the amount of P58,936.00 would have to be paid. This would make the
aggregate amount paid to the private respondents P2,500,000.00.[29] There was, however, a
proviso in the MOU which states that this contract shall not be construed as a waiver or
abandonment of the appellate review pending before the Supreme Court and that it will be subject
to all such interim orders and final outcome of said case.

On 13 August 2001, the instant petition was given due course, and the parties were obliged
to submit their respective Memoranda.[30]

ISSUES

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

Main Issue WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE


ERROR IN AFFIRMING THE 31 MARCH 2000 ORDER OF PUBLIC RESPONDENT JUDGE
WHICH ALLOWED EXECUTION ON THE COUNTER-BOND ISSUED BY THE
PETITIONER.

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


RULED THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS
DISCHARGED WITHOUT NEED OF COURT APPROVAL OF THE COUNTER-BOND
POSTED; and (2) WHETHER OR NOT THE COURT OF APPEALS CORRECTLY RULED
THAT THE ATTACHMENT ON THE PROPERTY OF VILLALUZ WAS DISCHARGED BY
THE MERE ACT OF POSTING THE COUNTER-BOND.

THE COURTS RULING

Petitioner seeks to escape liability by contending, in the main, that the writ of attachment
which was earlier issued against the real properties of Villaluz was not discharged. Since the writ
was not discharged, then its liability did not accrue. The alleged failure of this Court in G.R. No.
106214 to approve the counter-bond and to cause the discharge of the attachment against Villaluz
prevented the happening of a condition upon which the counter-bonds issuance was premised,

such that petitioner should not be held liable thereon.[31]

Petitioner further asserts that the agreement between it and Villaluz is not a suretyship
agreement in the sense that petitioner has become an additional debtor in relation to private
respondents. It is merely waiving its right of excussion[32] that would ordinarily apply to
counter-bond guarantors as originally contemplated in Section 12, Rule 57 of the 1997 Rules.

In their Comment,[33] the private respondents assert that the filing of the counter-bond by
Villaluz had already ipso facto discharged the attachment on the properties and made the petitioner
liable on the bond. Upon acceptance of the premium, there was already an express contract for
surety between Villaluz and petitioner in the amount ofP2,500,000.00 to answer for any adverse
judgment/decision against Villaluz.

Petitioner filed a Reply[34] dated 09 May 2001 to private respondents Comment, admitting the
binding effect of the bond as between the parties thereto. What it did not subscribe to was the
theory that the attachment was ipso facto or automatically discharged by the mere filing of the
bond in court. Such theory, according to petitioner, has no foundation. Without an order of
discharge of attachment and approval of the bond, petitioner submits that its stipulated liability on
said bond, premised on their occurrence, could not possibly arise, for to hold otherwise would be
to trample upon the statutorily guaranteed right of the parties to contractual autonomy.

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

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

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


Appeals,[36] we held:

. . . [A]fter the judgment for the plaintiff has become executory and the execution is
returned unsatisfied, as in this case, the liability of the bond automatically attaches and, in
failure of the surety to satisfy the judgment against the defendant despite demand therefore, writ of
execution may issue against the surety to enforce the obligation of the bond.

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

. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to these bonds
being security for the payment of any judgment that the attaching party may obtain; they are thus
mere replacements of the property formerly attached, and just as the latter may be levied upon
after final judgment in the case in order to realize the amount adjudged, so is the liability of the
countersureties ascertainable after the judgment has become final. . . .

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

. . . Section 17, Rule 57 of the Rules of Court cannot be construed that an execution
against the debtor be first returned unsatisfied even if the bond were a solidary one, for a
procedural may not amend the substantive law expressed in the Civil Code, and further would
nullify the express stipulation of the parties that the suretys obligation should be solidary with
that of the defendant.

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

held that the counterbond is intended to secure the payment of any judgment that the
attaching creditor may recover in the action.

Petitioner does not deny that the contract between it and Villaluz is one of surety. However,
it points out that the kind of surety agreement between them is one that merely waives its right of
excussion. This cannot be so. The counter-bond itself states that the parties jointly and severally
bind themselves to secure the payment of any judgment that the plaintiff may recover against the
defendant in the action. A surety is considered in law as being the same party as the debtor in
relation to whatever is adjudged touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable.[40]

Suretyship is a contractual relation resulting from an agreement whereby one person, the
surety, engages to be answerable for the debt, default or miscarriage of another, known as the
principal. The suretys obligation is not an original and direct one for the performance of his
own act, but merely accessory or collateral to the obligation contracted by the principal.
Nevertheless, although the contract of a surety is in essence secondary only to a valid principal
obligation, his liability to the creditor or promise of the principal is said to be direct, primary and
absolute; in other words, he is directly and equally bound with the principal. The surety therefore
becomes liable for the debt or duty of another although he possesses no direct or personal interest
over the obligations nor does he receive any benefit therefrom.[41]

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

Petitioners argument that the mere filing of a counter-bond in this case cannot
automatically discharge the attachment without first an order of discharge and approval of the
bond, is lame.

Under the Rules, there are two (2) ways to secure the discharge of an attachment. First, the party
whose property has been attached or a person appearing on his behalf may post a security.
Second, said party may show that the order of attachment was improperly or irregularly issued.
[42] The first applies in the instant case. Section 12, Rule 57,[43]provides:

SEC. 12. Discharge of attachment upon giving counter-bond. After a writ of attachment
has been enforced, the party whose property has been attached, or the person appearing on his
behalf, may move for the discharge of the attachment wholly or in part on the security given. The
court shall, after due notice and hearing, order the discharge of the attachment if the movant
makes a cash deposit, or files a counter-bond executed to the attaching party with the clerk of the
court where the application is made, in an amount equal to that fixed by the court in the order of
attachment, exclusive of costs. But if the attachment is sought to be discharged with respect to a
particular property, the counter-bond shall be equal to the value of that property as determined by
the court. In either case, the cash deposit or the counter-bond shall secure the payment of any
judgment that the attaching party may recover in the action. A notice of the deposit shall forthwith
be served on the attaching party. Upon the discharge of an attachment in accordance with the
provisions of this section, the property attached, or the proceeds of any sale thereof, shall be
delivered to the party making the deposit or giving the counter-bond, or to the person appearing on
his behalf, the deposit or counter-bond aforesaid standing in place of the property so released.
Should such counter-bond for any reason be found to be or become insufficient, and the party
furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new
order of attachment.

It should be noted that in G.R. No. 106214, per our Resolution dated 15 January 1997,[44] we
permitted Villaluz to file a counter-attachment bond. On 17 February 1997,[45] we required the
private respondents to comment on the sufficiency of the counter-bond posted by Villaluz.

It is quite palpable that the necessary steps in the discharge of an attachment upon giving
counter-bond have been taken. To require a specific order for the discharge of the attachment
when this Court, in our decision in G.R. No. 106214, had already declared that the petitioner is
solidarily bound with Villaluz would be mere surplusage. Thus:

During the pendency of this petition, a counter-attachment bond was filed by petitioner Villaluz
before this Court to discharge the attachment earlier issued by the trial court. Said bond amounting
to P2.5 million was furnished by Security Pacific Assurance, Corp. which agreed to bind itself
jointly and severally with petitioner for any judgment that may be recovered by private
respondent against the former.[46]

We are not unmindful of our ruling in the case of Belisle Investment and Finance Co., Inc. v.
State Investment House, Inc.,[47] where we held:

. . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbond does not
automatically discharge the writ of attachment. It is only after hearing and after the judge has
ordered the discharge of the attachment if a cash deposit is made or a counterbond is executed to
the attaching creditor is filed, that the writ of attachment is properly discharged under Section 12,
Rule 57 of the Rules of Court.

The ruling in Belisle, at first glance, would suggest an error in the assailed ruling of the Court of
Appeals because there was no specific resolution discharging the attachment and approving the
counter-bond. As above-explained, however, consideration of our decision in G.R. No. 106214 in
its entirety will readily show that this Court has virtually discharged the attachment after all the
parties therein have been heard on the matter.

On this score, we hew to the pertinent ratiocination of the Court of Appeals as regards the
heretofore cited provision of Section 12, Rule 57 of the 1997 Rules of Civil Procedure, on the
discharge of attachment upon giving counter-bond:

. . . The filing of the counter-attachment bond by petitioner Villaluz has discharged the
attachment on the properties and made the petitioner corporation liable on the counter-attachment
bond. This can be gleaned from the DEFENDANTS BOND FOR THE DISSOLUTION OF
ATTACHMENT, which states that Security Pacific Assurance Corporation, as surety, in
consideration of the dissolution of the said attachment jointly and severally, binds itself with
petitioner Villaluz for any judgment that may be recovered by private respondent Anzures against
petitioner Villaluz.

