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G.R. No.

L-35951 August 31, 1977


PIONEER INSURANCE & SURETY CORP. AND HADJI ESMAYATEN
LUCMAN, petitioners-appellants,
vs.
THE HON. AGAPITO HONTANOSAS, JUDGE OF THE COURT OF FIRST INSTANCE OF
CEBU, BRANCH XI AND THE SPOUSES BEN UY RODRIGUEZ, respondents-appellees.
Eriberto D. Ignacio for appellant.
Francisco E.F. Remotigue & Hilario G. Davide, Jr. for private respondent.

GUERRERO, J:
We reverse the decision of the Court of Appeals 1 promulgated, on October 30, 1972 in CAG.R. No. 00951-R entitled "Pioneer Insurance & Surety Corp., et al., petitioners, vs. Hon
Judge Agapito Hontanosas, et al., respondents," which decision had denied for lack of merit
the petition filed therein for certiorari. prohibition and/or mandamus with preliminary
injunction seeking to nullify the order of default of February 29, 1972 and the decision of
March 9, 1972 in Civil Case No. R-12069, entitled "Ben Rodriguez, et al. vs. Allied Overseas
Commercial Co., et al." issued by the respondent Presiding Judge of the Court of First
Instance of Cebu.
The case commenced on October 12, 1970 when Allied Overseas Commercial Co., Ltd., a
foreign corporation domiciled in Hongkong, filed in the Court of First Instance of Manila a
complaint against the respondent-appellee Ben Uy Rodriguez for the collection of a sum of
money arising out of a transaction between them in the amount of P450,533.00, the
agreed peso equivalent of the HK$418,279.60 balance unpaid. Plaintiff therein having
prayed for the issuance of a writ of preliminary attachment, the game was granted by the
Court against Rodriguez upon the filing by said plaintiff of a bond in the amount of
P450,000.00, which petitioner-appellant Pioneer Insurance & Surety Corp. duly posted. The
corresponding levy in attachment was made by annotation on the properties of Rodriguez
which consisted of 4 pieces of lots; notices of garnishment on different Cebu banks turned
out negative, while personal properties found at the Rodriguez residence, although
attached, were, however, not removed therefrom.
A motion to dismiss the complaint was thereupon filed by Rodriguez, followed by an
application for damages against the bond, praying that he be permitted to present
evidence of damages he sustained by reason of the wrongful attachment, and to enforce
said claim against the surety on its bond, alleging further that otherwise his claim against
the bond will forever be barred as said claim cannot be the subject of an independent civil
action under Sec. 20, Rule 57 of the Rules of Court. The court iii its order of December 22,
1970 dismissed the complaint on the ground of improper venue since defendant Rodriguez
was a resident of Cebu, and lifted the writ of preliminary attachment setting. the hearing
on the claim for damages against the bond on January 14, 1971.
With the intention of filing a separate civil action in the Court t T of Firs instance of Cebu,
respondent-appellee Rodriguez withdrew his claim for damages against Pioneer Insurance

and Surety Corp., which motion for withdrawal was granted by the Court Thereafter, the
respondents-appellees Rodriguez spouses filed a complaint for damages on February 15,
1971 against Pioneer Insurance & Surety Corp. and Allied Overseas (the Hongkong-based
corporation), docketed as Civil Case No. R-12069, Court of First Instance of Cebu presided
by respondent judge lion Agapito Hontanosas, the complaint praying that Rodriguez be
declared as not in any manner indebted to the defendant Allied Overseas Commercial Co.
and that Pioneer Insurance & Surety Corp. be held liable for damages, attorneys foes and
expenses of litigation by reason of the and malicious attachment issued by the Manila
Court.
Defendant Pioneer Insurance and Surety Corp. filed its manner to the complaint (Civil Case
No. R-12069) alleging affirmative and special defenses. With respect to the other
defendant Allied Overseas Commercial Co., summons was (coursed thru the Philippine
Consulate General in Honkong which turned it down as it had no authority to serve the
process under the Rules of Court.
On April 27, 1971, defendant Pioneer Insurance & Surety Corp. filed a motion for a
preliminary hearing of its affirmative defenses of lack of cause of action and bar by prior
judgment and/or abandonment, which are grounds for a motion to dismiss. This was
denied by the respondent Judge in his Order dated May 15, 1971, so also was the motion
for reconsideration per its Order of June 2, 1971.
On May 5, 1971, the case was called for pre-trial. Plaintiffs with counsel attended;
defendant Pioneer Insurance & Surety Corp. thru counsel was present The other defendant,
Allied Overseas Commercial Co was not yet summoned, hence absent. The parties
manifested failure to settle the case amicably, thus the Court set the trial of the case on
the merits for June 11, 1971.
A petition for certiorari and prohibition was then filed by Pioneer Insurance and Surety
Corp. on August 3, 1971 in the Court of Appeals, CA-G.R. No. 00369-R (Record on Appeal,
p. 133) with prayer to enjoin a hearing scheduled on August 7, 1971, alleging that
respondent Judge committed grave abuse of discretion amounting to lack and/or excess of
jurisdiction in lending the motion for preliminary hearing. The Court of Appeals In its
Resolution dated August 7, 1971 distributed this petition for certiorari. Record on Appeal,
pp. 133-137)
An amended complaint was now submitted to ad admitted by the Court on August 14,
1971 by impleading left petitioner-appellant Hadji Esmayaten Lucman as additional,
defendant., making allegations tending show confabulation between the new defendant,
and the foreign-based corporation to collect a non-existing debt. To the amended
complaint, Pioneer Insurance & Surety Corp filed its answer.
Lucman having been impleaded as assignee defendant Allied Overseas Commercial filed a
motion to dismiss on the ground of auter action pendant, that is an action pending in the
Court of First Instance of Rizal, Civil Case No. 14351 between the same parties with the
same allegation and defences of counterclaims. On November 25, 1971, respondent Judge
denied the motion to dismiss, whereupon Lucman filed his answer to the amended
complaint.

Upon an ex parte motion of Rodriguez, the Court declared Lucman in default in its Order of
January 10, 1972 and thereafter promulgated a decision dated January 28, 1972 against
Lucman only, ordering him to pay damage,- in the amount of P150,000.00; declaring that
Rodriguez was no in any manner indebted to Lucman or to Allied Overseas Commercial Co
and that the Metropolitan Bank & Trust Co. (Cebu Branch) Check No. CB2169 (xerox copy
marked Exhibit M issued iv Rodriguez to pay the indebtedness was a forgery.
Lucman moved on February 11, 1972 to set aside the order of default and to admit the
answer earlier filed by him to the amended complaint. On February 21. 1972, respondent
Judge set aside the order of default against Lucman including the decision against him, the
dispositive portion of which order reads as follows:
WHEREFORE, the Order of Default dated January 10, 1972 as well as the decision (Re: Hadji
Esmayaten Lucman) dated January 28, 1972, are hereby reconsidered and set aside. Let
the hearing of this case on the merits be scheduled as previously set for February 28, 1972
at 8:30 o'clock in the morning.
The parties thru their respective counsels are to be immediately notified of this order. The
Clerk of Court is directed to notify defendant Hadji Esmayaten Lucman thru counsel Atty.
Eriberto D. Ignacio At Rm. 414, Madrigal Bldg., Escolta, Manila by telegram.
SO ORDERED.
Cebu City, Philippines, February 21, 1972.
(SGD.) AGAPITO HONTANOSAS
JUDGE
(Record on Appeal, pp. 297-298)
Forthwith, the clerk of court sent the telegram notices in the following wise:
YOUR MOTION SET ASIDE ORDER, DEFAULT AND DECLARE PROCEEDINGS NULL AND VOID
RE CIVIL CASE BEN RODGIGUEZ ET AL VERSUS HADJI ESMAYATEN LUCMAN GRANTED STOP
PRETRIAL SHALL PROCEED AS PREVIOUSLY SCHEDULED FEBRARY 28 1972 MORNING
(Record on Appeal, p. 298)
Counsel for the petitioners received the telegram notices on February 21, 1972; and on
February 23, 1972 counsel filed an urgent motion for postponement of the pre-trial,
claiming that he was not aware of any such pre-trial having been previously set for
February 28, 1972 in the morning, as indeed no such pre-trial can as yet be set as the
issues with respect to the amended complaint are not yet fully joined since plaintiffs have
not answered the compulsory conterclaims separately set up by the defendants in said
summons to theforeign corporations Allied Overseas Commercial Co. Ltd. of Hongkong, nor
have plaintiffs asked that said foreign corporation be dropped from the amended
complaint; that counsel has a hearing in Manila of a criminal case which is of intransferable
character, and prayed that the pre-trial be set at some other date in March preferably
either March 22 or 23, 1972 at 9:00 a.m. which were the only free dates for the month of
March 1972 in the calendar of the counsel. (Record on Appeal, pp. 301-303)

Apparently, the above urgent motion for postponement although sent through registered
airmail special delivery and received by the Dispatching Section of the Post Office of Cebu
on February 28, 1972 (Resolution, Court of Appeals, Recrod on Appeal, pp. 365-366) was
not received by the Court for on February 28, 1972 when the case was called, an order was
issued by the Court postponing the pre-trial of the case to March 20, 1972 in ivew of the
absence of the defendants and counsel notwithstanding notices of hearing and telegrams
sent to them, on the condition that should defendants be found that as to plaintiffs will be
allowed to present their evidence and the defendants will be declared in default for failure
to appear at the pre-trial. (Record on Appeal, pp. 304-305)
Upon verification from the radio Communications of the Philippines that the telegrams
mentioned above were delivered and received by the addresses on February 21, 1972, the
Court on February 29, 1972 declared the defendants in default and allowed the plaintiffs to
present their evidence in support of their complaint before the Clerk of Court. (Record on
Appeal, pp. 306-307). The evidence was thereupon presented and on March 9, 1977 the
respondent Judge promulgated his Decision declaring that the plaintiff Rodriguez is not in
any manner indebted to defendant Lucman or to Allied Overseas Commercial Co.,
declaring the personal check of the plaintiff to be a forgery; that the attachment of the
properties of plaintiff in the Manila case was wrongfu; amd malicious, and ordering
defendant Pioneer Insurance and Surety Co. to pay P350,000.00 as moral damages,
P50,000.00 as exemplary damages and P50,000.00 for expenses of litigation in Manila.
Defendant Lucman was also ordered to pay plaintiffs the sum of P50,000,00 as exemplary
damages and P30,000.00 as attorney's fees.
Within 30 days reglementary period to perfect the appeal, defendants Pioneer Insurance &
Surety Corp. and Hadji Esmayaten Lucman filed the Notice of Appeal and the Original
record on Appeal, the latter ordered corrected and amended but finally approved by the
Court on July 31, 1972.
Meanwhile, petitioner's filed on April 4, 1972 before the Court of Appeals a petition for
certiorari, prohibition and/or mandamus with preliminary injunction CA-G.R. No. 00951-R)
seeking to nullify the order of default of February 29, 1972 and the Decision of March 9,
1972 of respondent Judge, to command said Judge to elevate the records of the case for
review and to prohibit him from enforcing his decision and from taking further action in the
case, No. 12069.
On April 13, 1972, the Court of Appeals promulgated its resolution dismissing the petition
aforestated and ruled among others as follows:
Furthermore, petitioners instant remedy is not proper because of their own admission that
appeal is available from the decision of respondent Judge (Discussion, pp. 12-13 of their
Petition). This is shown by the handwriting at the upper right hand corner of Annex R
(Decision) when they received the decision on March 25, 1972 and the period to appeal will
expire on April 24, 1972.
We are not, therefore, convinced that the remedy of appeal is inadequate, considering that
whatever errors respondent Judge might have committed can be assigned as specific
errors on appeal. It has been consistently held that certiorari is not available where the
remedy of appeal is present .

(Record on Appeal, p. 373)


On a motion for reconsideration, the Court of Appeals reconsidered the resolution cited
above, and issued another resolution dated July 25, 1972 giving due course to the petition
and required the respondents to answer the petition (not a motion to dismiss), and among
others, stated, to wit:
Upon this fact alone, we believe as petitioners contend that although appeal is available,
such remedy is not sufficiently speedy and adequate to cure the defects in the proceedings
therein or to remedy the disadvantageous position of Petitioners because, since they were
deprived of raising any issue or defense that they have in the respondent court by reason
of the order of default, they cannot raise said issues or defenses for the first time on
appeal.
(Rollo, P. 98)
The petition having been given due course, the respondents herein answered the same,
and on October 30, 1972, the Court of Appeals rendered its Decision denying the petition
for lack of merit, and held among others, thus
Finally we are not also convinced that the remedy of appeal is inadequate under the
circumstances obtaining in the principal cue Whatever errors respondent Judge might have
committed in his order or judgment may be assigned as specific errors in their appeal. This
Court can review any all such errors of fact and law in the appeal.
(Rollo, p. 138)
Petitioners filed a motion for reconsideration which was denied, hence this appeal by
certiorari from the decision of the Court of Appeals and is now before Us being assailed
and faulted on three principal issues: 1. the illegality of th order of the default and the
decision arising therefrom; 2. the inadequacy of the remedy of appeal; and 3. the lack of
jurisdiction of the Court in the principal case.
The petitioner's main thrust in this legal attack is directed to the other dated February 29,
1972 declaring defendants (now the petitioners) in default at the second pre-trial hearing
and allowing the plaintiffs (the present private respondents) to present evidence ex
parte before the Clerk of Court, which evidence uncotradicted and unrebutted was lifted
almost en toto as the basis of the decision granting damages so enormous and so huge in
amount as to exceed the bounds of reason and fairness.
The procedure for the pre-trial of a case is laid down by Rule 20, Revised Rules of court,
which provides, to wit:
Sec. 1. Pre-trial mandatory. In any action, after the last pleading has been filed, the ourt
shall direct the parties and their attorneys to appear before it for a conference to consider':
(a) The possibility of an amicable settlement or of a submission to arbitration;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to the pleadings;

(d) The possibility of obtaining stipulations or admissions of facts and of documents to


avoid unnecessary proofs;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of isues to a commissioner,
(g) Such other matters as may aid in the prompt disposition of the action.
Sec. 2. Failure to appear at pre-trial conference. A party who fails to appear at a pre-trial
conference may be non-suited or considered as in default.
Sec. 3. Allows the ocurt to render judgment on the pleading or summary judgment as
justice require. Sec. 4 directs that a reocrd of the pre-trial results be made; and Sec. 5
requires the court to prepare a pre-trial calendar of cases for consideration as above
provided, and that upon the submission of the last pleading in a particular case, it shall be
the duty of the clerk of court to place case in the pre-trial calendar.
Unquestionably, the present Rules make pre-trial mandatory. And the reason for making
pre-trial mandatory is that pre-trial conferences bring the parteis together, thus making
possible an amicable settlement or doing away with at least the non-essentials of a case
from the beginning. (Borja vs. Roxas, 73 Phil. 647).
Philippine jurisprudence has laid down the legal doctrine that while it is true that it is
mandatory for the parties and their attorneys to appear before the trial court for a pre-trial
conference to to consider inter alia the possibility of an amicable settlement, the rule wa
sby no means intended as an implacable bludgeon but as a tool to assist the trial court in
the orderly and expeditious conduct of trial. The rule is addressed to the sound discretion
of the trial court (Rice and Corn Administration vs. Ong Ante, et. al., G.R. No. L-30558, Oct.
4, 1971).
Both client and counsel must appear at the pre-trial. this is mandatory. Failure of the client
to appear is a ground for dismissal. (American Ins. Co. vs. Republic 1967D Phil. 63; Home
Ins. Co. vs. United States Lines Co., 1967D Phil. 401, cited in Saulog vs. Custombuilt
Manufacturing Corp. No. L-29612, Nov. 15, 1968; Taroma v. Sayo, L-37296, Oct. 30, 1975
(67 SCRA 508).
In the case of Insurance Co. of the North America vs. Republic, et. al., G.R. No.L-26794,
Nov. 15, 1967, 21 SCRA 887, the Supreme Court, speaking thru Justice Bengzon, held that
Sec. 1, Rule 20 of the Rules requries the court to hold a pre-trial before the case is heard
and since in this case, a pre-trial has already been had, the fact that an amended
complaint was later filed, did not necessitate another pre-trial. it would have been
impractical, useless and time-consuming to call another pre-trial.
Under the rules of pleading and practice, the answer ordinarily is the last pleading, but
when the defendant's answer contrains a counterclaim, plaintiff's answer to it is the last
pleading. When the defendant's answer has a cross-claim, the answer or the crossdefendant to it sit he last pleading. Where the plaintiff's answer to a counterclaim contains
a counterclaim constains a counter-claim agains the opposing party or a cross-claim
against a co-defendant, the answer of the opposing party to the counterclaim or the
answer of the co-defendant to the cross-claim is the last pleading. And where the plaintiff

files a reply alleging facts in denial or avoidance of new matter by way of defense in the
answer, such reply constitutes the last pleading. (Francisco, the Revised Rules of Court, Vo.
II, pp. 2-3).
The above citations and authorites are the ground rules upon which the conflictings claims
of the opposing partie's may be resolved and decided.
First, the legality of the order of default dated February 29, 1971 and the decision dated
March 9, 1972. there is spread out in the Record on Appeal, pp. 92-93 that on May 5, 1971,
a pre-trial. was conducted by the court between the plaintiff Ben Uy Rodriguez spouses and
the defendant Pioneer Insurance & Surety Corp. The record or results of said pre-trial is
found in the ordr of the court dated May 5, 1971, which states:
When this case was called for pre-trial today, the plaintiffs and their counsel, Atty. Hilario
Davide Jr. appeared. On the other hand, the defendant Pioneer Insurance & Surety Corp.
represented by its counsel, Atty. Amando Ignacio also appeared.
When asked by the court if there is any possibility of settling this case amicably, the
counsel for the defendant answered in the negative. Both counsels agreed that the only
issue to the resolved bu the Court is whether the bonding company is laible or not, and if
so, how much?
Atty. Hilario Davide, Jr. caused the markings of the following exhibit.
Exhibit "A-pre-trial", the finanacial report of Ben Rodriguez as of December 31, 1969; and
Exhibit "B-pre-trial", the affidavit of handwriting expert Perfecto Espina, and thereafter he
reserved his right to mark additinal exhibits during the trial on the merits.
The counsel for the defendant also reserved his right to object to the Exhibits of the
plaintiffs and mark his exhibits during the trial on the merits of the case.
Both counsels are given ten (10) days from today within which to file their simulatteneous
memoranda or authorities in support of the motion for preliminary hearing and its
objection thereto. and thereafter his incident will be resolved by the Court.
Following agreement of the partiesm, the trial on the the merits of this case is set for June
11, 1971 at 8:30 o'clock in the moring.
The parties thru their respective counsels are notified in open court of this order.
SO ORDERED.
Cebu City, Philippines, May 5, 1971.
SGD.) AGAPITO HONTANOSAS
JUDGE
(Record on Appeal, p. 93)
The defendant Pioneer Insurance & Surety Corp. having complied with the order of the
Court to appear and attend this pre-trial, and had manifested its opposition to settling the

case amicably, said party may no longer be compelled to attend a second pre-trial hearing,
and neither may it be punished by the court by its orde declaring said defendant as in
default. The mandatory character of a pre-trial nad the serious consequences confronting
the parties in the event that each party fails to attend the same must impose a strict
application of the Rule such that where we find no authority for the the Court to call
another pre-trial hearing, as in fact there is none in said Rule, the conclusion is inescapable
that the respondent Judge committed a grave and serious abuse of discretion and acted in
excess of jurisdiction in declaring defedant Pioneer Insurance & Surety Corp. "as in default"
for failure to attend the second pre-trial called by the Judge on February 29, 1972. In other
words, there is nothing in the Rules that empowers or has called a first pre-trial duly
attended by tha prties, and lacking such authority, the court perforce lack the autority to
declare a failure to prosecute on the part of the plaintiff for failing to attend such second
pre-trial; it also lack the authority to declare the defendant "as in default" by reason of the
latter's failure to be present at the said second pre-trial.
It serves no purpose for the court to call again another pre-trial where the parties had
previously agreed to disagree, where the issues had been joined and where the court itself
had been satisfied that a hearing on the merits is the next step to conduct as int he instant
case where the court, after the pre-trial on May 5, 1971, set he trial of the case on its
merits for June 11, 1971. Indeed, a second pre-trial is impractical, useless and timeconsuming.
We have not lost sight of the fact that when the first pre-trial was called and conducted,
the party litigants were the Ben Uy Rodriguez spouses as plaintiffs, while Pioneer Insurance
& Surety Corp. and Allied Overseas Commercial Co. (although not yet summoned) were the
defendants, whereas at the time the second pre-trial was called, the original complaint had
been amended to implead Hadji Esmayaten Lucman as additional defendant. The
amendment of the complaint to implead Lucman did not, however, alter the
impracticability, the uselessness and the absence of authority to call a second pretrial
hearing since the amended complaint merely impleaded Lucman as the assignee of the
original defendant Allied Overseas Commercial Co. and no additional cause of action was
alleged; the prayer was the same and the amount of damages sought was the same as
that in the original complaint.
Second, the prematureness of the pre-trial called on February 28, 1972, assuming that
there was need to have another pre-trial. The records (Record on Appeal, p. 293) show that
the notice of the clerk of court setting the case for pre-trial on February 28, 1972 was
issued and dated February 7, 1972. As of this date, February 7,1972, the complaint had
been amended on August 27, 1971 by impleading the defendant Hadji Esmayaten Lucman
who filed his answer on December 24, 1971, interposing therein a compulsory
counterclaim. (Record on Appeal, pp. 239-240). Before this date of February 7, 1972, the
court had already promulgated the Decision dated January 28, 1972 as against Lucman
only.
Likewise, as of February 7, 1972, defendant Pioneer Insurance & Surety Corp. had also filed
its answer to the amended complaint, interposing too a compulsory counterclaim. But as of
February 7, 1972, the plaintiffs have not yet filed their answer to the compulsory
counterclaims of the defendants (which is necessarily the last pleading to be filed in order
that the case is ready and ripe for the pre-trial). It was only on February 22, 1972 that

plaintiffs made their reply to the answer, and their answer to the compulsory, counterclaim
of defendant Lucman 'Record on Appeal, pp. 299- 301).
The records do not disclose any reply of the plaintiffs to the answer of Pioneer Insurance &
Surety Corp., nor any answer to the compulsory counterclaim of the Corp. The above state
of the case as far as the pleadings are concerned clearly and manifestly show that the case
was not yet ready for pre-trial, that it was as yet premature because the last pleading had
not yet been filed by the plaintiffs.
Even the state of the pleadings as of February 21, 1972 when the telegrams were sent
notifying the parties of the pre-trial for February 28, 1972 reveals the prematureness of
calendaring the case pre-trial. As of February 21, 1972, the complaint was already
amended to implead Lucman who submitted his answer with compulsory counterclaim. but
plaintiffs had not yet filed their reply and their answer to the counterclaim, because the
records indicate that the plaintiffs' answer to the counterclaim, because the records
indicate that the plaintiffs' answer to the counterclaim is dated February 22, 1972. (Record
on Appeal, pp. 299-301). And to the compulsory counterclaim of defendant Pioneer
Insurance & Surety Corp., plaintiffs made no answer whatsoever.
Third, the notices given by the clerk of court thru telegrams on February 21, 1972 notifying
the parties of the pre-trial on February 28, 1972 were insufficient, in law and jurisprudence.
We have careffully noted the telegraphic notices sent by the clerk of court and we find this
omission which is fatal to the respondents' cause: no telegram was sent to the defendant
Pioneer Insurance & Surety Corp. The telegram was sent to the counsel of this defendant,
but none to the defendant itself.
The Court had directed the clerk of court to send notice by telegram to the parties for the
February 28 pre-trial. The clerk did send the telegram to Atty. Eriberto Ignacio, counsel for
Pioneer Insurance & Surety Corp., but omitted and failed to send telegram to the party
itself, the corporation, as required strictly by law. Notice to the counsel is not enough. We
reiterate that this failure is a jurisdictional defect.
Reading the order of the court dated february 29, it appears in black and white (Record on
Appeal, pp. 306-307, Annex W, Rollo, p. 194) that only two telegraphic messages were sent
by the clerk of court, thus (1) the message addressed to Atty. Eriberto Ignacio delivered
to the given address at 3:45 P.M. the same day it was filed but the signature of he recipient
was unreadable; (2) the other message addressed to Hadji Esmayaten Lucman per RCPI
San Juan also delivered on the same day, February 21, 1972 and personally 4eceived by
the addressee himself. This was the offficial advice received by the Court from the Radio
Communications of the Philippines thru which the telegrams were wired.
This is also confirmed by the Order of the Court dated April 11, 1972 denying the
defendant's Urgent Motion for Reconsideration. The other states.
Per advice from the Radio Communications of the Philippines, Inc. these two messages
were received by the addressees, Atty. Eriberto Ignacio and Hadji Esmayaten Lucman on
the same day it was filed, that is on February 21, 1972.
(Record on Appeal, p. 357)

Decidedly, there was no telegram sent to party defendant Pioneer Insurance & Surety
Corp., informing it of the February 28 pre-trial hearng. The reason for requiring the
presence of the party who must be notified is explained in the case of Home Insurance Co.
vs. United Lines Co. (L-25593, November 15, 1967, 21 SCRA 863), where the Court,
speaking thru Justice Bengzon, said that:
A party who fails to appear at a pre-trial conference may be non-suited or considered as in
default. This shows the purpose of the Rules to compel the parties to appear personally
before the court to reach, if possible, a compromise. Accordingly the court is given the
discretion to dismiss the case should plaintiff not appear at the pre-trial.
Fourth, the denial of the motion for postponement was a grave abuse of discretion. We
grant the court the discretion to postpone any hearing, pre-trial or on the merits of the
case, but the exercise of discretion must be based on reasonable grounds. The motion
(Record on Appeal, pp. 301-303) had alleged grounds which are meritorious and not
frivolous nor intended for delay, which are 1. no formal order of the court scheduling the
February 28 pre-trial had been received; 2. pre-trial cannot be had as yet be set as the
issues are not yet fully joined; 3. counsel has a hearing previously set in Manila in a
criminal case which was of an intransferable character. We are also concede that counsel
may not presume nor take for granted that his motion for postponement and the proposed
setting to March 22 or 23, 1972 will be granted by the court but where the court had
actually postponed the hearing on February 28, 1972 due to the absence of the defendants
and their counsel, and scheduled the pre-trial to March 20, 1972 at 8:30 o'clock in the
morning (Record on Appeal, pp. 304-306), we find no reason nor fairness in the court's
order of February 29, 1972 finding defendants as in default since the pre-trial was moved
to a later date in March as prayed in the motion.
The motion for postponement was received on February 28, 1972 at the Cebu Post Office,
as shown in the postmarks on the envelope (photographed on p. 322, record on Appeal)
but was not immediately delivered to the court although the envelope bore the words,
"registered Air Mail/Special Delivery with Return Card." If the letter containing the moton
was not yet delivered to the Court the next day, February 29, 1972 when the court made
the order declaring defendants in default, this was clearly a postal neglect and omission to
perform its duty, not attributable to defendants, The Court, in the exercise of wise
discretion, could have restored their standing in court and given them an even chance to
face their opponents.
For refusing to set aside said order of default and the decision, we hold the Court of
Appeals in reversible error therefor. The respondent Court of Appeals has ignored
established rulings of the Supreme Court in Pineda vs. Court of Appeals, 67 SCRA 228, that
a party may not be declared in default for future to attend the pre-trial where only his
counsel was notified of the pre-trial schedule; in Sta. Maria, Jr. vs. Court of Appeals, 45
SCRA 596 that a pre-trial is unnecessary where the case could not be settled and that the
fact that an amended complaint was later filed with leave of court did not, undue the
circumstances, necessitate another pre-trial; and in Pineda vs. Court of Appeals, 67 SCRA
288 that Courys should be liberal in setting asiode default judgment.
At this juncture, it is necessary to emphasize once more the pronouncement of this Court
speaking through Justice Teehankee in Taroma vs. sayo, 67 SCRA 509, pp. 512-513, that:

For the guidelines of the bench and bar, therefore, the Court in reaffirminf the ruling that
notice of pre-trial must be served separately upon the party and his counsel of record,
retates that while service of such notice to party may be made directly to the party, it is
best that the trial courts uniformly serve such notice to party through or care of his counsel
of the obligation of notifying the party of the date, time and palce of the pre-trial
conference and assuring that the party either appear thereat or deliver to counsel a
written authority to represent the party with power to compromise the case, with the
warning that a party who fails to do so may be non-suited or declared in default.
The second point at issue is whether the remedy of ordinary appeal in the case is palin,
speedy and adequate such that the writ of certiorari will not lie. We have adverted to
previously that the Court of Appeals in its extended Resolution dated July 25, 1972 ruled
that although appeal was available, such remedy is not sufficiently speedy and adequate
to cure the defects in the proceedings therein or to remedy the disadvantageous position
of petitioners because, since they were deprived of raising any issue or defense that they
have in the respondent court by reason of the order of default, they cannot raise said issue
or defense for the first time on appeal. Yet, on October 30, 1972, the Court in its decision
held that the remedy of appeal is not inadequate in that whatever errors respondent Judge
might have committed in his order or judgment may be assigned as specific errors in their
appeal before said tribunal, and that it can review any errors of fact and of law in the
appeal.
This conflicting stand of the Court of Appeals issuing from the same case is as difficult to
resolve as it is to reconcile them. We have but to rule on them. hold one to be correct and
dislodge the other as an error.
On general principles, the writ of certiorari will lie where there is no appeal, nor any plain,
speedy and adequate remedy in the ordinary course of law. The existence of an appeal is a
bar to writ of certiorari where such appeal is in itself a sufficient and adequate remedy, in
that it will promptly relieve the petitioner from the injurious effects of the order or
judgment complained of. (Silvestre v. Torres, 57 Philippines 885, 890; Pachoco v.
Tumangday L-14500, May 25, 1960; Lopez et al. v. Alvendia, et al. L-20697, Dec. 24, 1964).
Courts ordinarily do not deny the writ if the result would be to deprive a party of his
substantial rights and leave him without remedy, and in those instances wherein the lower
court has acted without jurisdiction over the subject matter, or where the order or
judgment complained of is a patent nullity, courts have gone even as far as to disregard
completely the question of petitioner's fault, the reason being, undoubtedly, that acts
performed with absolute want of jurisdiction over the subject matter are void ab initio and
cannot be validated by consent, express or implied, of the parties. (Moran, Comments on
the Rules of Court, Vol. 3, 1970 ed., pp. 169-170).
There are numerous cases where the Supreme Court has granted the writ notwithstanding
the existence of an appeal. Thus, the Supreme Court to avoid future litigations, passed
upon a petition for certiorari though the proper remedy was appeal. Writs have been
granted despite the existence of the remedy of appeal where public welfare and the
advancement of public policy so dictate, the broader interests of justice so require, or
where the orders complained of were found to be completely null and void, or that the
appeal was not considered the appropriate remedy. (Fernando v. Varquez, No. L-26417, Jan.
30, 1970)

As to what is an adequate remedy, it has been defined as "a remedy which is equally
beneficial, speedy and sufficient, not merely a remedy which at some time in the future will
bring about a revival of the judgment of the lower court complained of in the certiorari
proceeding, but a remedy which will promptly relieve the petitioner from the injurious
effects of that judgment and the acts of the inferior court or tribunal." (Silvestre v. Torres,
57 Phil. 885, 11 CJ., p. 113)
Now to the case at bar, We find here a number of special facts and circumstances which
addresses themselves to the wise discretion of this court with such force to induce Us to
grant the writ in order to prevent a total or partial failure of justice, to redress or prevent
the wrong done. We are satisfied that petitioners are cornered into a desperate position
where they have been ordered to pay damages over and above the amount of the bond
posted for the attachment of private respondents' properties as ordered by the decision of
the court based on evidence presented ex parte by reason of the order of default, and
more than that, plaintiff Rodriguez is relieved from civil liability on an inexplicable and
unprecedented finding that the plaintiffs' check was a forgery, (when the check exhibited
was only a xerox copy of the original, which original was in the records of the case filed in
the court of First instance of Rizal, Civil Case No. 14499 entitled "Hadji Esmayaten Lucman
vs. Benjamin Rodriguez, et al.," (Record on Appeal, pp. 49-55). Again, the conflicting
notices as to the hearing ordered, pre-trial in one and on the merits in the other, is not the
doing of the petitioners of their standing in court was in effect a failure of justice.
Petitioners can no longer present their evidence to rebut the claim of damages, or reduce
the unconscionable and excessive damages or question the release of plaintiff's debt, for
the same may not be submitted nor raised for the first time on appeal. We, therefore, hold
that the Court of Appeals erred in holding that the appeal is adequate. The court erred in
ignoring the doctrine laid down in Omico v. Villegas, 63 SCRA 285, that appeal is not an
adequate remedy where party is illegally declared in default.
Petitioners assail the jurisdiction of the court of First Instance of Cebu in Civil Case No.
12069-R filed by the Rodriguez spouses, seeking damages for the alleged malicious and
unlawful is2suance of the writ of preliminary attachment against the latter's properties
granted by the Court of First Instance of Manila upon the posting of a security bond in the
amount of P450,000.00 given by the petitioner Pioneer Insurance & Surety Corp. The
petitioners contend that under See. 20, Rule 57 of the Revised Rules of Court, the claim for
damages against a bond in an alleged wrongful attachment can only be prosecuted in the
same court where the bond was filed and the attachment issued.
Rule 57, Sec. 20 of the Revised Rules of Court provides, to wit:
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 shaking
his right if damages and the amount thereof.
xxx xxx xxx

On the other hand, the private respondents argue that the above rule is not applicable to
the case at bar, citing Moran, Vol. Rules of Court, 1963 pp. 51-52, to wit:
... the rule that a claim for damages arising from the issuance of a wit of attachment,
injunction, receivership and replevin should be presented in the same action is not
applicable where the principal case has been dismissed for lack of Jurisdiction and no claim
for damages could therefore have beer presented in said case.
The position of the petitioners is correct. The ruling in the case of Santos vs. Court of
Appeals, et al., 95 Phil. 360 advanced by respondents to support their stand, is not
controlling here, or We find that no claim for damages against the surety bond in support
of a preliminary. attachment was ever presented or filed. The latest decisions of this Court
in Ty Tion et al., vs. Marsman & Co., et al., L-17229, July 31, 1962, 5 SCRA 761 reiterating
the rulings in Del Rosario vs. Nava, 50 O.G. 4189; Estioco vs. Hamada, L- 11079, May 21,
1958; Neva Espa;a vs. Montelibano, 58 Phil, 807; Tan Suyco vs. Javier, 21 Phil.
82; Raymundo vs. Carpio, 33 Phil. 894; Santos v. Moir,36 Phil. 350; lay down the proper and
pertinent rule that the claim for damages against a bond in an aleged wrongful attachment
can only be prosecuted in the same court where the bond was filed and the attachment
issued.
Moreover, the records show that private respondent Rodriguez filed an Application for
Damages Against Bond dated December 3, 1970 (Record on Appeal, pp. 77-81) praying
that
Wherefore, it is respectfully prayed that in the event the motion to dismiss and the motion
to discharge attachment were granted, the defendant be allowed to present evidence to
prove damages sustained by him by reason of the attachment against the Pioneer
Insurance & Surety Corp. in a hearing that may be conducted for the purpose with due
notice to the plaintiff and the surety, and that after due notice and hearing judgment be
rendered against the Pioneer Insurance and Surety Corp. for such amount of damages as
may be proved and established for defendant.
The defendant further prays for such other reliefs and remedies consistent with law, justice
and equity.
Cebu City, December 3, 1970.
ESTANISLAO FERNANDEZ
JOSE D. PALMA
Attorney for Defendant
The Court of First Instance of Manila in its order dated Dcember 22, 1970, after dismissing
the complaint and lifting the writ of preliminary attachment, ordered that the hearing of
the application for damages against the bond be set aside on January 14, 1971 at 8:30
a.m. (Record on Appeal, pp. 82-86)
In other words, defendant Rodriguez sought that judgment be rendered against the surety
for such amount of damages as may be proved or established by him, and was granted by
the court the opportunity to prove damages against the bond of the surety company. He

even cited the very provision of the Revised Rules of Court, Rule 57, Sec. 20 to justify his
application, and the cases supporting his application, for otherwise his claim will forever be
barred. In effect, at this point in time, defendant Rodriguez waived the lack of jurisdiction
on his person, be seeking an affirmative relief from the court, which he cannot now
complain before this Court.
Thus, Francisco, in his Revised Rules of Court, Vol. 1, p. 130 citing 21 C.J.S. writes that:
Objections to lack of jurisdiction of the person, and other objections to jurisdiction not
based on the contention that there is an absolute want of jurisdiction of the subject matter,
are waived by invoking the court's jurisdiction, as by a counterclaim, consent, or voluntary
submission, to jurisdiction, or conduct amounting to a general appearance.
In Soriano v. Palacio, 12 SCRA 557, this Court held that even if jurisdiction was not
originally acquired by the Court over the defendant due to allegedly defective services of
summons, still when the latter filed a motion for reconsideration of the judgment by
default, he is considered to have submitted to said court's jurisdiction.
We agree with the petitioners that the Court of Appeals erred in not dismissing the
complaint with respect to the petitioner Pioneer Insurance & Surety Corp., over which
respondent-appellee Judge had not acquired jurisdiction pursuant to Sec. 20, Rule 57 of the
Revised Rules of the Court.
IN VIEW OF THE FOREGOING, the judgment of the Court of Appeals is reversed and another
one is entered declaring the order of default dated February 29, 1972 and the decision
rendered by the respondent Judge on March 9, 1972 null and void, holding that the Court of
First Instance of Cebu lacks jurisdiction to hear and determine the claim for damages
arising from the alleged wrongful attachment issued by the Court of First Instance of Manila
and ordering the dismissal of that case (Civil Case No. 12069 of the Court of First Instance
of Cebu), as well as the pending of the judgment herein annuled in the Court of Appeals
which has been rendered moot.
Petition granted.
SO ORDERED.

.R. No. 84979 November 6, 1989


STRONGHOLD INSURANCE CO. INC., petitioner,
vs.
HON. COURT OF APPEALS, HON. CLEMENTE M. SORIANO, Presiding Judge of
Branch 3, Regional Trial Court of Manila, Sheriff JAIME K. DEL ROSARIO, Deputy
Sheriff of Branch 3, Regional Trial Court of Manila, and JOSE OROSA, respondents.
Santos, Gascon, Cuartero & Associates for petitioner.

2. The petitioner being not a party to the proceedings, judgment against it could not be
rendered without violating the elementary rules of procedure;
3. The allegations in private respondent's motion for execution pending appeal are purely
speculative, self-serving conclusions and without factual basis;
4. The exact liability of the bondsman is not specified.

Aladdin F. Trinidad for respondent Orosa.

REGALADO, J.:
In a complaint filed against private respondent Jose Orosa, dated November 13, 1984 and
docketed as Civil Case No. 8428188 in Branch 3 of the Regional Trial Court of Manila,
therein plaintiff FCP Credit Corporation prayed that a writ of replevin be issued against
private respondent Jose Orosa ordering the seizure of the motor vehicle covered by a
chattel mortgage executed in favor of said plaintiff. Upon the filing of an affidavit of
merit 1 and a replevin bond put up by petitioner Stronghold Insurance Co., Inc. in the
amount of P210,000.00, 2 a writ of replevin was issued by the court a quo.
On March 25, 1988, judgment was rendered by the trial court
dispositive portion:

1. The petitioner was adjudged liable in the decision without the benefit of hearing in
violation of Rule 57, Section 20 in relation to Section 10, Rule 60, Rules of Court;

with the following

WHEREFORE, judgment is rendered for the defendant, and against the plaintiff:
1) Dismissing the complaint for lack of merit;
2) Declaring that the plaintiff was not entitled to the Writ of Replevin, issued on January 7,
1985, and is now liable to the defendant for actual damages under the Replevin bond it
filed;
3) On defendant's counterclaim, ordering the plaintiff to pay the defendant the sum of
P400,000.00 as moral damages; P100,000.00 as exemplary damages, and P50,000.00 as,
and for, attorney's fees;
4) Ordering the plaintiff to return to the defendant the subject 1983 Ford Laser Sedan, with
Motor or Serial No. SUNKBT 14584, or its equivalent, in kind or value, in cash as of this
date and to pay the costs.
Copy of the decision was received by private respondent on April 11, 1988 while petitioner
received a copy thereof on April 13, 1988. On the following day, April 14, 1988, private
respondent Orosa filed a motion for execution of the judgment pending appeal, alleging
that the judgment in the case may be rendered ineffective because FCP Credit Corporation
was already liquidating its business affairs. He expressed his willingness to file a bond for
such purpose. 4 Petitioner opposed said motion through a "Motion for Partial
Reconsideration of the Decision and Opposition to the Motion for Execution" 5 filed on April
26, 1988, on the following grounds, as summarized by the respondent court, to wit:

An application for judgment on the bond was thereafter filed by private respondent Orosa
on April 26, 1988, adopting by reference his motion for execution of judgment pending
appeal and the findings of the trial court. 7 An opposition thereto was filed by petitioner on
the contentions that the appeal had been perfected hence the trial court had already lost
jurisdiction to hear therein defendant's motion; that the application for damages does not
set forth the facts showing his right thereto and the amount thereof; and that the motion is
fatally defective for lack of the requisite three (3) days notice. 8
The hearing on the application was scheduled on April 29, 1988, but the herein private
respondent Orosa and his counsel failed to appear therein. Consequently, petitioner's
counsel orally moved for the denial of said application for judgment on the bond, but the
court below denied said motion and declared all incidents submitted for resolution. 9 In the
meantime, action on therein plaintiff 's notice of appeal and motion to elevate the records
to the Court of Appeals, which were earlier filed on April 14, 1988, was held in abeyance by
the court. 10
In a special order dated June 3, 1988, the trial court ordered the issuance of a writ of
execution pending appeal upon respondent Orosa's filing of a bond in the amount of
P500,000.00. The special reasons cited by the court for said immediate execution are (1)
"defendant's willingness to file a required bond to answer for damages in the case of
reversal of the judgment" and (2) "the plaintiff is in imminent danger of insolvency or
dissolution." 11 The motion for partial reconsideration of the decision and opposition to the
motion for execution filed on April 26, 1988 by petitioner was likewise denied for lack of
merit in another order on the same date. 12
Respondent Orosa's right to recover damages on the replevin bond and the liability of
herein petitioner for said damages and for all the sums of money recovered in the case in
the lower court by therein defendant against the plaintiff, jointly and severally with the
plaintiff to the extent of the value of the bond, was held to be unquestionable in an order
of the court a quo dated June 6, 1988. 13
The following day, June 7, 1988, the trial court issued what was designated as a
"supplemental decision," which reads:
Pursuant to the order of June 6, 1988 and Sec. 10, Rule 60 of the Rules of Court, and by
way of supplement to the decision, dated March 25, 1988, judgment is hereby rendered,
for the defendant, ordering the Surety, Stronghold Insurance Co., Inc., jointly and severally
with the plaintiff, to return to the defendant, the 1983 Ford Laser 1.5 Sedan involved, or its
equivalent in kind or in cash, as of the date of the said decision (March 25, 1988), to pay

him the damages specified in the said decision, to the extent of the value of the replevin
bond which is P210,000.00, with costs against the said Surety." 14
Respondent Deputy Sheriff Jaime Del Rosario, by virtue of the order of execution pending
appeal, levied upon the properties of petitioner and garnished its funds with Far East Bank
and United Coconut Planters Bank on June 17, 1988. A few days thereafter, on June 22,
1988, petitioner filed a petition for certiorari, with a prayer for preliminary injunction and/or
restraining order, in respondent court where it was docketed as CA-G.R. SP No. 14938.
Petitioner sought therein the annulment of the orders of the trial court dated June 3 and 6,
1988, the supplemental decision of June 7, 1988 and the writ of execution issued in Civil
Case No. 84-28188.
Significantly, even after the filing of the petition for certiorari with the appellate court, the
trial court acted on several motions filed either before or after said petition was instituted.
On the same day of the filing of said petition, an order was issued by the trial court
supplementing its order of execution pending appeal dated June 3, 1988 by ordering
private respondent Orosa to file an additional bond in the amount of P200,000.00. 15
An "Urgent Omnibus Motion for Reconsideration with Prayer for Restraining Order," dated
June 24, 1988, was filed by the petitioner with the trial court, alleging that "there exists no
good and valid reasons to justify execution pending appeal against SICI considering that it
is very solvent and any final judgment against it would surely be satisfied." 16 The motion
was denied for lack of merit on June 27, 1988.
Likewise, the trial court denied on July 6, 1988 the motion of therein plaintiff, dated June
20, 1988, for the reconsideration of the special order of the court issued on June 3, 1988. 17
On July 11, 1988, upon an ex parte motion, the trial court directed the enforcement of the
writ of execution pending appeal against therein plaintiff FCP Credit Corporation
alone. 18 Later, on August 5, 1988, another order was issued this time directing its
enforcement against petitioner. 19 Petitioner moved for the reconsideration of said order
and in the hearing of said motion, its counsel adduced additional arguments in support
thereof. The court was informed that its application for a writ of injunction was already
submitted for resolution by the Court of Appeals. 20
Eventually, the application for a writ of injunction referred to by petitioner was granted by
the Court of Appeals on August 26, 1988. Nevertheless, the same writ was lifted and set
aside when the petition for certiorari was dismissed in a decision promulgated by
respondent court on September 9, 1988 in CA-G.R. SP No. 14938. 21 No grave abuse of
discretion was found to have been committed by the trial court in issuing the questioned
orders.
Hence, this petition to set aside and annul the aforesaid decision of respondent court.
The rule is clear that where the judgment in an action is in favor of the party against whom
the writ of replevin was issued, he may recover damages resulting therefrom and the
replevin bond required under Section 2, Rule 60 of the Rules of Court may be held to
answer for this purpose. The procedure to hold the surety liable upon the replevin bond is
provided for under Section 10 of the same rule in relation to Section 20 of Rule 57.
Compliance with the following requisites is essential:

... (1) the filing of an application therefor with the Court having jurisdiction of the action;
(2) the presentation thereof before the judgement becomes executory (or before the trial
or before appeal is perfected); (3) the statement in said application of the facts showing
the applicant's right to damages and the amount thereof; (4) the giving of due notice of
the application to the attaching creditor and his surety or sureties and (5) the holding of a
proper hearing at which the attaching creditor and sureties may be heard on the
application. These requisites apply not only in cases of seizure or delivery under Rule 60,
but also in cases of preliminary injunctions under Rule 58, and receiverships under Rule
59. 22
To avoid multiplicity of suits, all incidents arising from the same controversy must be
settled in the same court having jurisdiction of the main action. Thus, the application for
damages must be filed in the court which took cognizance of the case, with due notice to
the other parties.
The timeliness of the application for judgment on the bond in this case, as well as the
motion for immediate execution, is apparent because it was filed before the appeal was
perfected. The fact that one of the parties had filed a notice of appeal does not perfect
such appeal. An appeal is perfected upon the lapse of the last day for all parties to
appeal. 23
It should also be noted that the filing of the application for judgment on the bond by
private respondent Orosa was in the nature of a motion for reconsideration under Section
l(c), Rule 37 of the Rules of Court, which consequently had the effect of interrupting the
period to appeal. 24 This being so, the order holding in abeyance plaintiff 's notice of appeal
was not even necessary and was an apparent superfluity.
Petitioner nevertheless claims that there was failure to hold a proper hearing. Such
requirement, however, has been held to mean that "the hearing will be summary and will
be limited to such new defenses, not previously set up by the principal, as the surety may
allege and offer to prove. The oral proof of damages already adduced by the claimant may
be reproduced without the necessity of retaking the testimony, but the surety should be
given an opportunity to cross-examine the witness or witnesses if he so desires. 25 In the
present case, as respondent court correctly pointed out, petitioner did not allege and offer
to prove any new defense not previously set up by the principal. Furthermore, the grounds
relied upon in its opposition to the application requires no hearing for their proper
consideration by the courta quo, aside from the fact that the trial court adequately and
particularly resolved them in its order of June 6, 1988.
If petitioner really had additional defenses, if should have asked for the opportunity to
present the same when the motion to dismiss the application for judgment on the bond
was denied. This is also true with respect to the cross-examination of the witnesses which
petitioner is now belatedly asking for.While there was no one to cross-examine during the
hearing of the application for judgment on the bond because of private respondent's
absence. Petitioner could have invoked and insisted on such right. Further, even if private
respondent had appeared during the hearing, it could reasonably be expected that no
witnesses would be presented since the application for judgment on the bond relied mainly
on the same grounds that were already presented in court and were subject of the trial on
the merits, or were at least already of record. To repeat, had petitioner been sincere in the

stance that it now takes to create an issue, it should have demanded its right to crossexamine such witnesses as it was minded to. As it turned out, the opportunity to so
demand was present but petitioner did not care to do so. Instead, it preferred to stick to its
stand that the application should be denied for failure of respondent Orosa to appear
during the hearing. The petitioner should, therefore, suffer the consequences of its
inexplicable inaction and conscious omission.
Independent of the foregoing considerations, neither does the petitioner have the right to
question the "supplemental judgment" of the trial court. As already stated, the application
for judgment on the bond was in the nature of a motion for reconsideration, hence the
resolution thereof constitutes a final and appealable order. Appeal being the proper and
then available remedy, the original action for certiorari does not lie and cannot substitute
for the remedy of appeal that was thereafter lost.
We cannot, however, sanction the execution pending appeal which was authorized in this
case. The order for advance execution must be struck down for lack of the requisite good
reasons therefor. It is already settled that the mere filing of a bond does not warrant
execution pending appeal. To consider the mere filing of a bond a good reason would
precisely make immediate execution of a judgment pending appeal routinary, the rule
rather than the exception. 26
The alleged imminent danger of insolvency of plaintiff FCP Credit Corporation does not also
constitute a good reason for immediate execution. In the aforecited Philippine National
Bank case, we ruled that where there are two or more parties who are held to be solidarily
or subsidiarily liable for the judgment account, the insolvency of one will not justify
immediate execution where the others are capable of paying the obligation. The obligation
of petitioner surety company and the plaintiff corporation in the case at bar is in solidum.
Their agreement states that the principal and the surety therein jointly and severally
bound themselves "in the sum of TWO HUNDRED TEN THOUSAND PESOS ONLY
(P210,000.00) Philippine Currency for the prosecution of the action, for the return of the
property to defendant, if the return thereof be adjudged, and for the payment ... of such
sum as may in the cause be recovered against the plaintiff, and costs of the action." 27
IN VIEW OF THE FOREGOING, the order of the trial court, dated June 3, 1988, ordering the
issuance of a writ of execution pending appeal, as well as the other orders for its
implementation, are hereby ANNULLED and SET ASIDE. In all other respects, the decision
of respondent Court of Appeals is AFFIRMED.
SO ORDERED.

G.R. No. 73559-62 March 26, 1990


THE HEIRS OF THE LATE SANTIAGO MANINGO NAMELY: PIOGUITA C. VDA. DE
MANINGO, JANNILDA C. MANINGO, MARY LOU C. MANINGO, and MINORS:
SANTIAGO C. MANINGO JR., CORAZON C. MANINGO, CHRISTINE C. MANINGO,
ENGELBERT C. MANINGO (ALL REPRESENTED IN THIS PETITION BY THEIR
MOTHER, PIOGUITA C. VDS. DE MANINONGO), petitioners,
vs.
INTERMEDIATE APPELLATE COURT, NEVILLE V. LAMIS ENTERPRISES and NEVILLE
V. LAMIS, respondents.

MEDIALDEA, J:
This is a petition for review on certiorari seeking the reversal of the decision rendered by
the Intermediate Appellate Court (now Court of Appeals) on November 18, 1985,
dismissing the following cases: 1) AC G.R. SP No. 03725, entitled, "The Heirs of the late
Santiago Maningo, et al. vs. Hon. Adolfo Alba, as Presiding Judge of RTC Davao, et al., 2)
AC-G.R. SP No. 04480 entitled, Pioquita Vda. de Maningo as Administratrix of the Estate of
Santiago Maningo vs. Judge Jose R. Nolasco of the RTC, Tagum, Davao, et al., 3) AC-G.R. SP
No. 04517 entitled, "Paramount Insurance Corporation vs. Hon. Jose R. Nolasco, et I al., and
4) AC-G.R. SP No. 04377 entitled, "Pioquita Vda. de Maningo vs. Hon. Judge Adolfo Alba, et
al."

Four months later, on August 2, 1982, Lamis filed an urgent ex-parte motion in Civil Case
No. 1395 for the confiscation of Maningo's attachment bond. The lower court, on October
18, 1982, issued an order setting for hearing the issue of damages.
At the said hearing for the reception of evidence on damages suffered by Lamis, both the
surety, Paramount Insurance Corp. and Maningo objected to the hearing.
On December 22, 1 982, Maningo filed a petition for certiorari and prohibition with this
Court, docketed as G.R. No. 62733, alleging the following: That Lamis failed to comply with
Section 20, Rule 57, which provides that the application for damages must be made before
entry of judgment in the subject case; that Lamis filed his application for damages only
after final judgment; that Lamis' claim for damages could not by law, exceed the
attachment bond; and that in G.R. No. 57250, Lamis is not entitled to the possession of the
tractor unit, which is one of properties attached. The petition was dismissed by this Court
in a resolution dated February 28, 1983, for lack of merit. This became final on May 4,
1983.
In view of the dismissal, Lamis filed a motion for the execution of this Court's resolution in
G.R. No. 62733 and a motion in Civil Case No. 1395 to be allowed to present evidence for
the confiscation of Maningo's attachment bond and for damages.
However, on August 14, 1983, Santiago Maningo died intestate and his counsel moved for
the dismissal of Case No. 1395 on the ground that the heirs are no longer interested in the
prosecution of the case.

The antecedent facts in the aforestated cases as found by the I respondent appellate court
are as follows:

The lower court, on December 28, 1983, denied the above motion and set the case for
hearing.

AC-G.R. SP No. 03725

In the meantime, on March 6,1984, the court issued an order requiring the sheriffs to take
into custody in favor of Lamis1 all attached properties still unreleased by Maningo.

On November 16, 1979, Neville Lamis Enterprises through its proprietor Neville Lamis, filed
a complaint for specific performance with damages against Santiago Maningo before the
Court of First Instance (now Regional Trial Court) of Pasig, Rizal, docketed as Civil Case No.
35199, to enforce a Memorandum Agreement entered into by them.
During the pendency of the case, on December 8, 1979, Maningo instituted a complaint
against Lamis for collection of a sum of money with preliminary attachment before the RTCTagum, Davao, docketed as Civil Case No. 1395. The following day, on December 9, 1980,
the court issued a writ of preliminary attachment upon a bond of P100,000.00 issued by
Paramount Insurance Corporation. As a consequence thereof, the Deputy Provincial Sheriff
levied upon certain personal properties of Lamis. The latter filed an ex-parte manifestation
with the Provincial Sheriff for the suspension of the levy on the ground that Civil Case No.
1395 was merely a duplicity of Civil Case No. 35199 which was pending in the CFI (now
RTC) of Pasig. Lamis further moved for the dismissal of Civil Case No. 1395 based on lis
pendens and for improper venue. The court denied the motion in an order dated April 2,
1981.
Lamis went on certiorari to this Court in a petition filed on July 1, 1981 docketed as G.R.
No. 57250. On October 30,1981, We rendered a decision granting the petition and ordering
the dismissal of Civil Case No. 1395. Said decision became final on April 8, 1982.

On March 13, 1984, the intestate proceedings of the late Santiago Maningo began in the
RTC of Davao, docketed as Sp. Proc. 248.
On May 24, 1984, the lower court issued two orders: 1) an order requiring the surety to pay
Lamis the sum of P100,000.00 as the total claim for damages by reason of the unlawful
attachment; and 2) another order for the issuance of a writ of execution against the surety.
The hearing for the reception of evidence against the heirs was reset to another date.
Hence, on July 10, 1984, the heirs of Manigno filed with the Intermediate Appellate Court, a
petition for certiorari, mandamus, with preliminary injunction dockected was AC-G.R. SP
No. 03725, seeking to set asice all the orders of th lower court. Upon dismissal thereof, the
present petition was filed by the heirs of Santiago Manigno.
AC-G.R. No. 04480
On December 11, 1981, the late Santiago Maningo filed with the Regional Trial Court of
Tagum, Branch I, Davao City, a complaint for Foreclosure of Chattel Mortgage, interest,
damages and attorney's fees with prayer for attachment against Neville Lamis Enterprises,
Neville Lamis and others, docketed as Civil Case No. 147 (Santiago Maningo (deceased), as
substituted by his heirs thru Special Administratrix, Mrs. Pioquita Vda. de Maningo v.

Neville Y. Lamis Enterprises and Neville Lamis). The complaint was later amended to
Replevin, damages and attorney's fees.
On December 21, 1981, the court issued an order for the seizure of a bulldozer, upon a
replevin bond of P340,000 by Paramount Insurance Corporation.
On May 25,1982, Lamis moved for the dismissal of the aforesaid Civil Case No. 147 and to
cite Maningo for contempt on the ground of litis pendencia or multiplicity of suits; that the
said case is barred by the pendency of his Civil Case No. 35199 then pending with Regional
Trial Court of Pasig and also by the prior judgment of this Court in G.R. No. 57250
dismissing Civil Case
No. 1395 filed by Maningo.
On July 2, 1982, Lamis filed with this Court a petition for certiorari and prohibition,
docketed as G.R. No. 61419, to dismiss Civil Case No. 147
One and a half years later, on June 11, 1984, Lamis filed a motion in Civil Case No. 147 for
the reception of evidence on the damages he sustained by reason of the issuance of the
writ of replevin. Despite objections by the surety, Paramount Insurance Corporation, the
lower court granted the said motion, and in an - order dated September 20, 1 984, it
required the Estate of Maningo to pay to Lamis, compensatory damages by reason of the
unlawful issuance of replevin.
The Administratrix of Maningo's estate filed a petition for certiorari with preliminary
injunction with this Court seeking the dismissal of Lamis' action for damages in the lower
court. We, however, referred the case to the Intermediate Appellate Court for proper
determination docketed as AC-G.R. SP No. 04480.
SP-04377
In the meantime, in an order dated September 20, 1984, the Regional Trial Court in Civil
Case No. 147 awarded Lamis, et al. the amount of P7,677,177.00 as compensatory
damages by reason of the issuance of the writ of replevin. On September 21, 1984, writs of
execution were issued by the court and the cash deposits of Santiago Maningo, now
deceased, with the Philippine National Bank, Davao Branch and the Bank of the Philippine
Islands, Davao Branch, were ordered garnished. On September 25,1984, Lamis filed an exparte application in Special Proceedings No. 248, for the release of Maningo estate's
garnished deposits which was granted, and an order was issued directing the banks
concerned to release to the sheriff the cash deposits of Maningo. Prior to the issuance of
the above-stated order, however, the court had authorized the Special Administratrix of
Maningo's estate to withdraw in cash from the Philippine National Bank, Davao Branch, the
amounts of P654,963.03 and P90,829.45. On a motion for clarification, the court issued an
order on September 26, 1984, setting aside its previous order allowing the special
administratrix to withdraw the amount from the bank, and declared the branch manager
and branch attorney of PNB in contempt of court. Aggrieved, Pioquita Vda. de Maningo,
special administratrix
SP-04517

On the other hand, on September 21, 1984, the surety, Paramount mount Insurance
Corporation, appealed to the respondent appellate court from the order of the trial court
making it liable for the sum of P340,000.00. On the same date, the trial court issued a writ
of execution of Civil Case No. 147.
The surety, Paramount Insurance Corporation, filed with this Court a petition for certiorari,
prohibition with preliminary injunction against Judge Jose R. Nolasco of the Regional Trial
Court of Tagum, Davao and against Lamis. We referred the case to the Intermediate
Appellate Court (now Court of Appeals) on October 8, 1984. On November 18, 1985, the
Intermediate Appellate Court (now Court of Appeals) rendered judgment on the above four
cases, namely, SP-03725, SP-04480, SP-04517 and SP-04377, the dispositive portion of
which states:
WHEREFORE, premises considered, the petitions in SP-03725, SP-04480 and SP-04517 are
all dismissed with costs against the qqqw petitioners, while in SP-04377 including the
PNB's intervention thereon, the petition is also dismissed insofar as the orders of Judge
Adolfo Alba dated September 25 and 26,1984 in SP Proc. No. 248 are concerned. However,
his (Judge Alba) orders dated September 29, 1984, October 1, 1984, October 2,1984 and
October 3,1984 are hereby annulled and set aside. No costs.
SO ORDERED.(p. 88, Rollo)
Hence, the present petition, which was filed on February 19, 1986. We issued a temporary
restraining order on February 20, 1986, against the implementation of the orders of the
trial court on the award of damages, and the decision of the Intermediate Appellate Court
(now Court of Appeals).
For Us to consider is the following error assigned by petitioners:
THE RESPONDENT HONORABLE INTERMEDIATE APPELLATE COURT, WITH ALL DUE
RESPECT, HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AND/OR SANCTIONED SUCH DEPARTURE OF THE LOWER COURT WHEN IT
AFFIRMED THE PROCEEDINGS CONDUCTED BY THE LOWER COURTS (RTC-TAGUM, DAVAO,
BRANCH II IN CIVIL CASE NO. 1395 AND RTC-TAGUM, DAVAO BRANCH I IN SP. CIVIL CASE
NO. 147), IN ALLOWING RESPONDENT LAMIS TO PRESENT EVIDENCE ON ALLEGED
DAMAGES SUSTAINED AND IN AWARDING DAMAGES, EVEN LONG AFTER THE
ABOVEMENTIONED CASES HAS BEEN ORDERED DISMISSED BY THIS HONORABLE SUPREME
COURT WITHOUT AWARD OF DAMAGES. (pp. 33-34, Rollo)
Petitioners contend that Civil Case No. 1395 was ordered dismissed by Us in G.R. No.
57250 upon petition of private respondent Lamis; and that said decision became final on
April 8, 1982 long before the latter applied for damages sustained by reason of the
unlawful attachment. Anent Civil Case No. 1395, the respondent appellate court, in AC-G.R.
SP No. 03725, made the following findings:
Actually, this matter had already been threshed out by the deceased Santiago Maningo to
the Supreme Court when (he) filed a petition for certiorari and prohibition on December 22,
1982 which was docketed therein as G.R. L-62733. Unfortunately, the Supreme Court, in a
minute resolution dated February 28,1983 dismissed the aforesaid petition, (see p. 103,
Annex L 03725) which resolution became final on May 4,1983. (p. 77, Rollo)

We agree with the aforequoted findings of the appellate court. The principle of resjudicata
is applicable herein. Its requisites are present in the instant case, namely: 1) the presence
of a final former judgment; 2) the former judgment was rendered by a court having
jurisdiction over the subject matter and the parties; 3) the former judgment is a judgment
on the merits; and 4) there is between the first and second actions, Identity of parties, of
subject matter and of cause of action (Pantranco North Express, Inc. v. NLRC, No. 64152,
December 29, 1983, 126 SCRA 526).
We find that Our Resolution in G.R. No. 62733 on February 28, 1983 is a bar to SP No.
03725 subject of this petition for review. G.R. No. 62733 is a petition for certiorari filed by
Maningo, who is now succeeded by petitioners herein, questioning the order of the lower
court granting the application for damages of Lamis in Civil Case No. 1395, and alleging:
that Lamis failed to comply with Rule 57, Sec. 20 insofar as the application for damages
must be made before entry of judgment in the subject case; and that Lamis made such
application only after final judgment. These are the very same issues and contentions
raised by the heirs in the present petition with respect to AC-G.R. SP No. 03725.
It is worthy to note that G.R. No. 62733 was dismissed with finality by this Court on
February 28, 1983 and entry of final judgment was made on May 4, 1983. While contained
in a minute resolution, the dismissal was an adjudication on the merits of the case and
constituted a bar to a relitigation of the issues raised therein under the rules of resjudicata
(Commercial Union Assurance Company Limited v. Lepanto Consolidated Mining Company,
L-43342, October 30,1978,86 SCRA 79; Sy v. Tuvera, No. 76639, July 16, 1987, 152 SCRA
103). A final judgment on the merits is conclusive as to matters put in issue and actually
determined by the court, when they are raised in again in a subsequent litigation between
the same parties, even though it is irregular or erroneous. Hence, whether Our resolution in
petition in G.R. No. 62733 is right or wrong, is of no importance; herein. As long as the
judgment in that case had become final, the issues that were litigated therein cannot be
reopened by the parties in this subsequent petition, whether erroneously decided or not.
With respect to AC-G.R. SP No. 04480, petitioners allege that Civil Case No. 147 was also
ordered dismissed on December 15, 1982 by this Court upon petition of private respondent
Lamis in G.R. No. 61419; and that the said dismissal became final on March 3,1983 long
before Lamis applied for damages sustained by reason of unlawful replevin.
The respondent appellate court, on this matter, ruled, interalia:
Thus, after the Supreme Court in a decision rendered on December 15, 1982 in G.R. L61419, has ordered for (sic) the dismissal of Civil Case No. 147, the discharge of the writ of
replevin issued in the aforesaid civil case is likewise necessarily included therein. Hence,
the respondent judge has all the reason to order the return of the property subject of the
replevin order and to proceed in hearing and adjudicating whatever damages the
defendants (Lamises) may have suffered by reasons thereof. (p. 79, Rollo)
We find the latter portion of the ruling of the appellate court as aforequoted, incorrect.
Section 1 0 of Rule 60 of the Rules of Court provides that in the recovery of damages
against the bond posted by the applicant in replevin cases, the procedure shall follow that
what is laid down in Section 20 of Rule 57, which reads:

Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the action
be in favor of the party against who 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 tirial 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 an application by, with notice to the party in whose favor the attachement was
issued or his surety or sureties, before the judment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the
trial court.
As may be gathered from Section 20, Rule 57, the claim for damages resulting from
wrongful seizure of personalty property must be filed in the same action in which the writ
attachment or the writ of replevin was issued; otherwise, it is bar' red (Tan Suyco v. Javier,
21 Phil. 82; Nueva-Espaa v. Montelibano, 58 Phil. 807). It may be presented, before trial in
the answer by way of counterclaim (Medina v. Maderera del Norte de Catanduanes 51 Phil.
240). In the discretion of the court, it may also be made at any other time even after the
rendition of final judgment if the court has still jurisdiction over the case (Visayan Surety &
Insurance Corp. v. Pascual, 85 Phil. 779). Hence, if the application for damages is not made
in compliance with the procedure laid down in the rules, even the surety on the bond is
relieved from liability therefor. The remedy provided by law isexclusive and by failing to file
a motion for the determination of 1 the damages on time and whilejudment is still under
the control of the court, the claimant loses his right to damages (Santos v. Mair, 36 phil.
350; Japco v. The City of Manila, 48 Phil. 851; Cruz v. Manila Surety & Fidelity Co., Inc., et
al., 92 Phil. 699).
In the case at bar, there is no showing that respondent Lamis had timely filed his claim for
damages arising from the wrongful issuance of the writ of replevin in Civil Case No. 147, or
prior to dismissal on December 15, 1982, of the replevin case, upon Lamis' petition for
certiorari. It was only years later on June 11, 1984 that Lamis applied for damages on the
replevin bond, after the case had long been dismissed. The trial court no longer had
jurisdiction and control over the case when it awarded damages after it was dismissed and
thrown out of court in the certiorari case filed by Lamis himself. Thus, the judgment of the
y trial court awarding damages against the estate of Maningo in the amount of
P7,677,177.00 in the replevin case is null and void. Logically, the petitioners' surety,
Paramount Insurance Corporation, should be released from its liability under the bond.
Notwithstanding, Our dismissal of the latter's petitionseeking review on certiorari of the
same decision of the respondent dent appellate court on July 2, 1986, upholding the award
of damages to Lamis, We release said surety from liability based on the same principles We
have pronounced in the foregoing discussion.
ACCORDINGLY, the petition is hereby GRANTED in part, and the judgment of the
Intermediate Appellate Court (now Court of Appeals) dated November 18, 1985 with
respect to ACCUSED G.R. SP No. 04480, which upheld the award of damages by the trial

court in Civil Case No. 147, is REVERSED and SET ASIDE. In all other respects, the petition
is DENIED and the judgment of the respondent appellate court is AFFIRMED. The temporary
restraining order issued on February 20, 1986, is lifted.
SO ORDERED.