The contract of surety is only between petitioner Villaluz and petitioner corporation. The
petitioner corporation cannot escape liability by stating that a court approval is needed before it
can be made liable. This defense can only be availed by petitioner corporation against petitioner
Villaluz but not against third persons who are not parties to the contract of surety. The petitioners
hold themselves out as jointly and severally liable without any conditions in the counterattachment bond. The petitioner corporation cannot impose requisites before it can be made liable
when the law clearly does not require such requisites to be fulfilled.[48] (Emphases supplied.)

Verily, a judgment must be read in its entirety, and it must be construed as a whole so as to bring
all of its parts into harmony as far as this can be done by fair and reasonable interpretation and so
as to give effect to every word and part, if possible, and to effectuate the intention and purpose of
the Court, consistent with the provisions of the organic law.[49]

Insurance companies are prone to invent excuses to avoid their just obligation.[50] It seems that
this statement very well fits the instant case.

WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court of
Appeals dated 16 June 2000 and 22 August 2000, respectively, are both AFFIRMED. Costs
against petitioner.

SO ORDERED.

4 G.R. No. 139941

January 19, 2001

VICENTE B. CHUIDIAN, petitioner,

vs.
SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THE PHILIPPINES, respondents.
YNARES-SANTIAGO, J.:
The instant petition arises from transactions that were entered into by the government in the
penultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a
dummy or nominee of Ferdinand and Imelda Marcos in several companies said to have been
illegally acquired by the Marcos spouses. As a favored business associate of the Marcoses,
Chuidian allegedly used false pretenses to induce the officers of the Philippine Export and Foreign
Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI) and the
Central Bank, to facilitate the procurement and issuance of a loan guarantee in favor of the Asian
Reliability Company, Incorporated (ARCI) sometime in September 1980. ARCI, 98% of which
was allegedly owned by Chuidian, was granted a loan guarantee of Twenty-Five Million U.S.
Dollars (US$25,000,000.00).1wphi1.nt
While ARCI represented to Philguarantee that the loan proceeds would be used to establish five
inter-related projects in the Philippines, Chuidian reneged on the approved business plan and
instead invested the proceeds of the loan in corporations operating in the United States, more
particularly Dynetics, Incorporated and Interlek, Incorporated. Although ARCI had received the
proceeds of the loan guaranteed by Philguarantee, the former defaulted in the payments thereof,
compelling Philguarantee to undertake payments for the same. Consequently, in June 1985,
Philguarantee sued Chuidian before the Santa Clara County Superior Court,1 charging that in
violation of the terms of the loan, Chuidian not only defaulted in payment, but also misused the
funds by investing them in Silicon Valley corporations and using them for his personal benefit.
For his part, Chuidian claimed that he himself was a victim of the systematic plunder perpetrated
by the Marcoses as he was the true owner of these companies, and that he had in fact instituted an
action before the Federal Courts of the United States to recover the companies which the
Marcoses had illegally wrested from him.2
On November 27, 1985, or three (3) months before the successful peoples revolt that toppled
the Marcos dictatorship, Philguarantee entered into a compromise agreement with Chuidian
whereby petitioner Chuidian shall assign and surrender title to all his companies in favor of the
Philippine government. In return, Philguarantee shall absolve Chuidian from all civil and criminal
liability, and in so doing, desist from pursuing any suit against Chuidian concerning the payments
Philguarantee had made on Chuidians defaulted loans.
It was further stipulated that instead of Chuidian reimbursing the payments made by Philguarantee
arising from Chuidians default, the Philippine government shall pay Chuidian the amount of
Five Million Three Hundred Thousand Dollars (US$5,300,000.00). Initial payment of Five
Hundred Thousand Dollars (US$500,000.00) was actually received by Chuidian, as well as
succeeding payment of Two Hundred Thousand Dollars (US$200,000.00). The remaining balance
of Four Million Six Hundred Thousand Dollars (US$4,600,000.00) was to be paid through an

irrevocable Letter of Credit (L/C) from which Chuidian would draw One Hundred Thousand
Dollars (US$100,000.00) monthly.3 Accordingly, on December 12, 1985, L/C No. SSD-005-85
was issued for the said amount by the Philippine National Bank (PNB). Subsequently, Chuidian
was able to make two (2) monthly drawings from said L/C at the Los Angeles branch of the
PNB.4
With the advent of the Aquino administration, the newly-established Presidential Commission on
Good Government (PCGG) exerted earnest efforts to search and recover money, gold, properties,
stocks and other assets suspected as having been illegally acquired by the Marcoses, their relatives
and cronies.
Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May 30,
1986, the PCGG issued a Sequestration Order5 directing the PNB to place under its custody, for
and in behalf of the PCGG, the irrevocable L/C (No. SSD-005-85). Although Chuidian was then
residing in the United States, his name was placed in the Department of Foreign Affairs Hold
Order list.6
In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara County of
California in Civil Case Nos. 575867 and 577697 seeking to vacate the stipulated judgment
containing the settlement between Philguarantee and Chuidian on the grounds that: (a)
Philguarantee was compelled by the Marcos administration to agree to the terms of the settlement
which was highly unfavorable to Philguarantee and grossly disadvantageous to the government;
(b) Chuidian blackmailed Marcos into pursuing and concluding the settlement agreement by
threatening to expose the fact that the Marcoses made investments in Chuidians American
enterprises; and (c) the Aquino administration had ordered Philguarantee not to make further
payments on the L/C to Chuidian. After considering the factual matters before it, the said court
concluded that Philguarantee had not carried its burden of showing that the settlement between
the parties should be set aside.7 On appeal, the Sixth Appellate District of the Court of Appeal
of the State of California affirmed the judgment of the Superior Court of Sta. Clara County
denying Philguarantees motion to vacate the stipulated judgment based on the settlement
agreement.8
After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States
District Court, Central District of California, an action against PNB seeking, among others, to
compel PNB to pay the proceeds of the L/C. PNB countered that it cannot be held liable for a
breach of contract under principles of illegality, international comity and act of state, and thus it is
excused from payment of the L/C. Philguarantee intervened in said action, raising the same issues
and arguments it had earlier raised in the action before the Santa Clara Superior Court, alleging
that PNB was excused from making payments on the L/C since the settlement was void due to
illegality, duress and fraud.9
The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank from
making payment on the L/C; and (2) in Chuidians favor by denying intervenor Philguarantees
action to set aside the settlement agreement.10

Meanwhile, on February 27, 1987, a Deed of Transfer11 was executed between then Secretary of
Finance Jaime V. Ongpin and then PNB President Edgardo B. Espiritu, to facilitate the
rehabilitation of PNB, among others, as part of the governments economic recovery program.
The said Deed of Transfer provided for the transfer to the government of certain assets of PNB in
exchange for which the government would assume certain liabilities of PNB.12 Among those
liabilities which the government assumed were unused commercial L/Cs and Deferred L/Cs,
including SSD-005-85 listed under Dynetics, Incorporated in favor of Chuidian in the amount of
Four Million Four Hundred Thousand Dollars (US$4,400,000.00).13
On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027 against the
Marcos spouses, several government officials who served under the Marcos administration, and a
number of individuals known to be cronies of the Marcoses, including Chuidian. The complaint
sought the reconveyance, reversion, accounting and restitution of all forms of wealth allegedly
procured illegally and stashed away by the defendants.
In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the
Marcos spouses, engaged in devices, schemes and stratagems by: (1) forming corporations
for the purpose of hiding and avoiding discovery of illegally obtained assets; (2) pillaging the
coffers of government financial institutions such as the Philguarantee; and (3) executing the court
settlement between Philguarantee and Chuidian which was grossly disadvantageous to the
government and the Filipino people.
In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful concert
with the other defendants constituted gross abuse of official position of authority, flagrant
breach of public trust and fiduciary obligations, brazen abuse of right and power, unjust
enrichment, violation of the Constitution and laws of the land.14
While the case was pending, on March 17, 1993, the Republic of the Philippines filed a motion for
issuance of a writ of attachment15 over the L/C, citing as grounds therefor the following:
(1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary
capacity, justifying issuance of the writ under Section 1(b), Rule 57 of the Rules of Court;
(2) The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud in
contracting the debt or incurring the obligation upon which the action was brought, or that he
concealed or disposed of the property that is the subject of the action;
(3) Chuidian has removed or disposed of his property with the intent of defrauding the plaintiff as
justified under Section 1(c) of Rule 57; and
(4) Chuidian is residing out of the country or one on whom summons may be served by
publication, which justifies the writ of attachment prayed for under Section 1(e) of the same rule.

The Republic also averred that should the action brought by Chuidian before the U.S. District
Court of California to compel payment of the L/C prosper, inspite of the sequestration of the said
L/C, Chuidian can ask the said foreign court to compel the PNB Los Angeles branch to pay the
proceeds of the L/C. Eventually, Philguarantee will be made to shoulder the expense resulting in
further damage to the government. Thus, there was an urgent need for the writ of attachment to
place the L/C under the custody of the Sandiganbayan so the same may be preserved as security
for the satisfaction of judgment in the case before said court.
Chuidian opposed the motion for issuance of the writ of attachment, contending that:
(1) The plaintiffs affidavit appended to the motion was in form and substance fatally defective;
(2) Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between the
plaintiff and Chuidian;
(3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such
fraud must be present at the time the contract is entered into;
(4) Chuidian has not removed or disposed of his property in the absence of any intent to defraud
plaintiff;
(5) Chuidians absence from the country does not necessarily make him a non-resident; and
(6) Service of summons by publication cannot be used to justify the issuance of the writ since
Chuidian had already submitted to the jurisdiction of the Court by way of a motion to lift the
freeze order filed through his counsel.
On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of
attachment against L/C No. SSD-005-85 as security for the satisfaction of judgment.16 The
Sandiganbayans ruling was based on its disquisition of the five points of contention raised by
the parties. On the first issue, the Sandiganbayan found that although no separate affidavit was
attached to the motion, the motion itself contained all the requisites of an affidavit, and the
verification thereof is deemed a substantial compliance of Rule 57, Section 3 of the Rules of
Court.
Anent the second contention, the Sandiganbayan ruled that there was no fiduciary relationship
existing between Chuidian and the Republic, but only between Chuidian and ARCI. Since the
Republic is not privy to the fiduciary relationship between Chuidian and ARCI, it cannot invoke
Section 1(b) of Rule 57.
On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing or
disposing of the subject property, the Sandiganbayan held that there was a prima facie case of
fraud committed by Chuidian, justifying the issuance of the writ of attachment. The
Sandiganbayan also adopted the Republics position that since it was compelled to pay, through

Philguarantee, the bank loans taken out by Chuidian, the proceeds of which were fraudulently
diverted, it is entitled to the issuance of the writ of attachment to protect its rights as creditor.
Assuming that there is truth to the governments allegation that Chuidian has removed or
disposed of his property with the intent to defraud, the Sandiganbayan held that the writ of
attachment is warranted, applying Section 1(e) of Rule 57. Besides, the Rules provide for
sufficient security should the owner of the property attached suffer damage or prejudice caused by
the attachment.17
Chuidians absence from the country was considered by the Sandiganbayan to be the most
potent insofar as the relief being sought is concerned.18 Taking judicial notice of the admitted
fact that Chuidian was residing outside of the country, the Sandiganbayan observed that:
x x x no explanation whatsoever was given by him as to his absence from the country, or as to
his homecoming plans in the future. It may be added, moreover, that he has no definite or clearcut
plan to return to the country at this juncture given the manner by which he has submitted
himself to the jurisdiction of the court.19
Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the
Philippines, but is temporarily living outside, he is still subject to the provisional remedy of
attachment.
Accordingly, an order of attachment20 was issued by the Sandiganbayan on July 19, 1993,
ordering the Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant
to the Rules of Court as security for the satisfaction of judgment in Sandiganbayan Civil Case No.
0027.
On August 11, 1997, or almost four (4) years after the issuance of the order of attachment,
Chuidian filed a motion to lift the attachment based on the following grounds:
First, he had returned to the Philippines; hence, the Sandiganbayans most potent ground
for the issuance of the writ of preliminary attachment no longer existed. Since his absence in the
past was the very foundation of the Sandiganbayans writ of preliminary attachment, his
presence in the country warrants the immediate lifting thereof.
Second, there was no evidence at all of initial fraud or subsequent concealment except for the
affidavit submitted by the PCGG Chairman citing mere belief and information and not on
knowledge of the facts. Moreover, this statement is hearsay since the PCGG Chairman was not
a witness to the litigated incidents, was never presented as a witness by the Republic and thus was
not subject to cross-examination.
Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there is
nothing in the records that support the Sandiganbayans erroneous conclusion on the matter.
Fourth, Chuidian belied the allegation that he was also a defendant in other related criminal

action, for in fact, he had never been a defendant in any prosecution of any sort in the
Philippines.21 Moreover, he could not have personally appeared in any other action because he
had been deprived of his right to a travel document by the government.
Fifth, the preliminary attachment was, in the first place, unwarranted because he was not guilty
of fraud in contracting the debt or incurring the obligation. In fact, the L/C was not a product of
fraudulent transactions, but was the result of a US Court-approved settlement. Although he was
accused of employing blackmail tactics to procure the settlement, the California Supreme Court
ruled otherwise. And in relation thereto, he cites as a sixth ground the fact that all these allegations
of fraud and wrongdoing had already been dealt with in actions before the State and Federal
Courts of California. While it cannot technically be considered as forum shopping, it is
nevertheless a form of suit multiplicity over the same issues, parties and subject matter. 22
These foreign judgments constitute res judicata which warrant the dismissal of the case itself.
Chuidian further contends that should the attachment be allowed to continue, he will be deprived
of his property without due process. The L/C was payment to Chuidian in exchange for the assets
he turned over to the Republic pursuant to the terms of the settlement in Case No. 575867. Said
assets, however, had already been sold by the Republic and cannot be returned to Chuidian should
the government succeed in depriving him of the proceeds of the L/C. Since said assets were
disposed of without his or the Sandiganbayans consent, it is the Republic who is fraudulently
disposing of assets.
Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment had
been in effect, the government had not set the case for hearing. Under Rule 17, Section 3, the case
itself should be dismissed for laches owing to the Republics failure to prosecute its action for an
unreasonable length of time. Accordingly, the preliminary attachment, being only a temporary or
ancillary remedy, must be lifted and the PNB ordered to immediately pay the proceeds of the L/C
to Chuidian.
Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to deposit the
L/C in an interest bearing account.23 Annex D; Rollo, pp. 77-79.23 He pointed out to the
Sandiganbayan that the face amount of the L/C had, since its attachment, become fully
demandable and payable. However, since the amount is just lying dormant in the PNB, without
earning any interest, he proposed that it would be to the benefit of all if the Sandiganbayan
requires PNB to deposit the full amount to a Sandiganbayan trust account at any bank in order to
earn interest while awaiting judgment of the action.
The Republic opposed Chuidians motion to lift attachment, alleging that Chuidians absence
was not the only ground for the attachment and, therefore, his belated appearance before the
Sandiganbayan is not a sufficient reason to lift the attachment. Moreover, allowing the foreign
judgment as a basis for the lifting of the attachment would essentially amount to an abdication of
the jurisdiction of the Sandiganbayan to hear and decide the ill gotten wealth cases lodged before
it in deference to the judgment of foreign courts.

In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidians


motion to lift attachment.24
On the same day, the Sandiganbayan issued another Resolution denying Chuidians motion to
require deposit of the attached L/C in an interest bearing account.25
In a motion seeking a reconsideration of the first resolution, Chuidian assailed the
Sandiganbayans finding that the issues raised in his motion to lift attachment had already been
dealt with in the earlier resolution dated July 14, 1993 granting the application for the writ of
preliminary attachment based on the following grounds:
First, Chuidian was out of the country in 1993, but is now presently residing in the country.
Second, the Sandiganbayan could not have known then that his absence was due to the nonrenewal of his passport at the instance of the PCGG. Neither was it revealed that the Republic had
already disposed of Chuidians assets ceded to the Republic in exchange for the L/C. The foreign
judgment was not an issue then because at that time, said judgment had not yet been issued and
much less final. Furthermore, the authority of the PCGG Commissioner to subscribe as a
knowledgeable witness relative to the issuance of the writ of preliminary attachment was raised
for the first time in the motion to lift the attachment. Finally, the issue of laches could not have
been raised then because it was the Republics subsequent neglect or failure to prosecute despite
the passing of the years that gave rise to laches.26
Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the motion to
require deposit of the L/C into an interest bearing account. He argued that contrary to the
Sandiganbayans pronouncement, allowing the deposit would not amount to a virtual recognition
of his right over the L/C, for he is not asking for payment but simply requesting that it be
deposited in an account under the control of the Sandiganbayan. He further stressed that the
Sandiganbayan abdicated its bounden duty to rule on an issue when it found that his motion will
render nugatory the purpose of sequestration and freeze orders over the L/C. Considering that
his assets had already been sold by the Republic, he claimed that the Sandiganbayans refusal to
exercise its fiduciary duty over attached assets will cause him irreparable injury. Lastly, the
Sandiganbayans position that Chuidian was not the owner but a mere payee-beneficiary of the
L/C issued in his favor negates overwhelming jurisprudence on the Negotiable Instruments Law,
while at the same time obliterating his rights of ownership under the Civil Code.27
On July 13, 1999, the Sandiganbayan gave due course to Chuidians plea for the attached L/C to
be deposited in an interest-bearing account, on the ground that it will redound to the benefit of
both parties.
The Sandiganbayan declared the national government as the principal obligor of the L/C even
though the liability remained in the books of the PNB for accounting and monitoring purposes.
The Sandiganbayan, however, denied Chuidians motion for reconsideration of the denial of his