G.R. No. L-6436, Santos v. CA et al., 95 Phil. 360


Republic of the Philippines
SUPREME COURT
Manila
EN BANC
June 30, 1954
G.R. No. L-6436
OFRECINO T. SANTOS, petitioner,
vs.
THE COURT OF APPEALS, ET AL., respondents.
Amado A. Mundo for petitioner.
Teodulo M. Cruz for respondent Philippine Reconstruction Corporation, Inc.
PARAS, C.J.:
On May 20, 1950, Ofrecino T. Santos (hereinafter to be referred to as petitioner) filed in the
Court of First Instance of Cotabato an action for the recovery of the sum of P1,628 against
Teodulo M. Cruz and Valentin C. Garcia (Civil Case No. 241). The petitioner secured a writ of
preliminary attachment which was levied upon a tractor which, though believed by the
petitioner to belong to the defendants in Civil Case No. 241, in fact was owned by the
Philippine Reconstruction Corporation Inc. (hereinafter to be referred to as respondent),
which in due time filed a third party claim. The petitioner filed an amended complaint
including the respondent as a defendant, but upon motion filed by Teodulo M. Cruz and
Valentin C. Garcia, Civil Case No. 241 was dismissed by the Court of First Instance of
Cotabato for lack of jurisdiction, the amount involved being less than P2,000. The
petitioner filed a similar action in the Justice of the Peace Court of Buayan, Cotabato,
against the respondent as sole defendant, wherein the petitioner was awarded the sum of
P1,638.10, with interest and costs, but this decision is still the subject matter of a pending
certiorari proceeding in the Court of First Instance of Cotabato instituted by the
respondent.
On May 9, 1951, the respondent filed in the Court of First Instance of Manila Civil Case No.
13778 against the petitioner, for damages resulting from the levy of its tractor under the
writ of attachment issued in Civil Case No. 241. Paragraphs III and VII of the respondent's
complaint in Civil Case No. 13778 read as follows:
III
That on or about the month of September, 1950 and in connection with the execution of a
preliminary writ of attachment secured by the herein defendant Ofrecino T. Santos in Civil
Case No. 241 of the Court of First Instance of Cotabato entitled Ofrecino T. Santos,
plaintiff vs. Teodulo M. Cruz and Valentin C. Garcia, defendants, the above-named
defendants conspiring, confabulating and conniving with one another procured and caused
to be attached a certain Caterpillar D-8 tractor of herein plaintiff who was not a party in
said case and that defendants herein fully knowing that the said tractor does not belong to

any of the defendants Teodulo M. Cruz and Valentin C. Garcia in said Civil Case No. 241 of
the Court of First Instance of Cotabato;
VII
That due to the said wrongful and malicious attachment levied by the herein defendants on
plaintiffs' tractor and their subsequent refusal to release the same from attachment as
above stated plaintiff was consequently forced to violate its contractual undertaking with a
certain Mr. Tomas Gonzales as stated in the sworn third party claim so that it was
compelled to pay a liquidated damages in the sum of Three Thousand Pesos (P3,000) aside
from having lost a sure income from rent on said tractor in the sum of One Thousand Five
Hundred Pesos (P1,500);
The other necessary details are recited as follows in the decision of the Court of
Appeals[[1]] promulgated on October 30, 1952 in CA-G.R. No 9925-R, Ofrecino T. Santos,
petitioner, vs. Philippine Reconstruction Corporation, Inc., and the Honorable Demetrio B.
Encarnacion, Judge, Branch I, Court of First Instance of Manila, respondents:
On June 10, 1951, petitioner (defendant in Civil Case No. 13778 of Manila) was duly
summoned to answer the complaint filed in said Civil Case. A motion to dismiss, filed by
defendant's counsel, was received on June 23, 1951, in the Court of First Instance of
Manila. On the other hand, counsel for plaintiff Philippine Reconstruction Corporation (now
respondent) filed on July 12, 1951, an ex-partemotion, praying that defendant Ofrecino T.
Santos was declared in default on the ground that his motion to dismiss does not contain a
notice for hearing as provided in Rule 26 of the Rules of Court, and therefore not a valid
one. Copy of said order was received by defendant's counsel on August 2, 1951. On August
26th, plaintiffs counsel moved that the aforesaid Civil Case No. 13778 be set for hearing. In
his turn, counsel for defendant Ofrecino T. Santos filed on September 1st a petition praying
that the order of default dated July 23rd be set aside; that his motion to dismiss be given
due course, either by sustaining or denying the same; and that if denied, defendant be
allowed to file his answer.
By virtue of an order dated February 12, 1952, the case was set for hearing on February
28th, and on the following day decision was rendered in favor of the plaintiff and against
the defendants, ordering the later to pay the sum of P4,500 with legal rate of interest from
the date of the filing of the complaint and to further pay the sum of P1,000.00 as
attorney's fees and costs of the suit. A copy of this decision was on March 7, 1952, sent by
registered mail to Ofrecino T. Santos' counsel who received the same in March 17th.
Consequently, on April 5, 1952, defendant Ofrecino T. Santos, thru his counsel, moved for
the reconsideration of the aforesaid decision, to which motion counsel for the plaintiff filed
his opposition on April 20, 1952. On June 11, 1952, said motion for reconsideration was
denied.
Ofrecino T. Santos now comes before us as petitioner, alleging that the respondent court
committed a grave abuse of discretion when, as defendant in the aforesaid Civil Case No.
13778, he was arbitrarily declared in default; and when it declared his motion to dismiss
not a valid one. Petitioner further claims that the respondent court again committed a
grave abuse of discretion when, instead of acting upon his petition (Annex "A") for relief
from the order of default, it set the case for hearing a proceeded to hear plaintiff's

evidence and rendered a decision. It is also alleged by petitioner that the Court of First
Instance of Manila acted without jurisdiction, the cause of action in Civil Case No. 13778
having arisen from a supposed wrongful attachment ordered by the Court of First Instance
of Cotabato in Civil Case No. 241, and for that reason, that the latter court has exclusive
jurisdiction to determine whether its legal processes are wrongful or not; and even
granting that the Court of First Instance of Manila had proper jurisdiction, the particular
cause of action in said Civil Case No. 13778 is banned by the decision of the Justice of the
Peace Court of Buayan, Cotabato.
From the decision of the Court of Appeals dismissing his petition for certiorari, the
petitioner has interposed the present appeal by way of certiorari, assigning the following
alleged errors:
1. The Court of Appeals erred in finding the motion to dismiss dated June 19, 1951 in Civil
Case No. 13778 of Manila as no motion at all.
2. The Court of Appeals erred in sustaining the ruling of the Court of First Instance of
Manila that Ofrecino T. Santos was in default in Civil Case No. 13778.
3. The Court of Appeals erred in finding that the petition for relief from order dated August
28, 1951 was "impliedly overruled when the respondent court set Civil Case No. 13778 for
hearing, received plaintiff's evidence and finally rendered decision therein."
4. The Court of Appeals erred in holding Ofrecino T. Santos under estoppel to raise the
"issue of jurisdiction."
5. The Court of Appeals erred in sustaining a decision that was null and void, emanating as
it did from a court which had no jurisdiction to try Civil Case No. 13778.
Without deciding whether the petitioner's motion to dismiss filed in Civil Case No. 13778
was a mere scrap of paper for lack of notice of hearing, it is clear that he could and should
have appealed from the decision on the merits rendered therein by the Court of First
Instance of Manila, of which he was duly notified, raising in said appeal the propriety of the
ruling of default against him, the failure of the trial court to expressly dispose of his
petition for relief, and the principal question of jurisdiction. It is elementary that certiorari
will not lie where the remedy of appeal is available.
On the issue of jurisdiction, it is to be recalled that, when respondent's tractor was levied
upon, it was not a party in Civil Case No. 241, and although an amended complaint was
filed, no new writ of attachment was issued so as to cover respondent's properties. It is
also significant that Civil Case No. 241 was dismissed by the Court of First Instance of
Cotabato for lack of jurisdiction. We have no hesitancy in declaring that the Court of First
Instance of Manila correctly took cognizance of Civil Case No. 13778, because the
respondent sought damages, not on the allegation that the writ of attachment was illegally
or wrongfully issued by the Court of First Instance of Cotabato in Civil Case No. 241, but on
theory that said writ was caused by the petitioner to be levied upon the tractor of the
respondent which was not a party defendant. The filing of the amended complaint did not
cure the defect, since the seizure continued to be in virtue of the original writ, none having
been issued under the amended complaint.

The petitioner is invoking the following pronouncement in our decision in Cruz vs. Manila
Surety and Fidelity Co., Inc., et al., 49 Off. Gaz. (3) 964; 92 Phil. 699:
The procedure for recovery of damages on account of the issuance of a writ of attachment,
injunction, receivership, and replevin proceedings, as interpreted in the cases adverted to,
requires that the claim for damages should be presented in the same action which gave
rise to the special proceeding in order that it may be included in the final judgment of the
case, and it cannot be the subject of a separate action. The philosophy of the ruling seems
to be that the court that had acted on the special proceeding which occasioned the
damages has the exclusive jurisdiction to assess them because of its control of the case.
This ruling is sound and tends to avoid multiplicity of action.
The citation is not controlling, for the reason that, apart from the circumstance that, as
already stated, the respondent has never claimed that the writ of attachment was
wrongfully issued in Civil Case No. 241, it appears that the latter case was dismissed for
lack of jurisdiction, and no claim for damages could therefore properly have been
presented in said case, because the Court of First Instance of Cotabato, thus lacking
jurisdiction, was in fact prevented from rendering any final judgment therein which could
include such damages. Avoidance of multiplicity of suite presupposes the competence of
the court in the first or earlier case. Wherefore, the appealed decision is affirmed, and it is
so ordered with costs againsts the petitioner.

G.R. No. L-23868 October 22, 1970


ZACARIAS C. AQUINO, petitioner,
vs.
FRANCISCO SOCORRO and COURT OF APPEALS, respondents.
Tranquilino O. Calo, Jr. for petitioner.
Alfaro and Associates for respondent Francisco Socorro.

CASTRO, J.:.
On February 14, 1964 the Court of Appeals, upon petition of Francisco Socorro in CA-G.R.
33560-R,1 issued a writ of preliminary injunction in his favor upon his posting a P1,000
bond. The writ of preliminary injunction, among others, restrained Zacarias Aquino "from
entering, cutting, hauling, selling and/or exporting logs or other forest products from the
forest area" subject of litigation. Aquino, however, filed a counterbond in the amount of
P2,000, effecting the immediate dissolution of the writ.
The Court of Appeals, on June 29, 1964, dismissed Socorro's petition re the main action, for
lack of jurisdiction to entertain the same. Socorro subsequently appealed the decision of
the appellate court to this Court. We affirmed the appellate court's decision in a resolution
dated December 24, 1964 in case G.R. L-23608.

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.
Aquino points out that the said provisions do not require a claimant who seeks to recover
damages on account of the wrongful issuance of a writ of preliminary injunction, to prove
bad faith and malice on the part of the party who obtained the issuance of the writ. To
reinforce his contention, he invokes the provisions of Section 4 (b) of Rule 58 of the Rules
of Court. This rule, Aquino avers, makes the party applying for an injunction liable for all
damages sustained by the other party if the court finally decides the party applicant as not
entitled thereto. He maintains that, in the case at bar, the dissolution of the writ of
preliminary injunction by the respondent appellate court clearly demonstrates that the
respondent Socorro was not entitled thereto.

Hence, the present petition for certiorari to review the resolution of the Court of Appeals
denying his claim for damages.

Socorro, on the other hand, plays for the dismissal of the present petition on the following
grounds: (1) The petitioner "refused to prosecute his claim for damages ... in the main
action then already on appeal to this Court;" (2) The petitioner "failed to state in his motion
claiming for damages the facts upon which his rights thereto are based;" (3) The
petitioner, if "suing on the bond ... has no more cause of action as the said bond had
already been dissolved 2 upon motion by the petitioner Aquino;" and (4) The petitioner, if
"suing beyond the bond ... failed to show, or there is no showing that the respondent
Socorro," in filing his petition for certiorari and securing the issuance of the writ of
preliminary injunction, "was motivated by malice or bad faith."

Aquino contends that the respondent appellate court erred in denying his claim for
damages on the ground of want of bad faith and malice on the part of the respondent
Socorro in filing the petition for certiorari re the main case and securing the issuance of the
writ of preliminary injunction. He invokes the provisions of Section 9, Rule 58 in relation to
Section 20, Rule 57, of the Rules of Court. Section 9, Rule 58 recites:.

The present case raises the question of whether Aquino's claim for damages on account of
the improvident issuance by the respondent appellate court of the writ of preliminary
injunction should be dismissed on the ground that he has failed to show or prove bad faith
and malice on the part of the respondent Socorro in obtaining the issuance of the writ of
preliminary injunction.

Judgement to include damages against party and surities. Upon the trial the amount of
damages to be awarded to the plaintiff, or to the defendant, as the case may be, upon the
bond of the other party, shall be claimed, ascertained, and awarded under the same
procedure as prescribed in Section 20 of Rule 57.

In Pacis vs. The Commission on Elections,3 this Court made an extensive discussion of the
principles applicable to the recovery of damages caused through the improvident issuance
of a writ of preliminary injunction. This Court said that "damages sustained as a result of a
wrongfully obtained injunction may be recovered upon the injunction bond required to be
filed with the court." The same provisions permitting the issuance of the writ of preliminary
injunction require the filing of a bond before the grant of the writ. "The statutory
undertaking of the bond is that it shall answer for all damages which the party to be
restrained may sustain by reason of the injunction if the court should finally decide that the
plaintiff was not entitled thereto. Malice or lack of good faith is not an element of recovery

On July 15, 1964, before the appellate court's decision dismissing Socorro's petition
became final, Aquino filed with the appellate court his claim for damages in the amount of
P199,000 on account of the wrongful issuance of the writ of preliminary injunction. The
appellate court denied Aquino's claim, for want of bad faith and malice on the part of
Socorro in filing his petition and securing the issuance of the writ of preliminary injunction.
Aquino's subsequent motion for reconsideration was denied.

Section 20, Rule 57 reads:.


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, be may recover, upon the bond

on the bond. This must be so, because to require malice as a prerequisite would make the
filing of the bond a useless formality."
Continuing, this Court said that "the dissolution of the injunction, even if the injunction was
obtained in good faith, amounts to a determination that the injunction was wrongfully
obtained and a right of action on the injunction bond immediately accrues." Thus, for the
purpose of recovery upon the injunction bond, "the dissolution of the injunction because of
the failure of petitioner's main cause of action" provides the "actionable wrong" for the
purpose of recovery upon the bond.
This Court also stressed, in the same case, that "there is nothing in the Rules of Court
which allows recovery of damages other than upon the bond pledged by the party suing for
an injunction. Section 9, Rule 58, limits recovery only upon the bond, and it specifically
states that ... 'the amount of damages to be awarded to the plaintiff, or to the defendant,
as the case may be, upon the bond of the other party, shall be claimed, ascertained, and
awarded under the same procedure as prescribed in Section 20 of Rule 57.' " Under this
provision, the party restrained, if he can recover anything, can recover only by reason of
and upon the bond the only security and protection conceded to him by the rules.
Consequently, the rule limits the amount of recovery in a suit on an injunction bond to the
sum thus fixed, the amount measuring the extent of the assumed liability.
This Court also finds it necessary to restate the rule in Molina vs. Somes4 that "an action
for damages for the improper suing out of an injunction must be maintained upon the
same principles which govern an action for the wrongful bringing of an action." This rule,
however, applies only when the party restrained pursues his claim for damages not upon
the injunction bond. In such a case where the party restrained sues not on the injunction
bond, the rules accord him no relief by way of a claim for damages unless he can establish
that the party applicant secured the issuance of the writ maliciously and without probable
cause. This Court stated that "... when the process has been sued out maliciously there
may be a right of action in favor of the defendant. But this right depends upon the law
governing malicious prosecutions, and has no relation to the claim for damages urged by
the defendant in this case. ..."5
Additionally, this Court, citing Palmer vs. Foley (71 N.Y. 106, 108), said:.
It seems that, without some security given before the granting of an injunction order, or
without some order of the court or a judge, requiring some act on the part of the plaintiff,
which is equivalent to the giving of security such as a deposit of money in court the
defendant has no remedy for any damages which he may sustain from the issuing of the
injunction, unless the conduct of the plaintiff has been such as to give ground for an action
for malicious prosecution.
In the case at bar, the record reveals that the petitioner Aquino, in the proceedings before
the respondent appellate court filed a counterbond in the amount of P2,000 and opposed
the injunction bond filed by the respondent Socorro on the ground of its insufficiency. In
effect, those brought about the immediate dissolution of the writ of preliminary injunction.
Thus Aquino pursues his claim for damages in the amount of P199,000 no longer upon the
injunction bond in the amount of P1,000 filed by Socorro with the respondent appellate
court. This being the case, applicable here is the holding in Molina vs. Somes, supra, that

an application for damages on account of the improvident issuance of a preliminary


injunction writ must be governed by the same principles applicable to an action for the
wrongful bringing of action. Before the respondent's liability can attach, it must appear
that he filed his petition for certiorari re the main action and obtained the issuance of the
writ of preliminary injunction maliciously and without probable cause. These two essential
requisites, malicious prosecution and lack of probable cause, are neither alleged nor
proved in this case before us. Nothing in the record tends to establish the liability of the
respondent Socorro.
ACCORDINGLY, the present petition for certiorari is hereby denied. No cost.

G.R. No. 71229 September 30, 1986


HANIL DEVELOPMENT CO., LTD., petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT and M. R. ESCOBAR EXPLOSIVES
ENGINEERS, INC., represented by its General Manager, MANUEL R.
ESCOBAR, respondents.
M.A. Aguinaldo & Associates for petitioner.
Ponciano H. Gupit for private respondent.

GUTIERREZ, JR., J.:


This is a petition for certiorari, mandamus, and prohibition, with prayer for mandatory
injunction and restraining order from the resolutions of the then Intermediate Appellate
Court dated April 30, 1985 and June 20, 1985 in AC-G.R. No. 05055 entitled "Hanil
Development Co., Ltd. v. M.R. Escobar Explosives Engineers, Inc., represented by its
General Manager, Manuel R. Escobar."
The present controversy has its origins in a complaint for recovery of a sum of money with
damages filed by private respondent Escobar Explosives Engineers, Inc., against petitioner
Hanil Development Co., Ltd., before the then Court of First Instance of Rizal, Branch XXXI,
Pasig, Metro Manila. The petitioner is a foreign corporation organized under the laws of the
Republic of Korea and doing business in the Philippines pursuant to the Corporation Code
and the Foreign Investment Act. The complaint docketed as Civil Case No. 35966 sought to
compel the petitioner to pay for the blasting services rendered by the private respondent
in connection with the former's contract with the Ministry of Public Highways to construct
the 200 Km. Oro-Butuan Road Project in Mindanao.

Consequently, the order dated May 24, 1982 and the writ of attachment dated May 27,
1982 were enforced by the respondents and the bank accounts of the petitioner were
garnished and its equipment attached.
The petitioner then filed a motion for reconsideration of the May 24, 1982 order. While this
motion was pending, the private respondent filed another motion, this time an "Ex-Parte
Motion to Deposit Cash" praying that an order be issued directing the Finance Manager of
the National Power Corporation (NAPOCOR) to withdraw available funds of the petitioner
from the NAPOCOR and deposit them with the clerk of court of the Court of First Instance of
Rizal. This motion was granted in an order dated June 29, 1982.
In view of this development, the petitioner filed with the then Intermediate Appellate Court
a petition for certiorari with prayer for prohibition, injunction and preliminary restraining
order challenging the orders dated May 24, 1982 and June 29, 1982 of the trial court. The
case was docketed as CA-G.R. No. 14512.
The appellate court temporarily restrained the enforcement of the challenged orders and
after a hearing issued a preliminary injunction enjoining the implementation of said orders
upon the filing of a P50,000.00 cash bond by the petitioner.
In a decision dated February 3, 1983, the appellate court granted the petition and declared
the challenged orders null and void, having been issued with grave abuse of discretion.
While the above-mentioned petition was pending before the appellate court and despite
the writ of injunction issued by it, other developments continued to unfold in the trial court.
In an order dated August 23, 1982, the trial court disapproved the petitioner's amended
record on appeal on the ground that it was "filed beyond the reglementary period and the
extension granted." The appeal was dismissed. The petitioner filed a motion for
reconsideration of the dismissal while the private respondent filed a motion for execution
of judgment.

The trial court, on April 16, 1983, rendered a decision in favor of the private respondent.
The petitioner was ordered to pay the private respondent the sum of P1,341,727.40
corresponding to the value of the rocks blasted by the private respondent; ten percent
(10%) of said amount as attorney's fees and costs.

On October 19, 1982, the trial court issued an order denying the petitioner's motion for
reconsideration and at the same time granting the private respondent's motion for
execution of judgment.

On May 6, 1982, the private respondent filed a petition for the issuance of a preliminary
attachment. The motion was set for hearing.

The petitioner filed a petition for certiorari and mandamus with prayer for prohibition with
the Intermediate Appellate Court assailing the trial court's orders dated August 23, 1982
and October 19, 1982. The case was docketed as AC-G.R. No. 15050.

On May 13, 1982, the petitioner filed its notice of appeal and cash appeal bond with the
trial court.
On May 24, 1982, the trial court issued an order granting the petition for the issuance of
preliminary attachment.
On May 26, 1982, the private respondent moved for the appointment of Deputy Sheriff
Felix Honoracion as special sheriff to serve the writ of attachment/garnishment.

The appellate court granted the petition. The challenged orders were set aside and
declared null and void. Hence, the petitioner's appeal in Civil Case No. 35966 was
reinstated and the trial court was ordered to elevate the entire records of the case to the
appellate court.
A petition for review of the decision in AC-G.R. No. 15050 was filed by the private
respondent before this Court, but was denied for lack of merit.
After transmittal of the records, the appellate court on February 11, 1985, sent a notice to
the petitioner to file appellant's brief within forty-five (45) days from receipt. The petitioner
received the notice on February 25, 1985.

On March 13, 1985, and within the reglementary period to file appellant's brief, the
petitioner filed an "Application for Judgment against Attachment Bond" and "Motion to
Defer Filing of Appellant's Brief" praying for a hearing before the appellate court so it could
prove the damages it sustained as a result of the illegal writ of attachment issued by the
trial court. It wanted a judgment against the attachment bond posted by the private
respondent and its insurer Sanpiro Insurance Corporation to be included in the final
decision in the main case, Civil Case No. 35966, now pending before the appellate court.
Acting on the petitioner's motions, the appellate court issued a resolution directing the
private respondent to comment on these motions.
The private respondent filed its "Comment" with a "Motion to Dismiss Appeal" for the
petitioner's alleged failure to file its appellant's brief.
In a resolution dated April 30, 1985, the appellate court denied the petitioner's application
for judgment against the attachment bond and the motion to defer filing of appellant's
brief, granted the private respondent's motion to dismiss the appeal, and dismissed the
appeal. The petitioner filed a motion for reconsideration but this was denied in a resolution
dated June 20, 1985.
Hence, this petition.
In a resolution dated July 17, 1985, we issued a temporary restraining order to enjoin the
respondents from proceeding with the execution of the decision in Civil Case No. 35966.
The petitioner now asserts that the April 30, 1985 and June 20, 1985 resolutions were
issued by the appellate court with grave abuse of discretion.
The questioned April 30, 1985 minute resolution of the appellate court states:
Acting upon (1) the application for judgment against attachment bond, etc. filed by counsel
for defendant-appellant on March 13, 1985; (2) the comment thereto; (3) the motion to
dismiss appeal filed by counsel for plaintiff-appellee on April 24, 1985; and the docket
report dated April 25, 1985, the COURT RESOLVED: (a) to DENY the application for
judgment against attachment bond and the motion to defer filing of appellant's brief; and
(b) to GRANT the motion to dismiss appeal and to dismiss the instant appeal.
The issues to be resolved in the instant petition are: (1) whether or not the petitioner's
application for judgment against the attachment bond and its motion to defer filing of
appellant's brief were correctly denied by the appellate court and (2) whether or not the
same court rightly dismissed the petitioner's appeal.
Anent the first issue, the petitioner contends that its application for judgment against the
attachment bond was pursuant to Section 20, Rule 57 of the Revised Rules of Court.
Section 20, Rule 57 of the Revised Rules of Court provides for the claim of damages on
account of illegal attachment, to wit:
Claim for damages on account of illegal attachment. If the judgment on the motion 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
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.
In the instant case, the initial writ of attachment issued by the trial court in the main case
Civil Case No. 35966 which is the subject of appeal was declared null and void by the
appellate court in CA-G.R. No. 14512. This present writ of attachment was issued and
subsequently enforced after the trial court's decision in Civil Case No. 35966 had been
rendered and after the petitioner had already perfected its appeal. The petitioner,
therefore, argues that the application for judgment against the attachment bond was
properly lodged with the appellate court pursuant to Section 9, of the Judiciary
Reorganization Act of 1980 (Batas Pambansa Blg. 129) which grants the Intermediate
Appellate Court "power to try cases and conduct hearings, receive evidence and perform
any and all acts necessary to resolve factual issues ... ." It contends that it is only in the
appellate court that these damages could well be ventilated because they occurred during
the pendency of the appeal in AC-G.R. No. 15050.
The petitioner's arguments are well-taken.
The application for judgment against attachment bond was filed to prove the damages
sustained by the petitioner as a result of the illegal writ of attachment issued by the trial
court so that the judgment against the attachment bond posted by the private respondent
and its insurer could be included in the final judgment of the main case. The assessment
and award of such damages could not have been made in CA-G.R. No. 14512 as alleged by
the private respondent because the question therein was whether or not the writ of
attachment in Civil Case No. 35966 should have been issued.
The object was to set aside the preliminary attachment immediately. It was a preventive
measure.
The private respondent, in its petition for writ of attachment filed with the trial court,
posted an attachment bond issued by the Sanpiro Insurance Corporation in the amount of
P1,341,727.40, the relevant portion of which reads:
WHEREFORE, WE, M.R. ESCOBAR EXPLOSIVE ENGINEERS as PRINCIPAL, and the SANPIRO
INSURANCE CORPORATION, a corporation duly organized and existing under and by virtue
of the laws of the Philippines, as SURETY, in consideration of the above and of the levying
of said attachment, hereby jointly and severally bind ourselves in the sum of PESOS: ONE
MILLION THREE HUNDRED FORTY ONE THOUSAND SEVEN HUNDRED TWENTY SEVEN &
40/100 (P1,341,727.40), Philippine Currency, under the condition that we will pay all the
costs which may be adjudged to said defendant/s and all damages which said defendant/s

may sustain by reason of the attachment, if the Court shall finally adjudge that plaintiff/s
was/were not entitled thereto.

attachment, injunction and replevin or an order of receivership were issued should be


claimed in the appellate court.

Contrary to the claim of the private respondent, this writ of attachment issued by the trial
court was executed. The petitioner's equipment and bank accounts were garnished
pursuant to the writ. In fact, the private respondent's opposition to the petitioner's motion
for reconsideration of the trial court's order which issued the writ of attachment stated that
the same should be denied for being moot and academic "because the writ of attachment
and/or garnishment have already been executed."

xxx xxx xxx

Considering that the writ of attachment was declared null and void, the petitioner had the
right to ask for whatever damages it may have incurred as a result of its issuance pursuant
to Section 20, Rule 57 of the Revised Rules of Court.
Malayan Insurance Co., Inc. v. Salas (90 SCRA 252), lays down the procedure regarding
claims for damages against an illegal attachment. It states:
Under section 20, in order to recover damages on a replevin bond (or on a bond for
preliminary attachment, injunction or receivership) it is necessary (1) that the defendantclaimant has secured a favorable judgment in the main action, meaning that the plaintiff
has no cause of action and was not, therefore, entitled to the provisional remedy of
replevin; (2) that the application for damages, showing claimant's right thereto and the
amount thereof, be filed in the same action before trial or before appeal is perfected or
before the judgment becomes executory; (3) that due notice be given to the other party
and his surety or sureties, notice to the principal not being sufficient and (4) that there
should be a proper hearing and the award for damages should be included in the final
judgment (Luneta Motor Co. v. Menendez, 117 Phil. 970, 974; 3 Moran's Comments on the
Rules of Court, 1970 Ed., pp. 54-56. See Cruz v. Manila Surety & Fidelity Co., Inc., 92 Phil.
699).
xxx xxx xxx
As may be gathered from section 20 of Rule 57, the application for damages against the
surety must be filed (with notice to the surety) in the Court of First Instance before the trial
or before appeal is perfected or before the judgment becomes executory.
If an appeal is taken, the application must be filed in the appellate court but always before
the judgment of that court becomes executory so that the award may be included in its
judgment (Luneta Motor Co. v. Menendez, supra).
But it is not always mandatory that the appellate court should include in its judgment the
award of damages against the surety. Thus, it was held that where the application for
damages against the surety is seasonably made in the appellate court, 'the latter must
either proceed to hear and decide the application or refer 'it' to the trial court and allow it
to hear and decide the same' (Rivera v. Talavera, 112 Phil. 209, 219).
xxx xxx xxx
Note that under the second paragraph of section 20, Rule 57 of the present Rules of Court,
the damages suffered during the pendency of an appeal in a case where the writs of

In the instant case, the application for judgment against the attachment bond was filed
under the following circumstances: (1) the writ of attachment was issued by the trial court
after it had rendered its decision and after the petitioner had already perfected its appeal;
(2) the private respondent posted a surety bond to answer for any damages that may be
adjudged to the petitioner if the writ is later found to be illegal; (3) the writ of attachment
was declared illegal; and (4) the application for judgment against the attachment bond was
made with notice to the insurer, Sanpiro Insurance Corporation.
Applying the principles laid down in the Malayan case to the circumstances surrounding
the application for judgment against attachment bond in this case, the appellate court
committed grave abuse of discretion in denying the application for judgment against
attachment bond. The appellate court's error in this case is more pronounced considering
that under Section 9 of the Judiciary Reorganization Act of 1980 (Batas Pambansa Blg. 129)
the Intermediate Appellate Court is now empowered to try cases and conduct hearings,
receive evidence and perform acts necessary to resolve factual issues in cases falling
within its original and appellate jurisdiction. Certainly, the amount of damages, if any,
suffered by the petitioner as a result of the issuance of the illegal attachment during the
pendency of the appeal is a factual issue.
Moreover, the application for judgment against the bond seasonably filed by the petitioner
in the appellate court would avoid multiplicity of suits. We have earlier ruled that "the
explicit provision of Section 20 of Rule 57, Revised Rules of Court that the judgment
against the surety should be included in the final judgment is to avoid additional
proceedings. (Cruz v. Manila Surety & Fidelity Co., Inc. et al., 92 Phil. 699; (Japco v. City of
Manila, 48 Phil. 851, 855 cited in Malayan insurance Corporation v. Salas, supra).
Consequently, the appellate court also committed a grave abuse of discretion in denying
the motion to defer filing of appellant's brief. The petitioner filed this motion for the
purpose of first settling the issue on damages against the attachment bond so that such
issue would be discussed and included in the appellant's brief and ultimately in the final
judgment thereby avoiding multiplicity of suits.
Needless to say, the appellate court should not have dismissed the petitioner's appeal.
We take notice of the circumstances under which the appellate court dismissed the appeal.
Granting that the petitioner's application for judgment against attachment bond was not
meritorious, the appellate court's dismissal of the appeal would still be unwarranted.
The record shows that in response to the petitioner's application for judgment against the
attachment bond and motion to defer filing of the appellant's brief which was filed on
March 13, 1985 and within the 45-day reglementary period to fife appellant's brief, the
appellate court issued a resolution directing the private respondent to comment on the
motion within ten (10) days from notice. Upon motion ' of the private respondent, the
appellate court issued another resolution granting an extension of ten (10) days from April
13, 1985 to file comment on the said motions of the petitioner. The extension granted

meant that the private respondent had until April 24, 1985 to file its comment. In addition
to the comment, the private respondent filed on April 24, 1985 a motion to dismiss appeal
contending that the petitioner had not filed its appellant's brief within the 45-day
reglementary period. Upon verification from its docket decision that no appellant's brief
was filed as of April 25, 1985, the appellate court dismissed the appeal.
Under these circumstances, the dismissal of the appeal by the appellate court due to the
failure to file the appellant's brief within the 45-day reglementary period counted from
February 25, 1985 to April 25, 1985 without allowing any interruption gave undue
advantage to the private respondent. This is so, because the private respondent after
having been given ten (10) days from receipt of notice to comment on the twin motions of
the petitioner was again granted a ten-day extension or until April 24, 1985 to file its
comment thereto. This, in effect, removed a substantial number of days from the 45-day
period of the petitioner to file its brief, through no fault of its own.
The procedure adopted by the appellate court in interpreting the 45-day reglementary
period to file appellant's brief was unfair. When the appellate court issued the resolution
requiring the private respondent to comment on the petitioner's application for judgment
against the attachment bond and motion to defer appellant's brief the 45-day period
should be deemed to have stopped, and the period to commence again after denial of the
motions.
The notice to "file appellant's brief within 45 days from receipt" was received by the
petitioner on February 25, 1985. The petitioner filed the application for judgment against
the attachment bond and motion to defer filing of appellant's brief on March 13, 1985.
Thus, the petitioner filed its motions on the 16th day after receipt of the notice to file
appellant's brief and within the 45-day reglementary period. On March 26, 1985, the
appellate court issued its resolution directing the private respondent to file its comment on
the motions of the petitioner. At this point, counting from February 25, 1985 to March 26,
1985, a total number of 29 days had lapsed. Hence, the petitioner still had 16 days within
the 45-day reglementary period to file its appellant's brief in the event that its motions
were denied.
It is likewise the practise in the Court of Appeals, after granting an initial period of 45 days,
to routinely grant a motion for extension of another 45 days for the filing of an appellant's
brief. Considering the amount involved in this litigation and the nature of the defenses
raised by the petitioner, the appellate court was unduly severe when it peremptorily
dismissed the appeal.
Therefore, we have to set aside the appellate court's action in simultaneously denying the
application for judgment against the attachment bond and the motion to defer the filing of
appellant's brief and in dismissing the appeal. Since the petitioner's two motions were
denied on April 30, 1985, the petitioner still had 16 days from notice of the denial to file its
appellant's brief. In short, the petitioner's 45-day period within which to file its appellant's
brief had not yet lapsed when the appellate court dismissed the appeal. The brief could
have been filed or a motion for extension of time requested.
WHEREFORE, the instant petition is GRANTED. The questioned resolutions dated April 30,
1985 and June 20, 1985 of the then Intermediate Appellate Court are hereby REVERSED

and SET ASIDE. The Court of Appeals is directed to conduct hearings on the application for
judgment against attachment bond filed by the petitioner and to reinstate the appeal. The
temporary restraining order dated July 17, 1985 is made PERMANENT.
SO ORDERED.

G.R. No. L-61464 May 28, 1988


BA FINANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, AUGUSTO YULO, LILY YULO (doing
business under the name and style of A & L INDUSTRIES), respondents.

GUTIERREZ, JR., J.:


This is a petition for review seeking to set aside the decision of the Court of Appeals which
affirmed the decision of the then Court of First Instance of Manila, dismissing the complaint
instituted by the petitioner and ordering it to pay damages on the basis of the private
respondent's counterclaim.
On July 1, 1975, private respondent Augusto Yulo secured a loan from the petitioner in the
amount of P591,003.59 as evidenced by a promissory note he signed in his own behalf and
as representative of the A & L Industries. Respondent Yulo presented an alleged special
power of attorney executed by his wife, respondent Lily Yulo, who manages A & L
Industries and under whose name the said business is registered, purportedly authorizing
Augusto Yulo to procure the loan and sign the promissory note. About two months prior to
the loan, however, Augusto Yulo had already left Lily Yulo and their children and had
abandoned their conjugal home. When the obligation became due and demandable,
Augusto Yulo failed to pay the same.
On October 7, 1975, the petitioner filed its amended complaint against the spouses
Augusto and Lily Yulo on the basis of the promissory note. It also prayed for the issuance of
a writ of attatchment alleging that the said spouses were guilty of fraud in contracting the
debt upon which the action was brought and that the fraud consisted of the spouses'
inducing the petitioner to enter into a contract with them by executing a Deed of
Assignment in favor of the petitioner, assigning all their rights, titles and interests over a
construction contract executed by and between the spouses and A. Soriano Corporation on
June 19, 1974 for a consideration of P615,732.50 when, in truth, the spouses did not have
any intention of remitting the proceeds of the said construction contract to the petitioner
because despite the provisions in the Deed of Assignment that the spouses shall, without
compensation or costs, collect and receive in trust for the petitioner all payments made
upon the construction contract and shall remit to the petitioner all collections therefrom,
the said spouses failed and refuse to remit the collections and instead, misappropriated
the proceeds for their own use and benefit, without the knowledge or consent of the
petitioner.
The trial court issued the writ of attachment prayed for thereby enabling the petitioner to
attach the properties of A & L Industries. Apparently not contented with the order, the
petitioner filed another motion for the examination of attachment debtor, alleging that the
properties attached by the sheriff were not sufficient to secure the satisfaction of any
judgment that may be recovered by it in the case. This was likewise granted by the court.
Private respondent Lily Yulo filed her answer with counterclaim, alleging that although
Augusta Yulo and she are husband and wife, the former had abandoned her and their

children five (5) months before the filing of the complaint; that they were already
separated when the promissory note was executed; that her signature in the special power
of attorney was forged because she had never authorized Augusto Yulo in any capacity to
transact any business for and in behalf of A & L Industries, which is owned by her as a
single proprietor, that she never got a single centavo from the proceeds of the loan
mentioned in the promissory note; and that as a result of the illegal attachment of her
properties, which constituted the assets of the A & L Industries, the latter closed its
business and was taken over by the new owner.
After hearing, the trial court rendered judgment dismissing the petitioner's complaint
against the private respondent Lily Yulo and A & L Industries and ordering the petitioner to
pay the respondent Lily Yulo P660,000.00 as actual damages; P500,000.00 as unrealized
profits; P300,000.00 as exemplary damages; P30,000.00 as and for attorney's fees; and to
pay the costs.
The petitioner appealed. The Court of Appeals affirmed the trial court's decision except for
the exemplary damages which it reduced from P300,000.00 to P150,000.00 and the
attorney's fees which were reduced from P30,000.00 to P20,000.00.
In resolving the question of whether or not the trial court erred in holding that the
signature of respondent Lily Yulo in the special power of attorney was forged, the Court of
Appeals said:
The crucial issue to be determined is whether or not the signatures of the appellee Lily Yulo
in Exhibits B and B-1 are forged. Atty. Crispin Ordoa, the Notary Public, admitted in open
court that the parties in the subject documents did not sign their signatures in his
presence. The same were already signed by the supposed parties and their supposed
witnesses at the time they were brought to him for ratification. We quote from the records
the pertinent testimony of Atty. Ordoa, thus:
Q. This document marked as Exhibit B-1, when this was presented to you by that common
friend, June Enriquez, it was already typewritten, it was already accomplished, all
typewritten.?
A. Yes, sir.
Q And the parties had already affixed their signatures in this document?
A. Yes, sir.
Q. In this document marked as Exhibit B although it appears here that this is an
acknowledgment, you have not stated here that the principal actually acknowledged this
document to be her voluntary act and deed?
A This in one of those things that escaped my attention. Actually I have not gone over the
second page. I believed it was in order I signed it. (TSN pp. 13-14, Hearing of Nov. 26,
1976).
The glaring admission by the Notary Public that he failed to state in the acknowledgment
portion of Exhibit B-1 that the appellee Lily Yulo acknowledged the said document to be her

own voluntary act and deed, is a very strong and commanding circumstance to show that
she did not appear personally before the said Notary Public and did not sign the document.

neither did the appellant present another handwriting expert, at least to counter-act or
balance the appellee's handwriting expert.

Additionally, the Notary Public admitted that, while June Enriquez is admittedly a mutual
friend of his and the defendant Augusta Yulo, and who is also an instrumental witness in
said Exhibit B-1., he could not recognize or tell which of the two signatures appearing
therein, was the signature of this June Enriquez.