motion to lift attachment, agreeing in full with the governments apriorisms that:
x x x (1) it is a matter of record that the Court granted the application for writ of attachment upon
grounds other than defendants absence in the Philippine territory. In its Resolution dated July
14, 1993, the Court found a prima facie case of fraud committed by defendant Chuidian, and that
defendant has recovered or disposed of his property with the intent of defrauding plaintiff; (2)
Chuidians belated presence in the Philippines cannot be invoked to secure the lifting of
attachment. The rule is specific that it applies to a party who is about to depart from the
Philippines with intent to defraud his creditors. Chuidians stay in the country is uncertain and he
may leave at will because he holds a foreign passport; and (3) Chuidian s other ground,
sufficiency of former PCGG Chairman Gunigundos verification of the complaint, has been met
fairly and squarely in the Resolution of July 14, 1993.28
Hence, the instant petition for certiorari contending that the respondent Sandiganbayan committed
grave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that:
1) Most of the issues raised in the motion to lift attachment had been substantially addressed in the
previous resolutions dated July 14, 1993 and August 26, 1998, while the rest were of no
imperative relevance as to affect the Sandiganbayans disposition; and
2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential
Proclamation No. 50.
The Rules of Court specifically provide for the remedies of a defendant whose property or asset
has been attached. As has been consistently ruled by this Court, the determination of the existence
of grounds to discharge a writ of attachment rests in the sound discretion of the lower courts.29
The question in this case is: What can the herein petitioner do to quash the attachment of the L/C?
There are two courses of action available to the petitioner:
First. To file a counterbond in accordance with Rule 57, Section 12, which provides:
SEC. 12. Discharge of attachment upon giving counterbond. At anytime after an order of
attachment has been granted, the party whose property has been attached, or the person appearing
on his behalf, may, upon reasonable notice to the applicant, apply to the judge who granted the
order, or to the judge of the court in which the action is pending, for an order discharging the
attachment wholly or in part on the security given. The judge shall, after hearing, order the
discharge of the attachment if a cash deposit is made, or a counterbond executed to the attaching
creditor is filed, on behalf of the adverse party, with the clerk or judge of the court where the
application is made, in an amount equal to the value of the property attached as determined by the
judge, to secure the payment of any judgment that the attaching creditor may recover in the action.
Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attaching
creditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of
this section the property attached, or the proceeds of any sale thereof, shall be delivered to the

party making the deposit or giving the counter-bond, or the person appearing on his behalf, the
deposit or counter-bond aforesaid standing in place of the property so released. Should such
counterbond for any reason be found to be, or become, insufficient, and the party furnishing the
same fail to file an additional counter-bond, the attaching creditor may apply for a new order of
attachment.1wphi1.nt
or
Second. To quash the attachment on the ground that it was irregularly or improvidently issued, as
provided for in Section 13 of the same Rule:
SEC. 13. Discharge of attachment for improper or irregular issuance. The party whose property
has been attached may also, at any time either before or after the release of the attached property,
or before any attachment shall have been actually levied, upon reasonable notice to the attaching
creditor, apply to the judge who granted the order, or to the judge of the court in which the action
is pending, for an order to discharge the attachment on the ground that the same was improperly or
irregularly issued. If the motion be made on affidavits on the part of the party whose property has
been attached, but not otherwise, the attaching creditor may oppose the same by counter-affidavits
or other evidence in addition to that on which the attachment was made. After hearing, the judge
shall order the discharge of the attachment if it appears that it was improperly or irregularly issued
and the defect is not cured forthwith.
It would appear that petitioner chose the latter because the grounds he raised assail the propriety of
the issuance of the writ of attachment. By his own admission, however, he repeatedly
acknowledged that his justifications to warrant the lifting of the attachment are facts or events that
came to light or took place after the writ of attachment had already been implemented.
More particularly, petitioner emphasized that four (4) years after the writ was issued, he had
returned to the Philippines. Yet while he noted that he would have returned earlier but for the
cancellation of his passport by the PCGG, he was not barred from returning to the Philippines.
Then he informed the Sandiganbayan that while the case against him was pending, but after the
attachment had already been executed, the government lost two (2) cases for fraud lodged against
him before the U.S. Courts, thus invoking res judicata. Next, he also pointed out that the
government is estopped from pursuing the case against him for failing to prosecute for the number
of years that it had been pending litigation.
It is clear that these grounds have nothing to do with the issuance of the writ of attachment. Much
less do they attack the issuance of the writ at that time as improper or irregular. And yet, the rule
contemplates that the defect must be in the very issuance of the attachment writ. For instance, the
attachment may be discharged under Section 13 of Rule 57 when it is proven that the allegations
of the complaint were deceptively framed,30 or when the complaint fails to state a cause of
action.31 Supervening events which may or may not justify the discharge of the writ are not
within the purview of this particular rule.

In the instant case, there is no showing that the issuance of the writ of attachment was attended by
impropriety or irregularity. Apart from seeking a reconsideration of the resolution granting the
application for the writ, petitioner no longer questioned the writ itself. For four (4) long years he
kept silent and did not exercise any of the remedies available to a defendant whose property or
asset has been attached. It is rather too late in the day for petitioner to question the propriety of the
issuance of the writ.
Petitioner also makes capital of the two foreign judgments which he claims warrant the application
of the principle of res judicata. The first judgment, in Civil Case Nos. 575867 and 577697 brought
by Philguarantee before the Santa Clara Country Superior Court, denied Philguarantees prayer
to set aside the stipulated judgment wherein Philguarantee and Chuidian agreed on the subject
attached L/C. On March 14, 1990, the Court of Appeal of the State of California affirmed the
Superior Courts judgment. The said judgment became the subject of a petition for review by the
California Supreme Court. There is no showing, however, of any final judgment by the California
Supreme Court. The records, including petitioners pleadings, are bereft of any evidence to show
that there is a final foreign judgment which the Philippine courts must defer to. Hence, res judicata
finds no application in this instance because it is a requisite that the former judgment or order
must be final.32
Second, petitioner cites the judgment of the United States District Court in Civil Case 86-2255
RSWL brought by petitioner Chuidian against PNB to compel the latter to pay the L/C. The said
Courts judgment, while it ruled in favor of petitioner on the matter of Philguarantees actionin-intervention to set aside the settlement agreement, also ruled in favor of PNB, to wit:
Under Executive Order No. 1, the PCGG is vested by the Philippine President with the power to
enforce its directives and orders by contempt proceedings. Under Executive Order No. 2, the
PCGG is empowered to freeze any, and all assets, funds and property illegally acquired by former
President Marcos or his close friends and business associates.
On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to freeze any
further drawings on the L/C. The freeze order has remained in effect and was followed by a
sequestration order issued by the PCGG. Subsequently, Chuidians Philippine counsel filed a
series of challenges to the freeze and sequestration orders, which challenges were unsuccessful as
the orders were found valid by the Philippine Supreme Court. The freeze and sequestration orders
are presently in effect. Thus, under the PCGG order and Executive Orders Nos. 1 and 2,
performance by PNB would be illegal under Philippine Law. Therefore PNB is excused from
performance of the L/C agreement as long as the freeze and sequestration orders remain in effect.
(Underscoring ours)
xxx

xxx

xxx

Chuidian argues that the fact that the L/C was issued pursuant to a settlement in California, that
the negotiations for which occurred in California, and that two of the payments were made at
PNB/LA, compels the conclusion that the act of prohibiting payment of the L/C occurred in Los