Prescinding from the foregoing facts, we subscribe fully to the lower court's observations
that the signatures of the appellee Lily Yulo in the questioned document (Exh. B-1) were
forged. Hence, we find no factual basis to disagree. (pp. 28-30, Rollo)

Furthermore, as the issue is one of credibility of a witness, the findings and conclusions of
the trial court before whom said witness, Atty. Crispin Ordoa, the Notary Public before
whom the questioned document was supposedly ratified and acknowledged, deserve great
respect and are seldom disturbed on appeal by appellate tribunals, since it is in the best
and peculiar advantage of determining and observing the conduct, demeanor and
deportment of a particular witness while he is testifying in court, an opportunity not
enjoyed by the appellate courts who merely have to rely on the recorded proceedings
which transpired in the court below, and the records are bare of any circumstance of
weight, which the trial court had overlooked and which if duly considered, may radically
affect the outcome of the case.
On the other hand, the appellee Lily Yulo, to back up her claim of forgery of her signature
in Exhibit B-1, presented in court a handwriting expert witness in the person of Police
Captain Yakal Giron of the Integrated National Police Training Command, and who is also a
Document Examiner of the same Command's Crime Laboratory at Fort Bonifacio, Metro
Manila. His experience as an examiner of questioned and disputed documents, in our mind,
is quite impressive. To qualify him as a handwriting expert, he declared that he underwent
extensive and actual studies and examination of disputed or questioned document, both at
the National Bureau of Investigation Academy and National Bureau of Investigation
Questioned Document Laboratory, respectively, from July 1964, up to his appointment as
Document Examiner in June, 1975, and, to further his experience along this line, he
attended the 297th Annual Conference of the American Society of Questioned Docurnent
Examiners held at Seattle, Washington, in August 1971, as a representative of the
Philippines, and likewise conducted an observation of the present and modern trends of
crime laboratories in the West Coast, U.S.A., in 1971; that he likewise had conducted actual
tests and examination of about 100,000 documents, as requested by the different courts,
administrative, and governmental agencies of the Government, substantial portions of
which relate to actual court cases.
In concluding that the signatures of the appellee Lily Yulo, in the disputed document in
question (Exh. B-1), were all forgeries, and not her genuine signature, the expert witness
categorically recited and specified in open court what he observed to be about twelve (12)
glaring and material significant differences, in his comparison of the signatures appearing
in the genuine specimen signatures of the said appellee and with those appearing in the
questioned document (Exhibit B-1). Indeed, we have likewise seen the supposed notable
differences, found in the standard or genuine signatures of the appellee which were lifted
and obtained in the official files of the government, such as the Bureau of Internal Revenue
on her income tax returns, as compared to the pretended signature of the appellee
appearing in Exhibits B, B-1. It is also noteworthy to mention that the appellant did not
even bother to conduct a cross-examination of the handwriting expert witness, Capt. Giron,

As to the petitioner's contention that even if the signature of Lily Yulo was forged or even if
the attached properties were her exclusive property, the same can be made answerable to
the obligation because the said properties form part of the conjugal partnership of the
spouses Yulo, the appellate court held that these contentions are without merit because
there is strong preponderant evidence to show that A & L Industries belongs exclusively to
respondent Lily Yulo, namely: a) The Certificate of Registration of A & L Industries, issued
by the Bureau of Commerce, showing that said business is a single proprietorship, and that
the registered owner thereof is only Lily Yulo; b) The Mayor's Permit issued in favor of A & L
Industries, by the Caloocan City Mayor's Office showing compliance by said single
proprietorship company with the City Ordinance governing business establishments; and c)
The Special Power of Attorney itself, assuming but without admitting its due execution, is
tangible proof that Augusto Yulo has no interest whatsoever in the A & L Industries,
otherwise, there would have been no necessity for the Special Power of Attorney if he is a
part owner of said single proprietorship.
With regard to the award of damages, the Court of Appeals affirmed the findings of the trial
court that there was bad faith on the part of the petitioner as to entitle the private
respondent to damages as shown not only by the fact that the petitioner did not present
the Deed of Assignment or the construction agreement or any evidence whatsoever to
support its claim of fraud on the part of the private respondent and to justify the issuance
of a preliminary attachment, but also by the following findings:
Continuing and elaborating further on the appellant's mala fide actuations in securing the
writ of attachment, the lower court stated as follows:
Plaintiff not satisfied with the instant case where an order for attachment has already been
issued and enforced, on the strength of the same Promissory Note (Exhibit"A"), utilizing the
Deed of Chattel Mortgage (Exhibit "4"), filed a foreclosure proceedings before the Office of
the Sheriff of Caloocan (Exhibit"6") foreclosing the remaining properties found inside the
premises formerly occupied by the A & L Industries. A minute examination of Exhibit "4"
will show that the contracting parties thereto, as appearing in par. 1 thereof, are Augusto
Yulo, doing business under the style of A & L Industries (should be A & L Glass Industries
Corporation), as mortgagor and BA Finance Corporation as mortgagee, thus the
enforcement of the Chattel Mortgage against the property of A & L Industries exclusively
owned by Lily T. Yulo appears to be without any factual or legal basis whatsoever. The
chattel mortgage, Exhibit "4" and the Promissory Note, Exhibit A, are based on one and the
same obligation. Plaintiff tried to enforce as it did enforce its claim into two different modes
a single obligation.
Aware that defendant Lily Yulo, filed a Motion to Suspend Proceedings by virtue of a
complaint she filed with the Court of First Instance of Caloocan, seeking annulment of the
Promissory Note, the very basis of the plaintiff in filing this complaint, immediately after

the day it filed a Motion for the Issuance of an Alias Writ of Preliminary Attachment . . .Yet,
inspite of the knowledge and the filing of this Motion to Suspend Proceedings, the Plaintiff
still filed a Motion for the Issuance of a Writ of Attachment dated February 6, 1976 before
this court. To add insult to injury, plaintiff even filed a Motion for Examination of the
Attachment Debtor, although aware that Lily Yulo had already denied participation in the
execution of Exhibits "A" and "B". These incidents and actions taken by plaintiff, to the
thinking of the court, are sufficient to prove and establish the element of bad faith and
malice on the part of plaintiff which may warrant the award of damages in favor of
defendant Lily Yulo. (Ibid., pp. 102-103).<re||an1w>
Indeed, the existence of evident bad faith on the appellant's part in proceeding against the
appellee Lily Yulo in the present case, may likewise be distressed on the fact that its officer
Mr. Abraham Co, did not even bother to demand the production of at least the duplicate
original of the Special Power of Attorney (Exhibit B) and merely contended himself with a
mere xerox copy thereof, neither did he require a more specific authority from the A & L
Industries to contract the loan in question, since from the very content and recitals of the
disputed document, no authority, express or implied, has been delegated or granted to
August Yulo to contract a loan, especially with the appellant. (pp. 33-34, Rollo)
Concerning the actual damages, the appellate court ruled that the petitioner should have
presented evidence to disprove or rebut the private respondent's claim but it remained
quiet and chose not to disturb the testimony and the evidence presented by the private
respondent to prove her claim.
In this petition for certiorari, the petitioner raises three issues. The first issue deals with the
appellate court's affirmance of the trial court's findings that the signature of the private
respondent on the Special Power of Attorney was forged. According to the petitioner, the
Court of Appeals disregarded the direct mandate of Section 23, Rule 132 of the Rules of
Court which states in part that evidence of handwriting by comparison may be made "with
writings admitted or treated as genuine by the party against whom the evidence is offered,
or proved to be genuine to the satisfaction of the judge," and that there is no evidence on
record which proves or tends to prove the genuineness of the standards used.
There is no merit in this contention.
The records show that the signatures which were used as "standards" for comparison with
the alleged signature of the private respondent in the Special Power of Attorney were those
from the latter's residence certificates in the years 1973, 1974 and 1975, her income tax
returns for the years 1973 and 1975 and from a document on long bond paper dated May
18, 1977. Not only were the signatures in the foregoing documents admitted by the private
respondent as hers but most of the said documents were used by the private respondent in
her transactions with the government. As was held in the case of Plymouth Saving & Loan
Assn. No. 2 v. Kassing (125 NE 488, 494):
We believe the true rule deduced from the authorities to be that the genuineness of a
"standard" writing may be established (1) by the admission of the person sought to be
charged with the disputed writing made at or for the purposes of the trial or by his
testimony; (2) by witnesses who saw the standards written or to whom or in whose hearing
the person sought to be charged acknowledged the writing thereof; (3) by evidence

showing that the reputed writer of the standard has acquiesced in or recognized the same,
or that it has been adopted and acted upon by him his business transactions or other
concerns....
Furthermore, the judge found such signatures to be sufficient as standards. In the case
of Taylor-Wharton Iron & Steel Co. v. Earnshaw (156 N.E. 855, 856), it was held:
When a writing is offered as a standard of comparison it is for the presiding judge to decide
whether it is the handwriting of the party to be charged. Unless his finding is founded upon
error of law, or upon evidence which is, as matter of law, insufficient to justify the finding,
this court will not revise it upon exceptions." (Costelo v. Crowell, 139 Mass. 588, 590, 2 N.E.
648; Nuez v. Perry, 113 Mass, 274, 276.)
We cannot find any error on the part of the trial judge in using the above documents as
standards and also in giving credence to the expert witness presented by the private
respondent whose testimony the petitioner failed to rebut and whose credibility it likewise
failed to impeach. But more important is the fact that the unrebutted handwriting expert's
testimony noted twelve (12) glaring and material differences in the alleged signature of
the private respondent in the Special Power of Attorney as compared with the specimen
signatures, something which the appellate court also took into account. In Cesar v.
Sandiganbayan (134 SCRA 105, 132), we ruled:
Mr. Maniwang pointed to other significant divergences and distinctive characteristics
between the sample signatures and the signatures on the questioned checks in his report
which the court's Presiding Justice kept mentioning during Maniwang's testimony.
In the course of his cross-examination, NBI expert Tabayoyong admitted that he saw the
differences between the exemplars used and the questioned signatures but he dismissed
the differences because he did not consider them fundamental. We rule that significant
differences are more fundamental than a few similarities. A forger always strives to master
some similarities.
The second issue raised by the petitioner is that while it is true that A & L Industries is a
single proprietorship and the registered owner thereof is private respondent Lily Yulo, the
said proprietorship was established during the marriage and its assets were also acquired
during the same. Therefore, it is presumed that this property forms part of the conjugal
partnership of the spouses Augusto and Lily Yulo and thus, could be held liable for the
obligations contracted by Augusto Yulo, as administrator of the partnership.
There is no dispute that A & L Industries was established during the marriage of Augusta
and Lily Yulo and therefore the same is presumed conjugal and the fact that it was
registered in the name of only one of the spouses does not destroy its conjugal nature (See
Mendoza v. Reyes, 124 SCRA 161, 165). However, for the said property to be held liable,
the obligation contracted by the husband must have redounded to the benefit of the
conjugal partnership under Article 161 of the Civil Code. In the present case, the obligation
which the petitioner is seeking to enforce against the conjugal property managed by the
private respondent Lily Yulo was undoubtedly contracted by Augusto Yulo for his own
benefit because at the time he incurred the obligation he had already abandoned his
family and had left their conjugal home. Worse, he made it appear that he was duly
authorized by his wife in behalf of A & L Industries, to procure such loan from the

petitioner. Clearly, to make A & L Industries liable now for the said loan would be unjust
and contrary to the express provision of the Civil Code. As we have ruled in Luzon Surety
Co., Inc. v. De Gracia (30 SCRA 111, 115-117):
As explained in the decision now under review: "It is true that the husband is the
administrator of the conjugal property pursuant to the provisions of Art. 163 of the new
Civil Code. However, as such administrator the only obligations incurred by the husband
that are chargeable against the conjugal property are those incurred in the legitimate
pursuit of his career, profession or business with the honest belief that he is doing right for
the benefit of the family. This is not true in the case at bar for we believe that the husband
in acting as guarantor or surety for another in an indemnity agreement as that involved in
this case did not act for the benefit of the conjugal partnership. Such inference is more
emphatic in this case, when no proof is presented that Vicente Garcia in acting as surety or
guarantor received consideration therefore, which may redound to the benefit of the
conjugal partnership.(Ibid, pp. 46-47).
xxx xxx xxx
xxx xxx xxx
In the most categorical language, a conjugal partnership under that provision is liable only
for such "debts and obligations contracted by the husband for the benefit of the conjugal
partnership." There must be the requisite showing then of some advantage which clearly
accrued to the welfare of the spouses. There is none in this case.
xxx xxx xxx
Moreover, it would negate the plain object of the additional requirement in the present
Civil Code that a debt contracted by the husband to bind a conjugal partnership must
redound to its benefit. That is still another provision indicative of the solicitude and tender
regard that the law manifests for the family as a unit. Its interest is paramount; its welfare
uppermost in the minds of the codifiers and legislators.
We, therefore, rule that the petitioner cannot enforce the obligation contracted by Augusto
Yulo against his conjugal properties with respondent Lily Yulo. Thus, it follows that the writ
of attachment cannot issue against the said properties.
Finally, the third issue assails the award of actual damages according to the petitioner,
both the lower court and the appellate court overlooked the fact that the properties
referred to are still subject to a levy on attachment. They are, therefore, still
under custodia legis and thus, the assailed decision should have included a declaration as
to who is entitled to the attached properties and that assuming arguendo that the
attachment was erroneous, the lower court should have ordered the sheriff to return to the
private respondent the attached properties instead of condemning the petitioner to pay
the value thereof by way of actual damages.
In the case of Lazatin v. Twao (2 SCRA 842, 847), we ruled:
xxx xxx xxx

... It should be observed that Sec. 4 of Rule 59, does not prescribed the remedies available
to the attachment defendant in case of a wrongful attachment, but merely provides an
action for recovery upon the bond, based on the undertaking therein made and not upon
the liability arising from a tortuous act, like the malicious suing out of an attachment.
Under the first, where malice is not essential, the attachment defendant, is entitled to
recover only the actual damages sustained by him by reason of the attachment. Under the
second, where the attachment is maliciously sued out, the damages recoverable may
include a compensation for every injury to his credit, business or feed (Tyler v. Mahoney,
168 NC 237, 84 SE 362; Pittsburg etc. 5 Wakefield, etc., 135 NC 73, 47 SE 234). ...
The question before us, therefore, is whether the attachment of the properties of A & L
Industries was wrongful so as to entitle the petitioner to actual damages only or whether
the said attachment was made in bad faith and with malice to warrant the award of other
kinds of damages. Moreover, if the private respondent is entitled only to actual damages,
was the court justified in ordering the petitioner to pay for the value of the attached
properties instead of ordering the return of the said properties to the private respondent
Yulo ?
Both the trial and appellate courts found that there was bad faith on the part of the
petitioner in securing the writ of attachment. We do not think so. "An attachment may be
said to be wrongful when, for instance, the plaintiff has no cause of action, or that there is
no true ground therefore, or that the plaintiff has a sufficient security other than the
property attached, which is tantamout to saying that the plaintiff is not entitled to
attachment because the requirements of entitling him to the writ are wanting. (7 C.J.S.,
664)" (p. 48, Section 4, Rule 57, Francisco, Revised Rules of Court).
Although the petitioner failed to prove the ground relied upon for the issuance of the writ
of attachment, this failure cannot be equated with bad faith or malicious intent. The steps
which were taken by the petitioner to ensure the security of its claim were premised, on
the firm belief that the properties involved could be made answerable for the unpaid
obligation due it. There is no question that a loan in the amount of P591,003.59 was
borrowed from the bank.
We, thus, find that the petitioner is liable only for actual damages and not for exemplary
damages and attorney's fees. Respondent Lily Yulo has manifested before this Court that
she no longer desires the return of the attached properties since the said attachment
caused her to close down the business. From that time she has become a mere employee
of the new owner of the premises. She has grave doubts as to the running condition of the
attached machineries and equipments considering that the attachment was effected way
back in 1975. She states as a matter of fact that the petitioner has already caused the sale
of the machineries for fear that they might be destroyed due to prolonged litigation. We,
therefore, deem it just and equitable to allow private respondent Lily Yulo to recover actual
damages based on the value of the attached properties as proven in the trial court, in the
amount of P660,000.00. In turn, if there are any remaining attached properties, they
should be permanently released to herein petitioner.
We cannot, however, sustain the award of P500,000.00 representing unrealized profits
because this amount was not proved or justified before the trial court. The basis of the
alleged unearned profits is too speculative and conjectural to show actual damages for a

future period. The private respondent failed to present reports on the average actual
profits earned by her business and other evidence of profitability which are necessary to
prove her claim for the said amount (See G. A. Machineries, Inc. v. Yaptinchay, 126 SCRA
78, 88).
The judgment is therefore set aside insofar as it holds the petitioner liable for P500,000.00
actual damages representing unrealized profits, P150,000.00 for exemplary damages and
P20,000.00 for attorney's fees. As stated earlier, the attached properties, should be
released in favor of the petitioner.
WHEREFORE, the decision of the Court of Appeals is hereby SET ASIDE and the petitioner is
ordered to pay the private respondent Lily Yulo the amount of SIX HUNDRED SIXTY
THOUSAND PESOS (P660,000.00) as actual damages. The remaining properties subject of
the attachment are ordered released in favor of the petitioner.
SO ORDERED.

G.R. No. L-48820 May 25, 1979


MALAYAN INSURANCE CO., INC., petitioner,
vs.
HON. EMILIO V. SALAS, as Presiding Judge, Court of First Instance of Rizal,
Branch I, Pasig, Metro Manila, ROSENDO FERNANDO and JOHN DOE, respondents.
Angara, Abello, Concepcion, Regata & Cruz for petitioner.
Lazaro, Abinoja & Associates for private respondents.

AQUINO, J.:
This case is about the surety company's liability on its replevin bond which was not
included in the final judgment against the principal in the bond. It is undisputed that in
1970 Makati Motor Sales, Inc., as vendor mortgagee, sued Rosendo Fernando for the
recovery of four diesel trucks and the connection of the balance of his obligation plus
damages (Civil Case No. 13874, Court of First Instance of Rizal, Pasig Branch 1).
To obtain immediate possession of the trucks pending trial, Makati Motors Sales, Inc.
posted a replevin bond executed by the Malayan Insurance Co., Inc. In that bond the surety
bound itself to pay P362,775.92 "for the return of the property to the defendant, if the
return thereof be adjudged, and for the payment of such sum as may in the cause be
recovered against the plaintiff ". Pursuant to the order of the court, the sheriff seized the
four trucks. Later, two of the trucks were returned to Fernando.
After trial, or on March 2, 1973, the lower court rendered judgment ordering Makati Motor
Sales, Inc. to return to Fernando the other two trucks and to pay him for the seizure of
each of them, damages in the sum of three hundred pesos daily from September 25 and
26, 1970 (or six hundred pesos for the two trucks from the latter date) until their return to
Fernando plus P26,000 as actual and moral damages.
In turn, Fernando was ordered to pay Makati Motor Sales, Inc. the sum of P66,998.34, as
the balance of the price of the two trucks, with twelve percent interest from February 28,
1969 until fully paid and the further sum of P15,730.20 as the cost of the repair with six
percent interest from September 11, 1970 until fully paid.
Makati Motor Sales, Inc. appealed to the Court of Appeals. It affirmed the lower court's
judgment in its decision of March 1, 1977 in CA-G. R. No. 54196-R.
Meanwhile, on May 11, 1973, or before the elevation of the record to the Court of Appeals,
Fernando filed in the trial court an application for damages against the replevin bond. It
was opposed by the surety on the ground that the trial court had lost jurisdiction over the
case because of the perfection of the appeal. The trial court denied the application on June
28, 1973.
On May 27, 1974 Fernando filed in the Court of Appeals his claim for damages against the
replevin bond. He prayed that the same be included in the judgment. The surety, which
was furnished with a copy of the claim, filed an opposition to it.

The Court of Appeals did not act immediately on that claim but in its 1977 decision it
observed that Fernando's motion or claim "was correct" and it ordered that his claim
against Malayan Insurance Co., Inc. "be heard before the trial court". That decision
affirming the lower court's judgment became final and executory on March 18, 1977.
On April 6, 1977, or after the remand of the record to the trial court, Fernando filed a
motion to set for hearing his application for damages against the surety on its replevin
bond. The application was heard with notice to Makati Motor Sales, Inc. and Malayan
Insurance Co., Inc. Fernando submitted documentary evidence. On December 15, 1977
Malayan Insurance Co., Inc. moved to quash the proceeding regarding the claim for
damages. It contended that the trial court has no jurisdiction to alter or modify the final
judgment of the Court of Appeals.
The trial court in its order of July 14, 1978 denied the motion to quash. It directed Malayan
Insurance Co., Inc. to pay Fernando the damages which it had adjudged against Makati
Motor Sales, Inc. The surety company appealed from that order to this Court pursuant to
Republic Act No. 5440.
Section 10, Rule 60 of the Rules of Court provides that in replevin cases, as in receivership
and injunction cases, the damages "to be awarded to either party upon any bond filed by
the other" "shall be claimed, ascertained, and granted" in accordance with section 20 of
Rule 57 which reads:
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.
Under section 20, in order to recover damages on a replevin bond (or on a bond for
preliminary attachment, injunction or receivership) it is necessary (1) that the defendantclaimant has secured a favorable judgment in the main action, meaning that the plaintiff
has no cause of action and was not, therefore, entitled to the provisional remedy of
replevin; (2) that the application for damages, showing claimant's right thereto and the
amount thereof, be filed in the same action before trial or before appeal is perfected or
before the judgment becomes executory; (3) that due notice be given to the other party
and his surety or sureties, notice to the principal not being sufficient and (4) that there
should be a proper hearing and the award for damages should be included in the final
judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970, 974; 3 Moran's Comments on the

Rules of Court, 1970 Ed., pp. 54-56. See Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil.
699).
In this appeal, Malayan Insurance Co., Inc. contends that the trial court's judgment against
it is not warranted under section 20 of Rule 57. It assails the trial court's competence to
render judgment against the surety after the decision of the Court of Appeals against the
surety's principal had become final and executory.
We hold that the trial court has jurisdiction to pass upon Fernando's application for the
recovery of damages on the surety's replevin bond. The reason is that
Fernando seasonably filed his application for damages in the Court of Appeals. It was not
his fault that the damages claimed by him against the surety were not included in the
judgment of the Court of Appeals affirming the trial court's award of damages to Fernando
payable by the principal in the replevin bond. The peculiar factual situation of this case
makes it an exception to the settled rule that the surety's liability for damages should be
included in the final judgment to prevent duplicity of suits or proceedings.
As may be gathered from section 20 of Rule 57, the application for damages against the
surety must be filed (with notice to the surety) in the Court of First Instance before the trial
or before appeal is perfected or before the judgment becomes executory.
If an appeal is taken, the application must be filed in the appellate court but always before
the judgment of that court becomes executory so that the award may be included in its
judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976).
But it is not always mandatory that the appellate court should include in its judgment the
award of damages against the surety. Thus, it was held that where the application for
damages against the surety is seasonably made in the appellate court, "the latter must
either proceed to hear and decide the application or refer "it" to the trial court and allow it
to hear and decide the same"(Rivera vs. Talavera, 112 Phil. 209, 219).
We have stated earlier that in the instant case Fernando in 1974 made a timely claim in
the Court of Appeals for an award of damages against Malayan Insurance Co., Inc.
enforceable against its replevin bond. The surety was notified of that application. It
registered an opposition to the claim. The Court of Appeals did not resolve the claim
immediately but in its 1977 decision it directed the trial court to hear that claim.
Obviously, the lower court has no choice but to implement that directive which is the law
of the case (See Compagnie Franco Indochinoise vs. Deutsch, etc., 39 Phil. 474, 476).
However, the trial court's implementation of that directive was incorrect. It set the claim
for hearing but the surety assailed its jurisdiction and did not consider itself bound by the
mandate of the appellate court. The merits of the claim for damages were not threshed out
at the hearing because the surety stood pat on its contention that the trial court has no
jurisdiction to allow the claim in view of the finality of the decision of the Court of Appeals.
This Court has held that, if the surety was not given notice when the claim for damages
against the principal in the replevin bond was heard, then as a matter of procedural due
process the surety is entitled to be heard when the judgment for damages against the
principal is sought to be enforced against the surety's replevin bond.