Angeles. However, the majority of the evidence andTchacosh and Sabbatino compel the opposite
conclusion. The L/C was issued in Manila, such was done at the request of a Philippine
government instrumentality for the benefit of a Philippine citizen, the L/C was to be performed in
the Philippines, all significant events relating to the issuance and implementation of the L/C
occurred in the Philippines, the L/C agreement provided that the L/C was to be construed
according to laws of the Philippines, and the Philippine government certainly has an interest in
preventing the L/C from being remitted in that it would be the release of funds that are potentially
illgotten gains. Accordingly, the Court finds that the PCGG orders are acts of state that must be
respected by this Court, and thus PNB is excused from making payment on the L/C as long as the
freeze and sequestration orders remain in effect.33 (Underscoring ours)
Petitioners own evidence strengthens the governments position that the L/C is under the
jurisdiction of the Philippine government and that the U.S. Courts recognize the authority of the
Republic to sequester and freeze said L/C. Hence, the foreign judgments relied upon by petitioner
do not constitute a bar to the Republics action to recover whatever alleged ill-gotten wealth
petitioner may have acquired.
Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence of
fraud on record other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud,
however, touches on the very merits of the main case which accuses petitioner of committing
fraudulent acts in his dealings with the government. Moreover, this alleged fraud was one of the
grounds for the application of the writ, and the Sandiganbayan granted said application after it
found a prima facie case of fraud committed by petitioner.
In fine, fraud was not only one of the grounds for the issuance of the preliminary attachment, it
was at the same time the governments cause of action in the main case.
We have uniformly held that:
x x x when the preliminary attachment is issued upon a ground which is at the same time the
applicants cause of action; e.g., an action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other
person in a fiduciary capacity, or for a willful violation of duty, or an action against a party
who has been guilty of fraud in contracting the debt or incurring the obligation upon which the
action is brought, the defendant is not allowed to file a motion to dissolve the attachment under
Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiffs
application and affidavits on which the writ was based and consequently that the writ based
thereon had been improperly or irregularly issued the reason being that the hearing on such a
motion for dissolution of the writ would be tantamount to a trial of the merits of the action. In
other words, the merits of the action would be ventilated at a mere hearing of a motion, instead of
at the regular trial.34 (Underscoring ours)
Thus, this Court has time and again ruled that the merits of the action in which a writ of

preliminary attachment has been issued are not triable on a motion for dissolution of the
attachment, otherwise an applicant for the lifting of the writ could force a trial of the merits of the
case on a mere motion.35
It is not the Republics fault that the litigation has been protracted. There is as yet no evidence of
fraud on the part of petitioner. Petitioner is only one of the twenty-three (23) defendants in the
main action. As such, the litigation would take longer than most cases. Petitioner cannot invoke
this delay in the proceedings as an excuse for not seeking the proper recourse in having the writ of
attachment lifted in due time. If ever laches set in, it was petitioner, not the government, who
failed to take action within a reasonable time period. Challenging the issuance of the writ of
attachment four (4) years after its implementation showed petitioners apparent indifference
towards the proceedings before the Sandiganbayan.
In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused its
discretion in a whimsical, capricious and arbitrary manner. There are no compelling reasons to
warrant the immediate lifting of the attachment even as the main case is still pending. On the other
hand, allowing the discharge of the attachment at this stage of the proceedings would put in
jeopardy the right of the attaching party to realize upon the relief sought and expected to be
granted in the main or principal action. It would have the effect of prejudging the main case.
The attachment is a mere provisional remedy to ensure the safety and preservation of the thing
attached until the plaintiff can, by appropriate proceedings, obtain a judgment and have such
property applied to its satisfaction.36To discharge the attachment at this stage of the proceedings
would render inutile any favorable judgment should the government prevail in the principal action
against petitioner. Thus, the Sandiganbayan, in issuing the questioned resolutions, which are
interlocutory in nature, committed no grave abuse of discretion amounting to lack or excess of
jurisdiction. As long as the Sandiganbayan acted within its jurisdiction, any alleged errors
committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment
which are reviewable by timely appeal and not by special civil action of certiorari.37
Moreover, we have held that when the writ of attachment is issued upon a ground which is at the
same time the applicants cause of action, the only other way the writ can be lifted or dissolved
is by a counterbond, in accordance with Section 12 of the same rule.38 This recourse, however,
was not availed of by petitioner, as noted by the Solicitor General in his comment.39
To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a counterbond
immediately; or (b) by moving to quash on the ground of improper and irregular issuance.40
These grounds for the dissolution of an attachment are fixed in Rule 57 of the Rules of Court and
the power of the Court to dissolve an attachment is circumscribed by the grounds specified
therein.41 Petitioners motion to lift attachment failed to demonstrate any infirmity or defect in
the issuance of the writ of attachment; neither did he file a counterbond.
Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing account. We
agree with the Sandiganbayan that any interest that the proceeds of the L/C may earn while the

case is being litigated would redound to the benefit of whichever party will prevail, the Philippine
government included. Thus, we affirm the Sandiganbayans ruling that the proceeds of the L/C
should be deposited in an interest bearing account with the Land Bank of the Philippines for the
account of the Sandiganbayan in escrow until ordered released by the said Court.
We find no legal reason, however, to release the PNB from any liability thereunder. The Deed of
Transfer, whereby certain liabilities of PNB were transferred to the national government, cannot
affect the said L/C since there was no valid substitution of debtor. Article 1293 of the New Civil
Code provides:
Novation which consists in substituting a new debtor in the place of the original one, may be made
without the knowledge or against the will of the latter, but not without the consent of the creditor.
Payment by the new debtor gives him the rights mentioned in Articles 1236 and 1237.
Accordingly, any substitution of debtor must be with the consent of the creditor, whose consent
thereto cannot just be presumed. Even though Presidential Proclamation No. 50 can be considered
an insuperable cause, it does not necessarily make the contracts and obligations affected
thereby exceptions to the above-quoted law, such that the substitution of debtor can be validly
made even without the consent of the creditor. Presidential Proclamation No. 50 was not intended
to set aside laws that govern the very lifeblood of the nations commerce and economy. In fact,
the Deed of Transfer that was executed between PNB and the government pursuant to the said
Presidential Proclamation specifically stated that it shall be deemed effective only upon
compliance with several conditions, one of which requires that:
(b) the BANK shall have secured such governmental and creditors approvals as may be
necessary to establish the consummation, legality and enforceability of the transactions
contemplated hereby.
The validity of this Deed of Transfer is not disputed. Thus, PNB is estopped from denying its
liability thereunder considering that neither the PNB nor the government bothered to secure
petitioners consent to the substitution of debtors. We are not unmindful that any effort to secure
petitioners consent at that time would, in effect, be deemed an admission that the L/C is valid
and binding. Even the Sandiganbayan found that: 36 Sta. Ines Melale Forest Products Corp. v.
Macaraig, Jr., 299 SCRA 491, 515 (1998).
x x x Movant has basis in pointing out that inasmuch as the L/C was issued in his favor, he is
presumed to be the lawful payee-beneficiary of the L/C until such time that the plaintiff
successfully proves that said L/C is ill-gotten and he has no right over the same.42
In Republic v. Sandiganbayan,43 we held that the provisional remedies, such as freeze orders and
sequestration, were not meant to deprive the owner or possessor of his title or any right to the
property sequestered, frozen or taken over and vest it in the sequestering agency, the Government
or other person.

Thus, until such time that the government is able to successfully prove that petitioner has no right
to claim the proceeds of the L/C, he is deemed to be the lawful payee-beneficiary of said L/C, for
which any substitution of debtor requires his consent. The Sandiganbayan thus erred in relieving
PNB of its liability as the original debtor.
WHEREFORE, in view of all the foregoing, the petition is DISMISSED. The Resolutions of the
Sandiganbayan dated November 6, 1998 and July 2, 1999 are AFFIRMED. The PNB is
DIRECTED to remit to the Sandiganbayan the proceeds of Letter of Credit No. SFD-005-85 in the
amount of U.S. $4.4 million within fifteen (15) days from notice hereof, the same to be placed
under special time deposit with the Land Bank of the Philippines, for the account of
Sandiganbayan in escrow for the person or persons, natural or juridical, who shall eventually be
adjudged lawfully entitled thereto, the same to earn interest at the current legal bank rates. The
principal and its interest shall remain in said account until ordered released by the Court in
accordance with law.1wphi1.nt
No costs.
SO ORDERED.