The hearing win be summary and win be limited to such new defense, not previously set
up by the principal, as the surety may allege and offer to prove. The oral proof of damages
already adduced by the claimant may be reproduced without the necessity of retaking the
testimony, but the surety should be given an opportunity to cross-examine the witness or
witnesses if it so desires." That procedure would forestall the perpetration of fraud or
collusion against the surety (Visayan Surety and Insurance Corporation vs. Pascual, 85 Phil.
779, 785-786).
Inasmuch as in this case appellant Malayan Insurance Co., Inc. was not given the summary
hearing during which it could contest the reality or reasonableness of Fernando's claim for
damages, we have to set aside the trial court's order awarding damages against it and, in
the interest of justice, give it another opportunity to be heard on the merits of Fernando's
claim for damages.
Before closing, it may be useful to make a review and synthesis of the copious
jurisprudence on the surety's liability in attachment, injunction, replevin and receivership
bonds. It was observed in one case that once upon a time the rulings on that point were in
a muddled state.
Section 20 of Rule 57 is a revised version of section 20, Rule 59 of the 1940 Rules of Court
which earlier section 20 is a restatement of this Court's rulings under sections 170, 177,
223, 272 and 439 of the Code of Civil Procedure regarding the damages recoverable in
case of the wrongful issuance of the writs of preliminary injunction, attachment,
mandamus and replevin and the appointment of a receiver.
Section 170 contains the provision that the damages suffered in connection with the
issuance of a preliminary injunction shall be ascertained by the court trying the action
(meaning the court where the action is pending) and shall be included in the final
judgment "against the plaintiff and against the sureties". As to damages in case of
wrongful attachment, see section 439 of the Code of Civil Procedure and Belzunce vs.
Fernandez, 10 Phil. 452.
So, as held under the Code of Civil Procedure, if the preliminary injunction was issued by
this Court, the specification of damages should be filed in this Court. The petitioner and his
bondsmen should be served with copies of the specification (Somes vs. Crossfield, 9 Phil.
13 and Macatangay vs. Municipality of San Juan de Bocboc, 9 Phil. 19).
On the other hand, under section 439 of the Code of Civil Procedure, the damages caused
by a wrongful attachment may be adjudicated in a summary hearing but the better
practice would be to claim the damages in the answer and to offer evidence in support
thereof during the trial (Gasataya vs. Fallon 32 Phil. 245 and Raymundo vs. Carpio, 33 Phil.
395).
Note that under the second paragraph of section 20, Rule 57 of the present Rules of Court,
the damages suffered during the pendency of an appeal in a case where the writs of
attachment, injunction and replevin or an order of receivership were issued should be
claimed in the appellate court.
There is an old ruling that the sureties in an injunction bond are bound by a judgment for
damages against their principal even if the sureties were not heard at the time the claim

for damages was tried. The reason for that ruling is that the sureties in an injunction bond
"assume such a connection with the suit that they are included by a judgment in it in a suit
at law upon the bond, so far as the same issues are involved; and that, upon the entry of a
judgment against the principal, their liability is absolute" (Florentino vs. Domadag, 45 O.G.
4937, 81 Phil. 882).
Also, it was held that if damages were awarded against the principal in a replevin bond
without notice to the surety, that final judgment may be enforced against the surety after
it has been given an opportunity to be heard as to the reality or reasonableness of the
alleged damages. In such a case, the trial court must order the surety to show cause why
the bond should not answer for the judgment for damages. The hearing is summary and
the surety may cross-examine the witnesses presented by the defendant (Visayan Surety &
Insurance Corporation vs. Pascual, 85 Phil 779).
Insofar as those rulings in the Florentino and Visayan Surety cases allowed a claim for
damages against the surety to be ventilated in a separate proceeding or after the finality
of the judgment for damages against the principal in the bond, those rulings
were jettisoned and abandoned in several subsequent cases because they are contrary to
the explicit provision of section 20 of Rule 59, now Rule 57, that the judgment for damages
against the surety should be included in the final judgment to avoid additional proceedings
(Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil. 699; Japco vs. City of Manila, 48 Phil.
851, 855).
The damages are recoverable on the theory that an actionable wrong was committed by
the losing party. The recovery is limited to the amount of the bond (Pacis vs. Commission
on Elections, L-29026, August 22, 1969, 29 SCRA 24, 29).
The usual procedure is to file an application for damages with due notice to the other party
and his sureties. The other part may answer the application. Upon the issues thus being
Joined, the matter will be tried and determined. A court order declaring the bond
confiscated without adhering to that procedure is void ( Fabella vs. Tancinco 86 Phil. 543;
Luzon Sureo Inc. Guerrero, L-20705, June 20, 1966. 17 SCRA 100).
The claim for damages against the surety should be made it notice to the surety and
before the judgment against the principal becomes executory. The liability of the surety
should be included in the final judgment. That remedy is exclusive. If riot assailed of, the
surety is released (Curilan vs. Court of Appeals, 105 Phil. 1160 and De la Rama vs.
Villarosa, 118 Phil. 42-1. 430: Jesswani vs. Dialdas 91 Phil. 915: Estioco vs. Hamada, 103
Phil. 1145).
Therefore, the prevailing settled rule is that a court has no jurisdiction to entertain any
proceeding seeking to hold a surety upon its bond if such surety has not been given notice
the claim for damages against the principal and the judgment holding the latter liable has
already become executor (People's Surety & Insurance Co., Inc. vs. Court of Appeals, L21627. June 29, 1961, 20 SCRA 481).
If the judgment awarding damages against the principal in a bond for the lifting of a
preliminary injunction had already become executory, that claim cannot be pressed
against the surety by setting it for hearing with notice to the surety. The failure to notify
the surety of the claim for damages against the principal relieves the surety from any

liability on his bond (Sy vs. Ceniza, 115 Phil. 396; Pacis vs. Commission on Elections, L29026, August 22, 1969, 29 SCRA 24; Dee vs. Masloff, 116 Phil. 412).
To entertain the belated claim against the surety after the judgment for damages against
the principal has become executory would result in the alteration of that judgment. That
should not be done (De Guia vs. Alto Surety & Insurance Co., Inc., 117 Phil. 434; Visayan
Surety & Insurance Co., Inc. vs. De Aquino, 96 P1. 900; Port Motors, Inc. vs. Raposas and
Alto Surety & Insurance Co., Inc., 100 Phil. 732; Gerardo vs. Plaridel Surety & Insurance
Co., Inc., 100 Phil. 178; Luneta Motor Co. vs. Lopez, 105 Phil. 327; Curilan vs. Court of
Appeals, 105 Phil. 1160; Riel vs. Lacson, 104 Phil. 1055).
Moreover, the damages claimed by the defendant should be pleaded as a compulsory
counterclaim in his answer. Hence, a separate action to claim those damages is
unwarranted (Ty Tion and Yu vs. Marsman & Co. and Alpha Insurance & Surety Co., Inc.,
115 Phil. 746, 749; Medina vs. Maderera del Norte de Catanduanes, Inc., 51 Phil. 240;
Nueva-Espaa vs. Montelibano, 58 Phil. 807; Tan Suyco vs. Javier, 21 Phil. 82).
It may be noted that in the Visayan Surety case, 85 Phil 779, Visayan Surety & Insurance
Corporation filed a replevin bond for one Yu Sip who sued Victoria Pascual for the recovery
of a truck. The trial court found that the writ of replevin was wrongfully procured, that
Victoria Pascual was the lawful owner of the truck and that she suffered damages on
account of its wrongful seizure by the sheriff at the instance of plaintiff Yu Sip.
The trial court ordered Yu Sip to return the truck to Victoria Pascual or to pay its value of
P2,300 in case of his inability to return it and, in either case, to pay thirty pesos daily from
January 6, 1947 up to the date of the return of the truck or until its value was fully paid.
The Court of Appeals affirmed that judgment.
After the return of the record to the trial court, Victoria Pascual filed a "petition for
execution of the surety bond" wherein she prayed for a writ of execution against the surety
to satisfy the judgment out of its replevin bond. The surety opposed that petition. It
contended that it was never notified by Victoria Pascual regarding her presentation of
evidence covering the damages which she had suffered. The trial court granted the
petition and ordered the issuance of a writ of execution against the surety. That order was
assailed in a certiorari in this Court.
It was held that the writ of execution should be set aside and that the surety should be
given a chance to be heard in a summary proceeding. That proceeding was conducted
after the judgment against Yu Sip, the principal in the replevin bond, had become final and
executory.
What was done in the Visayan Surety case, as recounted above, was not allowed in
subsequent cases. Thus, inManila Underwriters Insurance Co., Inc. vs. Tan, 107 Phil. 911,
the trial court rendered in 1954 a judgment dissolving the preliminary attachment and
ordering the plaintiff to pay the defendant the damages which the latter suffered by reason
of the wrongful attachment. The surety in the attachment bond was not notified of the
hearing but it was furnished with a copy of the decision.
In 1957 the Court of Appeals affirmed that judgment. After it became final, the defendant
filed in the trial court against the surety a motion for execution winch the latter opposed.

At the hearing of the motion, the defendant offered to reproduce the evidence which he
had presented at the trial. The offer was accepted by the trial court. It issued the writ of
execution against the surety.
It was held that, because the surety was not notified of the hearing on the damages
suffered by the defendant in the manner prescribed in section 20 of Rule 59, now Rule 57,
it was not liable for damages under its attachment bond.
The surety is notified so that he may cross-examine the witnesses testifying as to the
damages and question the evidence presented by the claimant and interpose any
appropriate defense (Riel vs. Lacson, 104 Phil. 1055; Liberty Construction Supply Co. vs.
Pecson, 89 Phil. 50).
So, if plaintiff's claim for damages resulting from the wrongful lifting of the writ of
preliminary injunction was awarded in the main decision without notice to the surety and
the decision had become executory, the failure to notify the surety on time relieves him
from liability under the bond (Alliance Insurance & Surety Co., Inc. vs. Piccio, 105 Phil.
1192).
The surety may be held liable only if before the judgment for damages against the
principal becomes executory, an order is entered against him after a hearing with notice to
him. After the judgment becomes executory, it is too late to file such claim for damages
with notice to the surety (Abelow vs. Riva 105 Phil. 159; Visayan Surety & Insurance Corp.
vs. Lacson, 96 Phil. 878).
Where the Court of Appeals dismissed a mandamus action originally filed in that court and
dissolved the preliminary injunction which it had issued and after entry of judgment was
made the record was remanded to the trial court, it was error for the Court of Appeals to
allow the respondent in that case to file a claim for damages against the principal and
surety in the injunction bond. The claim should have been filed before the judgment of
dismissal became final (Luzon Surety Co. Inc. vs. Court of Appeals, 108 Phil. 157).
Section 20 of Rule 57 contemplates one judgment for damages against the principal and
the surety in the injunction, replevin, attachment and receivership bonds. Since the judicial
bondsman has no right to demand the exhaustion of the property of the principal debtor,
there is no justification for entering separate judgments against them. The claim for
damages against the surety should be made before entry of judgment (Del Rosario vs.
Nava, 95 Phil. 637).

In another case, it was held that as the winning party sought to hold the surety liable on its
replevin bond almost a year after the judgment of the Court of Appeals became final, the
trial court erred in enforcing its judgment against the surety. "The surety may only be held
liable if, before judgment becomes final, an order against the surety is entered after a
hearing with notice to the surety". The claim against the surety should be included in the
final judgment. It is not sufficient that the surety be afforded an opportunity to oppose the
writ of execution. (Plaridel Surety & Insurance Company vs. De los Angeles, L-25550, July
31, 1968, 24 SCRA 487).
After this Court's judgment dissolving a preliminary injunction had become final and
executory, it would be too late to entertain in the trial court the defendant's application for
damages allegedly caused by the injunction (Santos vs. Moir 36 Phil. 350).
The defendant in a replevin case cannot file a separate action for damages due to the
wrongful issuance of the writ. He should have claimed the damages as a counterclaim in
the original replevin suit (Pascua vs. Sideco 24 Phil. 26, Ty Tion and Yu vs. Marsman & Co.
and Alpha Ins. & Surety Co. Inc., 115 Phil. 746).
A final judgment for damages against the principal in a replevin bond cannot be enforced
against the surety company which was not notified of the claim for damages and was not
afforded a chance to be heard (People's Surety and Ins. Co., Inc. vs. Aragon, 117 Phil, 257).
Where an injunction was dissolved and only attorney's fees and costs were adjudged
against the principal, and the procedure for claiming damages against the surety was not
followed, no recourse could be had against the injunction bond in case the writ of
execution against the principal was not satisfied. Moreover, the attorney's fees and costs
could be recovered from the principal even without the filing of the bond (People's Surety &
Insurance Co., Inc. vs. Bayona, 103 Phil. 1109).
Where after the dismissal of a petition for relief from the judgment of a municipal court,
the Court of First Instance ordered ex parte the issuance of a writ of execution against the
petitioner's injunction bond, that order is void because there was no formal claim for
damages and there was no hearing with notice to the petitioner and his surety. The court
should hold a hearing. (Luzon Surety Co., Inc. vs. Guerrero, L-20705, June 20, 1966, 17
SCRA 400).

In the Del Rosario case a judgment for damages was rendered against the principal in an
attachment bond but there was no notice to the surety of the claim for damages. That
judgment became final. After the execution against the principal was returned unsatisfied,
the claimant filed a motion praying that the surety company be required to show cause
why it should not answer for the judgment against the principal.

Where on June 11, 1959 an action to stop the foreclosure of a chattel mortgage was
dismissed, without prejudice, for failure to prosecute and, before that dismissal became
final, the defendant did not prove any damages resulting from the issuance of the
preliminary injunction, defendant's motion of September 7, 1959 praying that judgment be
rendered against the surety's bond could no longer be entertained. The claim for damages
should have been made before entry of final judgment. It must be duly substantiated at
the proper hearing with notice to the surety (Jao and Sia vs. Royal Financing Corporation,
114 Phil. 1152; Visayan Surety & Insurance Corp. vs. Lacson, 96 Phil. 878).

It was held that, while the prevailing party may apply for an award of damages against the
surety even after the award has already been obtained against the principal, nevertheless,
in order that all awards for damages may be included in the final judgment, the application
and notice to the surety must be made before the judgment against the principal becomes
final and executory.

If the case wherein the injunction was issued was dismissed for failure to prosecute and no
damages were awarded to the defendant by reason of the issuance of the injunction, it was
error for the trial court to issue a writ of execution against the surety since there was no
claim nor evidence of damages suffered the defendant. The order of dismissal did not
include in final of damages. (Vet Bros. and Co., Inc. vs. Movido 11 4 Phil, 211).

The case of Vadil vs. De Venecia, 118 Phil. 1217, involves a queer situation. Plaintiff
corporation in that case filed an action to recover a sum of money. It asked for a writ of
attachment. Before any attachment could be issued, the defendant filed a counterbond.
But this bond provided that the defendant and his sureties would pay "all damages that
the defendant (sic) may suffer by reason of" the attachment. In other words, the defendant
executed a bond in favor of himself.
Judgment was rendered for the plaintiff. As the execution was returned unsatisfied, the trial
court on plaintiff's motion ordered execution against defendant's bond. It was held that the
execution was wrongfully issued.
However, where an injunction was issued in a forcible entry case but on certiorari to the
Court of First Instance, the justice of the peace court was held to be without jurisdiction to
entertain the ejectment case, that ejectment suit is not considered dismissed and it may
still be regarded as pending in the justice of the peace court for the purpose of allowing
the defendant's claim for damages on the injunction bond (Cruz vs. Manila Surety & Fidelity
Co., 92 Phil. 699).
Section 10 of Rule 60 makes section 20 of Rule 57 applicable not only to the replevin bond
but also to theredelivery bond posted by the defendant for the lifting of the order of
seizure. The requisites for holding the surety liable on the replevin bond are also the
requisites for holding the surety hable on the redelivery bond. So, if the surety on
the redelivery bond was not notified of the plaintiff's claim for damages, the surety cannot
be held liable on its redelivery bond for the damages adjudged against the principal. It is
necessary that the surety be notified and that its liability be included in the final judgment
against the principal (Luneta Motor Co. vs. Menendez 117 Phil. 970).
The writ of execution issued against the counterbond for the dissolution of an injunction is
void if it was issued without notice to the surety and after the judgment on the merits had
become executory. The surety's liability should have been included in the final judgment
(Cajefe vs. Fernandez, 109 Phil. 743).
If the judgment awarding damages against the principals in the counterbonds filed for the
lifting of the receivership was appealed to the Court of Appeals and the plaintiff-appellee
filed in the trial court (not in the appellate court) his application for damages against the
sureties in the counterbonds, the trial court cannot hear the said application after the
record is remanded to it because, by then, the decision of the appellate court had become
final and the damages to be awarded against the sureties could no longer be included in
that judgment. The application for damages against the sureties should have been filed in
the Court of Appeals (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976).
The procedure in section 20 of Rule 57 should not be confounded with the procedure in
section 17 of the same rule regarding the surety's liability on the counterbond for the
lifting of the preliminary attachment. Under section 17, the surety may be held liable after
notice and summary hearing conducted after the judgment had become executory and the
execution was returned unsatisfied (Towers Assurance Corporation vs. Ororama Supermart,
L-45848, November 9, 1977, 80 SCRA 262; Vanguard Assurance Corporation vs. Court of
Appeals, L-25921, May 27, 1975, 64 SCRA 148).