METRO, INC. and


SPOUSES FREDERICK JUAN
and LIZA JUAN,
Petitioners,

versus

LARAS 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, 2009


x
x

DECISION

CARPIO, J.:

The Case

This is a petition for review[1] of the 29 September 2004 Decision[2] and 2 March 2006
Resolution[3] 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 Laras Gifts and
Decors, Inc., Luis Villafuerte, Jr., and Lara Maria R. Villafuerte (respondents). In its 2 March
2006 Resolution, the Court of Appeals denied the motion for reconsideration of petitioners Metro,
Inc., Frederick Juan and Liza Juan (petitioners).

The Facts

Laras Gifts and Decors Inc. (LGD) and Metro, Inc. are corporations engaged in the
business of manufacturing, producing, selling and exporting handicrafts. Luis Villafuerte, Jr. and
Lara Maria R. Villafuerte are the president and vice-president of LGD respectively. Frederick

Juan and Liza Juan are the principal officers of Metro, Inc.

Sometime in 2001, petitioners and respondents agreed that respondents would endorse to
petitioners purchase orders received by respondents from their buyers in the United States of
America in exchange for a 15% commission, to be shared equally by respondents and James R.
Paddon (JRP), LGDs agent. The terms of the agreement were later embodied in an e-mail
labeled as the 2001 Agreement.[4]

In May 2003, respondents filed with the Regional Trial Court, Branch 197, Las Pias City
(trial court) a complaint against petitioners for sum of money and damages with a prayer for the
issuance of a writ of preliminary attachment. Subsequently, respondents filed an amended
complaint[5] and alleged that, as of July 2002, petitioners defrauded them in the amount of
$521,841.62. Respondents also prayed for P1,000,000 as moral damages, P1,000,000 as
exemplary damages and 10% of the judgment award as attorneys fees. Respondents also prayed
for the issuance of a writ of preliminary attachment.
In its 23 June 2003 Order,[6] the trial court granted respondents prayer and issued the writ
of attachment against the properties and assets of petitioners. The 23 June 2003 Order provides:

WHEREFORE, let a Writ of Preliminary Attachment issue against the properties and assets
of Defendant METRO, INC. and against the properties and assets of Defendant SPOUSES
FREDERICK AND LIZA JUAN not exempt from execution, as may be sufficient to satisfy the
applicants demand of US$521,841.62 US Dollars or its equivalent in Pesos upon actual
attachment, which is about P27 Million, unless such Defendants make a deposit or give a bond in
an amount equal toP27 Million to satisfy the applicants demand exclusive of costs, upon
posting by the Plaintiffs of a Bond for Preliminary Attachment in the amount of twenty five
million pesos (P25,000,000.00), subject to the approval of this Court.

SO ORDERED.[7]

On 26 June 2003, petitioners filed a motion to discharge the writ of attachment. 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 did not show that there was a meeting of the
minds between the parties; (2) assuming that the 2001 agreement was a valid contract, the same

was inadmissible because respondents failed to authenticate it in accordance with the Rules on
Electronic Evidence; (3) that respondents failed to substantiate their allegations of fraud with
specific acts or deeds showing how petitioners defrauded them; and (4) that respondents failed to
establish that the unpaid commissions were already due and demandable.

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

Premises considered, after having taken a second hard look at the Order dated June 23, 2003
granting plaintiffs application for the issuance of a writ of preliminary attachment, the Court
holds that the issuance of a writ of preliminary attachment in this case is not justified.

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

SO ORDERED.[9]

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 it ordered the discharge of the writ of
attachment without requiring petitioners to post a counter-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 assailed Orders are

hereby ANNULLED and SET ASIDE. However, the issued Writ of Preliminary Attachment may
be ordered discharged upon the filing by the private respondents of the proper counter-bond
pursuant to Section 12, Rule 57 of the Rules of Civil Procedure.

SO ORDERED.[10]

Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, the Court 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 petitioners were
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 were motivated by malice in
entering into the 2001 agreement. The trial court also declared that petitioners failure to fully
comply with their obligation, absent other facts or circumstances to indicate evil intent, does not
automatically amount to fraud. Consequently, the trial court ordered the discharge of the writ of
attachment for lack 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 it ordered
the discharge of the writ of attachment without requiring petitioners to post a counter-bond. The
Court of Appeals said that when the writ of attachment is issued upon a ground which is at the
same time also the applicants cause of action, courts are precluded from hearing the motion for
dissolution of the writ when such hearing would necessarily force a trial on the merits of a case on
a mere motion.[11] The Court of Appeals pointed out that, in this case, fraud was not only alleged
as the ground for the issuance of the writ of attachment, but was actually the core of

respondents complaint. The Court of Appeals declared that the only way that the writ of
attachment can be discharged is by posting a counter-bond in accordance with Section 12,[12]
Rule 57 of the Rules of Court.
The Issue

Petitioners raise the question of whether the writ of attachment issued by the trial court was
improperly issued such that it may be discharged without the filing of a counter-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 circumstances constitutive of fraud.
Petitioners insist that the improperly issued writ of attachment may be discharged without the
necessity of filing a counter-bond. Petitioners also argue that respondents failed to show that the
writ of attachment was issued upon a ground which is at the same time also respondents cause
of action. Petitioners maintain that respondents amended complaint was not an action based on
fraud but was a simple case for collection of sum of money plus damages.

On the other hand, respondents argue that the Court of Appeals did not err in ruling that the
writ of attachment can only be discharged by filing a counter-bond. According to respondents,
petitioners cannot avail of Section 13,[13] 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 of
respondents amended complaint. Respondents assert that the amended complaint is a complaint
for damages for the breach of obligation and acts of fraud committed by petitioners.

In this case, the basis of respondents application for the issuance of a writ of preliminary
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 the action
or at any time before entry of judgment, a plaintiff or any proper party may have the property of
the adverse party attached as security for the satisfaction of any judgment that maybe recovered in
the following cases: x x x

(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; x x x

In Liberty Insurance Corporation v. Court of Appeals,[14] we explained:

To sustain an attachment on this ground, it must be shown that the debtor in contracting the
debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the
execution of the agreement and must have been the reason which induced the other party into
giving consent which he would not have otherwise given. To constitute a ground for attachment in
Section 1(d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the
obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor
has a preconceived plan or intention not to pay, as it is in this case.[15]

The applicant for a writ of preliminary attachment must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtors
mere non-payment of the debt or failure to comply with his obligation.[16]

In their amended complaint, respondents alleged the following in support of their prayer 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 to enter into a business

deal. He proposed to plaintiff spouses the following:

a. That plaintiffs transfer and endorse to defendant Metro some of


Orders (POs) they will receive from their US buyers;

the Purchase

b. That defendants will sell exclusively and only thru plaintiffs for their US buyer;

xxx

6. After several discussions on the matter and further inducement on the part of defendant
spouses, plaintiff spouses agreed. Thus, on April 21, 2001, defendant spouses confirmed and
finalized the agreement in a letter-document entitled 2001 Agreement they emailed to
plaintiff spouses, a copy of which is hereto attached as Annex A.

xxx

20. Defendants are guilty of fraud committed both at the inception of the agreement and in
the performance of the obligation. Through machinations and schemes, defendants successfully
enticed plaintiffs to enter into the 2001 Agreement. In order to secure plaintiffs full trust in
them and lure plaintiffs to endorse more POs and increase the volume of the orders, defendants
during the early part, remitted to plaintiffs shares under the Agreement.
21. However, soon thereafter, just when the orders increased and the amount involved
likewise increased, defendants suddenly, without any justifiable reasons and in pure bad faith and
fraud, abandoned their contractual obligations to remit to plaintiffs their shares. And worse,
defendants transacted directly with plaintiffs foreign buyer to the latters exclusion and
damage. Clearly, defendants planned everything from the beginning, employed ploy and
machinations to defraud plaintiffs, and consequently take from them a valuable client.

22. Defendants are likewise guilty of fraud by violating the trust and confidence reposed

upon them by plaintiffs. Defendants received the proceeds of plaintiffs LCs with the clear
obligation of remitting 15% thereof to the plaintiffs. Their refusal and failure to remit the said
amount despite demand constitutes a breach of trust amounting to malice and fraud.[17]
(Emphasis and underscoring in the original) (Boldfacing and italicization supplied)

We rule that respondents allegation that petitioners undertook to sell exclusively and only
through JRP/LGD for Target Stores Corporation but that petitioners transacted directly with
respondents foreign buyer is sufficient allegation of fraud to support their application 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 in accordance 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,
[18] FCY Construction Group, Inc. v. Court of Appeals,[19] and Liberty Insurance Corporation v.
Court of Appeals[20] is proper. The rule that when the writ of attachment is issued upon a
ground which is at the same time the applicants cause of action, the only other way the writ can
be lifted or dissolved is by a counter-bond[21] is applicable in this case. It is clear that in
respondents amended complaint of fraud is not only alleged as a ground for the issuance of the
writ of preliminary attachment, but it is also the core of 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 the attachment has a basis.

WHEREFORE, we DENY the petition. We AFFIRM the


29 September 2004
Decision and 2 March 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 79475.

SO ORDERED.

G.R. No. 88379 November 15, 1989

PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,


vs.
COURT OF APPEALS, GATES LEARJET CORPORATION and GATES LEARJET EXPORT
CORPORATION,respondents.
T.J. Sumawang & Associates for petitioner.
Quasha, Asperilla, Ancheta, Pea & Nolasco for private respondents.

NARVASA, J.:
In December, 1981, Learjet Phil. Inc. commenced suit in the Regional Trial Court at Pasig against
Gates Learjet Corporation and Gates Learjet Export Corporation. 1 On said plaintiffs application,
and upon the posting of an attachment bond in its behalf by Philippine Charter Insurance
Corporation (then known as Phil-Am Assurance Co., Inc.), the Court issued a writ of preliminary
attachment directed against the defendants properties. On the strength of the writ, the sheriff
seized a twin engine airplane, a Learjet 35-A-3799, belonging to the defendants.
After due proceedings, judgment was rendered by the Trial Court in plaintiffs favor, sentencing
the defendants to pay US$2,250,000.00 as actual damages, P200,000.00 as moral damages,
P100,000.00 as exemplary damages, as well as attorneys fees and costs. On appeal to the Court
of Appeals by the defendants, 2 however, this judgment was reversed. The decision of the
Appellate Tribunal, promulgated on December 10, 1986, disposed as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and Civil
Case No. 43874 of the Regional Trial Court of Pasig is DISMISSED for lack of merit. For the
wrongful attachment of Learjet aircraft 35A-44 owned by defendant-appellant Gates Learjet
Corporation, plaintiff-appellee Learjet Philippines, Inc. is hereby ordered to pay to the former by
way of actual damages the amount of $73,179-36, P50,000.00 as exemplary damages, and the
costs of the suit.
On December 16, 1986 four days after notice of the judgment was served on the defendants, they
filed with the Court of Appeals an Urgent Petition to have Damages Awarded on Account of
Illegal Attachment Executed Against Attachment Bond Issued by the T.J. Philippine American
Assurance Co., Inc., Now Pan-Philippines General Insurance Corporation. The petition
adverted to the attachment bond posted by the surety firm in the amount of P2,000,000.00, and
asked that the damages awarded defendants- appellants by reason of the wrongful attachment be
enforced, after proper notice to plaintiff and its bondsman and hearing of (the) application,
jointly and severally against both the plaintiff and the bonds-man-surety . A copy of the
petition was furnished the surety. The plaintiff, in its turn, filed a motion for reconsideration of the
decision of December 10, 1986.

By Resolution dated March 10, 1987, the Court of Appeals: 3 (1) denied the plaintiffs motion for
reconsideration for lack of merit; and (2) NOTED defendants-appellants application or claim
for damages against the surety and RESOLVED to refer the Said claim or application to the
trial court and allow the latter to hear and decide the same pursuant to Section 20, Rule 57 of the
Rules of Court.
The plaintiff tried to have the Appellate Courts decision reviewed and reversed by us, but failed.
4 We denied its petition for review by resolution dated August 10, 1987; and entry of the
resolution was made on February 26, 1988.
On remand of the case to the Trial Court, the defendants filed an Urgent Petition to Have
Damages Awarded on Account of Illegal Attachment Executed Against Attachment Bond Issued
by the Surety Philippine American Assurance Co., Inc., now Pan-Philippines General Insurance
Corporation dated December 16, 1986. The Court ordered execution of the judgment against
the plaintiff at Suite 10 Prescon Strata 100 Emerald Avenue, Pasig, Metro Manila in accordance
with the Rules. The writ issued on April 8, 1988.
Evidently, the sheriff sought to enforce the writ also against the surety, Philippine Charter
Insurance Corporation (formerly Pan-Philippines General Insurance Corporation). Said
surety thereupon filed with the Trial Court an Urgent Motion to Recall against Nullify Sheriffs
Notice of Enforcement of Writ of Execution, and for Issuance of Restraining Order/Writ of
Restraining Injunction. It contended that there was in truth no judgment against it due to the
wrongful attachment of (the defendants) Learjet Aircraft 35A-44, that since neither
Section 20, Rule 57 of the Rules of Court nor the Resolution of the Court of Appeals of March 10,
1987 had been complied with, there existed no award of damages against it under its attachment
bond, and enforcement of execution against said bond would be contrary to due process.
The Trial Court forthwith restrained enforcement of the writ of execution against the surety and
set the suretys motion for hearing in the morning of May 27, 1988. After receiving the parties
arguments, the Court promulgated an Order on June 14, 1988 overruling the movant suretys
argument that it (the Court) had lost competence to hear and determine the application or damages
against the attachment bond because the judgment of the Court of Appeals had become final and
executory. The Court observed that:
What is contemplated under Section 20, Rule 57, is that if no application for damages is made
before the entry of the final judgment the surety on the bond is relieved from liability therefor.
(Visayan Surety and Insurance Corporation v. Pascual [85 Phil. 779], citing Facundo vs. Tan and
Facundo vs. Lim). In the case at bar, an application was made before the entry of final judgment
. What was merely deferred was the hearing of said application before the trial court. In fact,
said application was duly noted by the Honorable Court of Appeals in its resolution. Hence, an
application for damages was filed in time.
Considering the foregoing, and in order to determine the extent of the liability of both principal

and surety on the attachment bond, a hearing is necessary.


The Court also resolved to issue, upon a bond of Pl,000,000.00, a writ of preliminary injunction
restraining the sheriffs from enforcing the writ of execution or otherwise executing the judgment
against the surety until the application for damages on the attachment bond is heard and
decided; and set the hearing on the matter on August 9, 1988.
The surety moved for reconsideration, but its motion was denied by Order handed down on
October 13, 1988. The surety then went to the Court of Appeals again, where it sought annulment
of the Trial Courts Orders of June 14, 1988 and October 13, 1988. Its petition for certiorari,
prohibition and preliminary injunction, filed on November 3, 1988, was docketed as CA-G.R. No.
SP No. 15987. In it the surety argued that it had been denied its day in court when, without its
being present at the trial, the defendants had adduced evidence in support of (the) damages
eventually awarded by the Court of Appeals; that said defendants had fatally failed to file an
application for damages on account of the wrongful attachment, and consequently, the Court
had no more jurisdiction to set for hearing (the) urgent petition (to have damages awarded
on account of illegal attachment executed against attachment bond, etc.).
The Appellate Courts verdict however again went against the surety. By Decision promulgated
on March 8, 1 989,5 the petition was DENIED DUE COURSE. According to the Court, (1)
the general prayer in the petition (to hold surety liable on its bond) dated December 16,1986
for such further reliefs justified in the premises was broad enough to include and embrace
an application or claim for whatever damages movants sustained during the pendency of the
appeal, by reason of the wrongful attachment , (2) such a finding was consistent with
Supreme Court rulings and the earlier Resolution of March 10, 1987 noting
defendants-appellants application or claim for damages against the surety and referring it
to the, trial court pursuant to Section 20, Rule 57 of the Rules of Court; and (3) what
must have been contemplated (in said application or claim for damages) were not the damages
awarded in CA-G.R. CV No. 08585, 6 but the damages which applicants or claimants could have
suffered during the pendency of said appeal, as a consequence of the wrongful attachment found
by final judgment, for otherwise there would have been no need for this Court to allow and,
in effect, direct the trial court a quo to hear and decide subject post-judgment petition in CAG.R. CV No. 08585. The suretys motion for reconsideration dated March 28, 1989 was
denied by Resolution dated May 17, 1989.
The surety is once again before us, 7 this time praying for reversal of the Appellate Tribunals
aforesaid judgment of March 8, 1989. Once again it will fail, no merit being discerned in its
petition for review on certiorari.
By settled rule a writ of preliminary attachment may issue once the Court is satisfied, on
consideration ex parte of the application and its supporting affidavits and documents, 8 or after
healing, as the court may in its discretion consider proper, that any of the grounds specified by law
exists, and an acceptable bond is given by the applicant 9

executed to the adverse party in an amount fixed by the judge, not exceeding the
applicants claim, conditioned that the latter will pay all the costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto.
The filing of the attachment bond by a surety undoubtedly connotes and operates as a voluntary
submission by it to the Courts jurisdiction, and of course binds it to faithfully comply with its
specific obligations under its bond.
The surety does not, to be sure, become liable on its bond simply because judgment is
subsequently rendered against the party who obtained the preliminary attachment. The surety
becomes liable only when and if the court shall finally adjudge that the applicant was not
entitled to the attachment. This is so regardless of the nature and character of the judgment on
the merits of the principal claims, counterclaims or cross-claims, etc. asserted by the parties
against each other. Indeed, since an applicants cause of action may be entirely different from the
ground relied upon by him for a preliminary attachment, 10 it may well be that although the
evidence warrants judgment in favor of said applicant, the proofs may nevertheless also establish
that said applicants proferred ground for attachment was inexistent or specious and hence, the
writ should not have issued at all; i.e., he was not entitled thereto in the first place. In that event,
the final verdict should logically award to the applicant the relief sought in his basic pleading, but
at the same time sentence him usually on the basis of a counterclaim to pay damages caused
to his adversary by the wronful attachment. 11
When the final judgment declares that the party at whose instance an attachment had issued was
not entitled thereto, there is no question about the eminent propriety of condemning that party to
the payment of all the damages that the wrongful attachment had caused to the party whose
property had been seized under the attachment writ.
But what of the suretys liability? The surety on an attachment bond, as already pointed out,
assures that the applicant will pay all the costs which may be adjudged to the adverse party and
all damages which he may sustain by reason of the attachment, if the court shall finally adjudge
that the applicant was not entitled thereto. 12 In other words the surety, by submitting its
attachment bond, binds itself solidarily to make the same payments which its principal the
party at whose instance the attachment issues may be condemned to make, to compensate for
the damages resulting from the wrongful attachment, although unlike its principal, its liability is
limited to the amount stated in its bond.
The final adjudication that the applicant was not entitled to the attachment, standing alone,
does not suffice to make the surety liable. It is necessary, in addition, that the surety be accorded
due process, i.e., that it be given an opportunity to be heard on the question of its solidarily
liability for damages arising from wrongful attachment. This, by established rule and practice, is
accorded to the surety at a summary hearing, scheduled after, judgment on presentation of an
application to hold it answerable on its bond. Evidently, such a summary hearing is not rendered
unnecessary or superfluous by the fact that the matter of damages was among the issues tried

during the hearings on the merits, unless of course, the surety had previously been duly impleaded
as a party, or otherwise earlier notified and given opportunity to be present and ventilate its side on
the matter during the trial. The procedure for the rendition of a binding directive on the surety
upon its solidarily liability for damages for wrongful attachment is indicated in Section 20, Rule
57 of the Rules of Court. The section reads as follows:
Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the action be
in favor of the party against whom attachment was issued, he may recover upon the bond given or
deposit made by the attaching creditor,, any damages resulting from the attachment. Such damages
may be awarded only upon application and after proper hearing, and shall be included in the final
judgment. The application must be filed before the trial or before appeal is perfected or before the
judgment becomes executory, with due notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof.
If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an
application with notice to the party in whose favor the attachment was issued or his surety or
sureties. before the judgment of the appellate court becomes executory. The appellate court may
allow the application to be heard and decided by the trial court.
Certain principles are derived from this provision of the Rules. A party against whom a writ of
preliminary attachment issues may impugn the writ by alleging and proving inter alia that the
applicant was not entitled thereto, i.e., that the asserted ground for attachment was inexistent, or
the amount for which the writ was sought was excessive, etc., this, by appropriate motion. He may
also claim damages on account of the wrongful attachment through an appropriate pleading, such
as a counterclaim, or other form of application. What is important is that the application must be
filed before the trial or before appeal is perfected or before the judgment becomes executory, with
due notice to the attaching creditor and his surety or sureties, setting forth the facts showing his
right to damages and the amount thereof.
In the case at bar, since the Trial Courts decision had gone against the defendants, and no
irregularity had been adjudged as regards the preliminary attachment, the latter obviously had no
occasion to apply for damages from wrongful attachment although they could have so applied
therefor because, as already pointed out, it is entirely possible under the law that an applicant for
preliminary attachment be adjudged entitled to relief on his basic claimand at the same time
pronounced as not entitled to the attachment.
As things turned out, the Trial Courts judgment was reversed by the Court of Appeals; the latter
dismissed the complaint, declared the plaintiff not entitled to the attachment and sentenced it to
pay to the defendants damages on account thereof And it was only at this time that the defendants
could have presented and did actually present their petition to enforce the suretys liability on its
bond. This petition, as aforestated, the Court of Appeals (a) noted and (b) referred to the Trial
Court with instructions to hear and decide pursuant to Section 20, Rule 57 of the Rules of
Court. Under the circumstances, and in the light of the explicit provisions of said Section 20,

Rule 57, there can be no debate about the seasonablenes of the defendants application for
damages and the correctness of the referral by the Court of Appeals of the application for damages
to the Trial Court for hearing and determination.
Under the circumstances, too, there can be no gainsaying the suretys full awareness of its
undertakings under its bond: that, as the law puts it: the plaintiff will pay all costs which may be
adjudged to the defendant(s), and all damages which may be sustained by reason of the
attachment, if the same shall finally be adjudged to have been wrongful and without cause, and
that those damages plainly comprehended not only those sustained during the trial of the action
but also those during the pendency of the appeal. This is the law, 13 and this is how the surety s
liability should be understood. The suretys liability may be enforced whether the application for
damages for wrongful attachment be submitted in the original proceedings before the Trial Court,
or on appeal, so long as the judgment has not become executory. The suretys liability is not and
cannot be limited to the damages caused by the improper attachment only during the pendency of
the appeal. That would be absurb. The plain and patent intendment of the law is that the surety
shall answer for all damages that the party may suffer as a result of the illicit attachment, for all
the time that the attachment was in force; from levy to dissolution. The fact that the attachment
was initially (and erroneously) deemed correct by the Trial Court, and it was only on appeal that it
was pronounced improper, cannot restrict recovery on the bond only to such damages as might
have been sustained during the appeal. The declaration by the appellate court that the applicant for
attachment was not entitled thereto, signifies that the attachment should not have issued in
the first place, that somehow the Trial Court had been misled into issuing the writ although no
proper ground existed therefor. The logical and inevitable conclusion is that the applicant for
attachment and the surety on the attachment bond are solidarily liable for all the damages suffered
by the party against whom the writ is enforced, except only that the suretys liability is limited to
the amount set forth in its bond.
The fact that the second paragraph of the rule speaks only of damages sustained during the
pendency of the appeal is of no moment; it obviously proceeds from the assumption in the first
paragraph that the award for the damages suffered during the pendency of the case in the trial
court was in fact included in the final judgment (or applied for therein before the appeal was
perfected or the judgment became executory); hence, it states that the damages additionally
suffered thereafter, i.e., during the pendency of the appeal, should be claimed before the judgment
of the appellate tribunal becomes executory. It however bears repeating that where, as in the case
at bar, the judgment of the Trial Court has expressly or impliedly sustained the attachment and
thus has given rise to no occasion to speak of, much less, file an application for damages for
wrongful attachment, and it is only in the decision of the Court of Appeals that the attachment is
declared wrongful and that the applicant was not entitled thereto, the rule is, as it should be,
that it is entirely proper at this time for the application for damages for such wrongful attachment
to be filed i.e., for all the damages sustained thereby, during all the time that it was in force, not
only during the pendency of the appeal. And the application must be filed with notice to the
party in whose favor the attachment was issued or his surety or sureties, before the judgment of
the appellate court becomes executory. In such a situation, the appellate court may resolve the
application itself or allow it to be heard and decided by the trial court.

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

Related
Provisional Remedies Rule 58 Cases
G.R. No. 110086. July 19, 1999] PARAMOUNT INSURANCE CORPORATION, petitioner, vs.
COURT OF APPEALS and DAGUPAN ELECTRIC CORPORATION, respondents. D E C I S I
O N YNARES-SANTIAGO, J.: Before this Court is a petition for review on certiorari assailing
the Decision of the Court of Appeals dated April 30, 1993 in CA-G.R. CV No. 11970 which
B.P BLG. 68
BP BLG. 68 (PRIVATE CORPORATIONS) Section 2. Corporation defined. A corporation is an
artificial being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence. Doctrine of
corporate entity Doctrinally, a corporation is a legal
Torts Notes
Concept of Quasi-delict Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of