The case contemplated in section 17 of Rule 57 is different from the case envisaged in
section 20 of that rule (Dizon vs. Valdes, L-23920, April 25, 1968, 23 SCRA 200; Visayan
Surety & Insurance Corp. vs. De Aquino, 96 Phil. 900).
Nor does section 20 of Rule 57 apply to cases where the surety bound himself to abide by
the judgment against his principal and thereby renounced his right to be sued or cited, or
where the surety guaranteed the return of certain goods and he did not raise the issue of
lack of notice, or where the sureties bound themselves to pay the plaintiff a definite
amount (Aguasin vs. Velasquez, 88 Phil. 357; Lawyers Cooperative Publishing Co. vs.
Periquet, 71 Phil. 204; Mercado vs. Macapayag and Pineda, 69 Phil. 403 cited in Alliance
Insurance case, 105 Phil. 1201).
Note that a different rule also obtains with respect to the surety in the bond of an
administrator or executor The nature of a surety's obligation on an administrator's bond,
which makes him privy to the proceeding against his principal, is such that he is bound and
concluded, in the absence of fraud or collusion, by a judgment against his principal, even
though the surety was not a party to the proceedings (Laurente vs. Rizal Surety &
Insurance Co., Inc., L-21250, March 31, 1966, 16 SCRA 551, citing Philippine Trust Co. vs.
Luzon Surety Co., Inc., 112 Phil. 44. See Cosme de Mendoza vs. Pacheco and Cordero, 64
Phil. 34).
It should be underscored that in the instant case, although the surety's liability was not
included in the final judgment, which became executory, nevertheless, there was a timely
application for damages in the Court of Appeals which in its decision ordered the trial court
to hear defendant-appellee Fernando's claim for damages against the surety. That feature
of the case removes it from the coverage of the rule that the surety should be heard before
the judgment becomes executory and that his liability should be included in the final
judgment.
WHEREFORE, we hold that the trial court has jurisdiction to comply with the directive of the
Court of Appeals but we reverse and set aside its order of July 14, 1978, requiring
petitioner-appellant Malayan Insurance Co., Inc. to pay the damages which it had adjudged
against Makati Motor Sales, Inc.
The trial court is required to hold a summary hearing wherein appellant surety should be
given a chance to contest the reality or reasonableness of respondent-appellee Rosendo
Fernando's claim for damages. After such hearing, or if the surety should waive it, the trial
court should render the proper judgment. No costs.
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 attorney's fees and costs.
On appeal to the Court of Appeals by the defendants, 2 however, this judgment was
reversed. The decision of the Appellate Tribunal, promulgated on December 10, 1986,
disposed as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and Civil
Case No. 43874 of the Regional Trial Court of Pasig is DISMISSED for lack of merit. For the
wrongful attachment of Learjet aircraft 35A-44 owned by defendant-appellant Gates
Learjet Corporation, plaintiff-appellee Learjet Philippines, Inc. is hereby ordered to pay to
the former by way of actual damages the amount of $73,179-36, P50,000.00 as exemplary
damages, and the costs of the suit.
On December 16, 1986 four days after notice of the judgment was served on the
defendants, they filed with the Court of Appeals an "Urgent Petition to have Damages
Awarded on Account of Illegal Attachment Executed Against Attachment Bond Issued by
the T.J. Philippine American Assurance Co., Inc., Now Pan-Philippines General Insurance
Corporation." The petition adverted to the attachment bond posted by the surety firm in
the amount of P2,000,000.00, and asked that the "damages awarded defendantsappellants by reason of the wrongful attachment be enforced, after proper notice to
plaintiff and its bondsman and hearing of ... (the) application, jointly and severally against
both the plaintiff and the bonds-man-surety ... ." A copy of the petition was furnished the
surety. The plaintiff, in its turn, filed a motion for reconsideration of the decision of
December 10, 1986.
By Resolution dated March 10, 1987, the Court of Appeals: 3 (1) denied the plaintiffs
motion for reconsideration for lack of merit; and (2) NOTED "defendants-appellants'

application or claim for damages against the surety" and RESOLVED "to refer the Said
claim or application to the trial court and allow the latter to hear and decide the same
pursuant to Section 20, Rule 57 of the Rules of Court."
The plaintiff tried to have the Appellate Court's decision reviewed and reversed by us, but
failed. 4 We denied its petition for review by resolution dated August 10, 1987; and entry of
the resolution was made on February 26, 1988.
On remand of the case to the Trial Court, the defendants filed an "Urgent Petition to Have
Damages Awarded on Account of Illegal Attachment Executed Against Attachment Bond
Issued by the Surety Philippine American Assurance Co., Inc., now Pan-Philippines General
Insurance Corporation" dated December 16, 1986. The Court ordered execution of the
judgment "against the plaintiff at Suite 10 Prescon Strata 100 Emerald Avenue, Pasig,
Metro Manila" in accordance with the Rules. The writ issued on April 8, 1988.
Evidently, the sheriff sought to enforce the writ also against the surety, "Philippine Charter
Insurance Corporation ... (formerly Pan-Philippines General Insurance Corporation)." Said
surety thereupon filed with the Trial Court an "Urgent Motion to Recall against Nullify
Sheriffs Notice of Enforcement of Writ of Execution, and for Issuance of Restraining
Order/Writ of Restraining Injunction." It contended that there was in truth no judgment
against it "due to the wrongful attachment of ... (the defendants') Learjet Aircraft 35A-44,"
that since neither Section 20, Rule 57 of the Rules of Court nor the Resolution of the Court
of Appeals of March 10, 1987 had been complied with, there existed no award of damages
against it under its attachment bond, and enforcement of execution against said bond
would be contrary to due process.
The Trial Court forthwith restrained enforcement of the writ of execution against the surety
and set the surety's motion for hearing in the morning of May 27, 1988. After receiving the
parties' arguments, the Court promulgated an Order on June 14, 1988 overruling the
movant surety's argument that it (the Court) had lost competence to hear and determine
the application or damages against the attachment bond because the judgment of the
Court of Appeals had become final and executory. The Court observed that:
What is contemplated under Section 20, Rule 57, is that if no application for damages is
made before the entry of the final judgment the surety on the bond is relieved from liability
therefor. (Visayan Surety and Insurance Corporation v. Pascual [85 Phil. 779], citing
Facundo vs. Tan and Facundo vs. Lim). In the case at bar, an application was made before
the entry of final judgment ... . What was merely deferred was the hearing of said
application before the trial court. In fact, said application was duly noted by the Honorable
Court of Appeals in its resolution. Hence, an application for damages was filed in time.
Considering the foregoing, and in order to determine the extent of the liability of both
principal and surety on the attachment bond, a hearing is necessary.
The Court also resolved to issue, upon a bond of Pl,000,000.00, a writ of preliminary
injunction restraining the sheriffs from enforcing the writ of execution or otherwise
executing the judgment against the surety "until the application for damages on the
attachment bond is heard and decided;" and set the hearing on the matter on August 9,
1988.

The surety moved for reconsideration, but its motion was denied by Order handed down on
October 13, 1988. The surety then went to the Court of Appeals again, where it sought
annulment of the Trial Court's Orders of June 14, 1988 and October 13, 1988. Its petition
for certiorari, prohibition and preliminary injunction, filed on November 3, 1988, was
docketed as CA-G.R. No. SP No. 15987. In it the surety argued that it had been denied its
day in court when, without its being present at the trial, the defendants had "adduced
evidence in support of ... (the) damages" eventually awarded by the Court of Appeals; that
said defendants had "fatally failed to file an application for damages on account of the
wrongful attachment," and consequently, the Court had "no more jurisdiction to set for
hearing ... (the) urgent petition" (to have damages awarded on account of illegal
attachment executed against attachment bond, etc.).
The Appellate Court's verdict however again went against the surety. By Decision
promulgated on March 8, 1 989,5 the petition was "DENIED DUE COURSE." According to the
Court, (1) the "general prayer" in the petition (to hold surety liable on its bond) dated
December 16,1986 "for such further reliefs justified in the premises" was "broad enough to
include and embrace an application or claim for whatever damages movants sustained
during the pendency of the appeal, by reason of ... "the wrongful attachment ...", (2) such
a finding was consistent with "Supreme Court rulings' and the earlier "Resolution of March
10, 1987" noting "defendants-appellants' application or claim for damages against the
surety" and referring it "to the, trial court ... pursuant to Section 20, Rule 57 of the Rules of
Court;" and (3) "what must have been contemplated ... (in said application or claim for
damages) were not 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 CA-G.R. CV No. 08585." The surety's
motion for reconsideration dated March 28, 1989 was denied by Resolution dated May 17,
1989.
The surety is once again before us, 7 this time praying for reversal of the Appellate
Tribunal's aforesaid judgment of March 8, 1989. Once again it will fail, no merit being
discerned in its petition for review on certiorari.
By settled rule a writ of preliminary attachment may issue once the Court is satisfied, on
consideration ex parte of the application and its supporting affidavits and documents, 8 or
after healing, as the court may in its discretion consider proper, that any of the grounds
specified by law exists, and an acceptable bond is given by the applicant 9
... executed to the adverse party in an amount ... fixed by the judge, not exceeding the
applicant's claim, conditioned that the latter will pay all the costs which may be adjudged
to the adverse party and all damages which he may sustain by reason of the attachment, if
the court shall finally adjudge that the applicant was not entitled thereto.
The filing of the attachment bond by a surety undoubtedly connotes and operates as a
voluntary submission by it to the Court's jurisdiction, and of course binds it to faithfully
comply with its specific obligations under its bond.

The surety does not, to be sure, become liable on its bond simply because judgment is
subsequently rendered against the party who obtained the preliminary attachment. The
surety becomes liable only when and if "the court shall finally adjudge that the applicant
was not entitled to the attachment." This is so regardless of the nature and character of
the judgment on the merits of the principal claims, counterclaims or cross-claims, etc.
asserted by the parties against each other. Indeed, since an applicant's cause of action
may be entirely different from the ground relied upon by him for a preliminary
attachment, 10 it may well be that although the evidence warrants judgment in favor of
said applicant, the proofs may nevertheless also establish that said applicant's proferred
ground for attachment was inexistent or specious and hence, the writ should not have
issued at all; i.e., he was not entitled thereto in the first place. In that event, the final
verdict should logically award to the applicant the relief sought in his basic pleading, but at
the same time sentence him usually on the basis of a counterclaim to pay damages
caused to his adversary by the wronful attachment. 11
When the final judgment declares that the party at whose instance an attachment had
issued was not entitled thereto, there is no question about the eminent propriety of
condemning that party to the payment of all the damages that the wrongful attachment
had caused to the party whose property had been seized under the attachment writ.
But what of the surety's liability? The surety on an attachment bond, as already pointed
out, assures that the applicant "will pay all the costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the attachment, if the
court shall finally adjudge that the applicant was not entitled thereto." 12 In other words the
surety, by submitting its attachment bond, binds itself solidarily to make the same
payments which its principal the party at whose instance the attachment issues may
be condemned to make, to compensate for the damages resulting from the wrongful
attachment, although unlike its principal, its liability is limited to the amount stated in its
bond.
The final adjudication "that the applicant was not entitled" to the attachment, standing
alone, does not suffice to make the surety liable. It is necessary, in addition, that the
surety be accorded due process, i.e., that it be given an opportunity to be heard on the
question of its solidarily liability for damages arising from wrongful attachment. This, by
established rule and practice, is accorded to the surety at a summary hearing, scheduled
after, judgment on presentation of an application to hold it answerable on its bond.
Evidently, such a summary hearing is not rendered unnecessary or superfluous by the fact
that the matter of damages was among the issues tried during the hearings on the merits,
unless of course, the surety had previously been duly impleaded as a party, or otherwise
earlier notified and given opportunity to be present and ventilate its side on the matter
during the trial. The procedure for the rendition of a binding directive on the surety upon
its solidarily liability for damages for wrongful attachment is indicated in Section 20, Rule
5'7 of the Rules of Court. The section reads as follows:
Sec. 20. Claim for damages on account of illegal attachment. If the judgment on the
action be in favor of the party against whom attachment was issued, he may recover upon
the bond given or deposit made by the attaching creditor,, any damages resulting from the
attachment. Such damages may be awarded only upon application and after proper
hearing, and shall be included in the final judgment. The application must be filed before

the trial or before appeal is perfected or before the judgment becomes executory, with due
notice to the attaching creditor and his surety or sureties, setting forth the facts showing
his right to damages and the amount thereof.
If the judgment of the appellate court be favorable to the party against whom the
attachment was issued, he must claim damages sustained during the pendency of the
appeal by filing an application with notice to the party in whose favor the attachment was
issued or his surety or sureties. before the judgment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the
trial court.
Certain principles are derived from this provision of the Rules. A party against whom a writ
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 Court's decision had gone against the defendants, and no
irregularity had been adjudged as regards the preliminary attachment, the latter obviously
had no occasion to apply for damages from wrongful attachment although they could
have so applied therefor because, as already pointed out, it is entirely possible under the
law that an applicant for preliminary attachment be adjudged entitled to relief on his basic
claimand at the same time pronounced as not entitled to the attachment.
As things turned out, the Trial Court's judgment was reversed by the Court of Appeals; the
latter dismissed the complaint, declared the plaintiff not entitled to the attachment and
sentenced it to pay to the defendants damages on account thereof And it was only at this
time that the defendants could have presented and did actually present their petition to
enforce the surety's liability on its bond. This petition, as aforestated, the Court of Appeals
(a) noted and (b) referred to the Trial Court with instructions "to hear and decide ...
pursuant to Section 20, Rule 57 of the Rules of Court." Under the circumstances, and in the
light of the explicit provisions of said Section 20, Rule 57, there can be no debate about the
seasonablenes of the defendants' application for damages and the correctness of the
referral by the Court of Appeals of the application for damages to the Trial Court for
hearing and determination.
Under the circumstances, too, there can be no gainsaying the surety's full awareness of its
undertakings under its bond: that, as the law puts it: "the plaintiff will pay all costs which
may be adjudged to the defendant(s), and all damages which may be sustained by reason
of the attachment, if the same shall finally be adjudged to have been wrongful and without
cause," and that those damages plainly comprehended not only those sustained during the
trial of the action but also those during the pendency of the appeal. This is the law, 13 and
this is how the surety's liability should be understood. The surety's liability may be
enforced whether the application for damages for wrongful attachment be submitted in the

original proceedings before the Trial Court, or on appeal, so long as the judgment has not
become executory. The surety's liability is not and cannot be limited to the damages
caused by the improper attachment only during the pendency of the appeal. That would be
absurb. The plain and patent intendment of the law is that the surety shall answer for all
damages that the party may suffer as a result of the illicit attachment, for all the time that
the attachment was in force; from levy to dissolution. The fact that the attachment was
initially (and erroneously) deemed correct by the Trial Court, and it was only on appeal that
it was pronounced improper, cannot restrict recovery on the bond only to such damages as
might have been sustained during the appeal. The declaration by the appellate court that
the applicant for attachment "was not entitled thereto," signifies that the attachment
should not have issued in the first place, that somehow the Trial Court had been misled
into issuing the writ although no proper ground existed therefor. The logical and inevitable
conclusion is that the applicant for attachment and the surety on the attachment bond are
solidarily liable for all the damages suffered by the party against whom the writ is
enforced, except only that the surety's liability is limited to the amount set forth in its
bond.
The fact that the second paragraph of the rule speaks only of "damages sustained during
the pendency of the appeal" is of no moment; it obviously proceeds from the assumption
in the first paragraph that the award for the damages suffered during the pendency of the
case in the trial court was in fact "included in the final judgment" (or applied for therein
before the appeal was perfected or the judgment became executory); hence, it states that
the damages additionally suffered thereafter, i.e., during the pendency of the appeal,
should be claimed before the judgment of the appellate tribunal becomes executory. It
however bears repeating that where, as in the case at bar, the judgment of the Trial Court
has expressly or impliedly sustained the attachment and thus has given rise to no occasion
to speak of, much less, file an application for damages for wrongful attachment, and it is
only in the decision of the Court of Appeals that the attachment is declared wrongful and
that the applicant "was not entitled thereto," the rule is, as it should be, that it is entirely
proper at this time for the application for damages for such wrongful attachment to be filed
i.e., for all the damages sustained thereby, during all the time that it was in force, not
only during the pendency of the appeal. And the application must be filed "with notice to
the party in whose favor the attachment was issued or his surety or sureties, before the
judgment of the appellate court becomes executory." In such a situation, the appellate
court may resolve the application itself or allow it "to be heard and decided by the trial
court."
WHEREFORE, the petition is DISMISSED for lack of merit, the costs against the petitioner.
SO ORDERED.

G.R. No. L-29723 July 14, 1988


ANTONIO ZARAGOZA, plaintiff-appellee,
vs.
MARIA ANGELA FIDELINO and/or "JOHN DOE," defendants MABINI INSURANCE &
FIDELITY CO., INC.,surety-appellant.

NARVASA, J.:
Involved in this appeal is no more than the procedure to hold a surety hable upon a
counter-bond posted by it for the release of an automobile seized from a defendant in
a replevin action under a writ issued by the Trial Court at the plaintiffs instance.
The suit for the replevy of the car was brought by Antonio Zaragoza in the Court of First
Instance at Quezon City 1against Ma. Angela Fidelino and/or John Doe. His complaint
alleged that the car had been sold to Fidelino but the latter had failed to pay the price in
the manner stipulated in their agreement. The car was taken from Fidelino's possession by
the sheriff on the strength of a writ of delivery 2 but was promptly returned to her on orders
of the Court when a surety bond for the car's releases 3 was posted in her behalf "by
Mabini Insurance & Fidelity Co., Inc.
The action resulted in a judgment
follows:

for the plaintiff the dispositive part of which reads as

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay to the plaintiff the sum of P19,417.46, representing
the balance of the purchase price of the car sold including interest thereon, collection
charges, notarial fees and sheriffs fees and expenses in conn with the recovery of the
vehicle sold; to pay liquidated damage in the amount of P6,471.84 equivalent to 33 1/3 %
of the balance outstanding and to pay the costs of this suit.
Within the reglementary period for taking an appeal, Zaragoza moved for the amendment
of the decision so as to include the surety, Mabini Insurance & Fidelity Co., Inc., as a party
solidarily liable with the defendant for the payment of the sums awarded in the
judgment. 5 Despite having been duly furnished with copies of the motion and the notice of
hearing, neither Fidelino nor the surety company filed any opposition to the motion, nor did
either of them appear at the hearing thereof. 6 The Trial Court deemed the motion
meritorious and granted it. Its Order of April 16, 1968 7 decreed the following:
WHEREFORE, the motion is hereby granted, and the dispositive portion of the decision in
this case is hereby amended to read as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, ordering defendant Maria Angela Fidelino and her surety, the Mabini Insurance
& Fidelity Co., Inc., to pay jointly and severally to the plaintiff the sum of P19,417.46,
representing the balance of the purchase price of the car sold, including interests thereon,
collection charges, notarial fees and sheriffs fees and expenses in connection with the
recovery of the vehicle sold, liquidated damages in the amount of P6,471.84 equivalent to
33 1/3% of the balance outstanding and to pay the costs of this suit.

No motion for reconsideration was filed or appeal taken by the defendant Fidelino as
regards either the original or the amended decision. It was the surety which presented a
motion for reconsideration, and upon its denial, appealed to this Court. 8 It ascribes to the
Court a quo, as might be expected, reversible error in amending the judgment in the
manner just described. It argues that the Lower Court never acquired jurisdiction over it
since no summons was ever served on it, its filing of a counter-bond not being equivalent
to voluntary submission to the Court's jurisdiction; Zaragoza failed to make a proper
application with notice before finality of the decision as provided by Section 20, Rule 57 of
the Rules of Court; and when the order amending the judgment was promulgated, the
judgment had already become final, the running of the period of appeal not having been
suspended by Zaragoza's motion to amend decision, 9 and so, the Court no longer had
authority to amend it on April 16, 1968.
The appellant surety deposits quite correctly, that the situation at bar is governed by
Section 10, Rule 60, in relation to Section 20, Rule 57, of the Rules of Court. Section 10,
Rule 60, provides as follows:
SEC. 10. Judgment to include recovery against sureties. The amount, if any, to be
awarded to either party upon any bond filed by the other in accordance with the provisions
of this rule, shag be claimed, ascertained, and granted under the same procedure as
prescribed in section 20 of Rule 57.
And Section 20, Rule 57 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
xxx xxx xxx

10

It would seem at first blush that Section 20, Rule 57 above quoted is not relevant. Its title
and first sentence speak [1] of an illegal attachment, and [2] of a judgment "in favor of the
party against whom (said illegal) attachment was issued." In the case at bar, the writ of
delivery was not illegal; and the judgment was for, not against, the party in whose favor
the writ of delivery was issued. In other words, it would appear that for Section 20, Rule 57
to apply to the instant action," 11 the judgment should have been "in favor of" defendant
Fidelino (the party "against whom" the writ of delivery was issued). This however was not
the case. The judgment was in fact against, NOT in favor of Fidelino.
It thus sums indeed that the first sentence of Section 20 precludes recovery of damages by
a party against whom an attachment is issued and enforced if the judgment be adverse to
him. This is not however correct. Although a party be adjudged liable to another, ff it be
established that the attachment issued at the latter's instance was wrongful and the
former had suffered injury thereby, recovery for damages may be had by the party thus
prejudiced by the wrongful attachment, even if the judgment be adverse to him. Slight

reflection will show the validity of this proposition. For it is entirely possible for a plaintiff to
have a meritorious cause of action against a defendant but have no proper ground for a
preliminary attachment. In such a case, if the plaintiff nevertheless applies for and
somehow succeeds in obtaining an attachment, but is subsequently declared by final
judgment as not entitled thereto, and the defendant shows that he has suffered damages
by reason of the attachment, there can be no gainsaying that indemnification is justly due
the latter. So has this Court already had occasion to rule, inBaron v. David, 51 Phil. 1,
and Javellana v. D.O. Plaza Enterprises, 32 SCRA 26].
Be all this as it may, the second and third sentences of Section 20, Rule 57, in relation to
Section 10, Rule 60, are unquestionably relevant to the matter of the surety's liability upon
a counter-bond for the discharge of a writ of delivery in a replevin suit. 12 Under Section 10,
Rule 60 (which makes reference "to either party upon any bond filed by the other in
accordance with the provisions of this rule" [60]), the surety's liability for damages upon its
counter-bond should "W claimed, ascertained, and granted under the same procedure as
prescribed in section 20 of Rule 57; 13 and andd section 20 pertinently decrees that '(s)uch
damages may be awarded only upon application and after proper hearing, and shall be
included in the final judgment .. (which means 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." Stated otherwise, to hold a surety on a
counter-bond liable, what is entailed is (1) the filing of an application therefor with the
Court having jurisdiction of the action; (2) the presentation thereof before the judgment
becomes executory (or before the trial or before appeal is perfected); (3) the statement in
said application of the facts showing the applicant's right to damages and the amount
thereof, (4) the giving of due notice of the application to the attaching creditor and his
surety or sureties; and (5) the holding of a proper hearing at which the attaching creditor
and the sureties may be heard on the application. These requisites apply not only in cases
of seizure or deliveryunder Rule 60, but also in cases of preliminary injunctions under Rule
58, 14 and receiverships under Rule 59. 15
It should be stressed, however, that enforcement of a surety's liability on a counter-bond
given for the release of property seized under a writ of preliminary attachment is
governed, not by said Section 20, but by another specifically and specially dealing with the
matter; Section 17 of Rule 57, which reads as follows:
SEC. 17. When execution returned unsatiated, recovery had upon bond. If the execution
be returned unsatisfied in whole or in part, the surety or sureties on any counter-bond
given pursuant to the provisions of this rule to secure the payment of the judgment shall
become charged on such counter-bond, and bound to pay to the judgment creditor upon
demand, the amount due under the judgment, which amount may be recovered from such
surety or sureties after notice and summary hearing in the same action."
The record shows that the appellant surety company bound itself "jointly and
severally" with the defendant Fidelino"in the sum of PESOS FORTY EIGHT THOUSAND ONLY
(P48,000.00), Philippine Currency, which is double the value of the property stated in the
affidavit of the plaintiff, for the delivery thereof if such delivery is adjudged, or for the
payment of such sum to him as may be recovered against the defendant and the costs of
the action. 16

This being so, the appellant surety's liability attached upon the promulgation of the verdict
against Fidelino. All that was necessary to enforce the judgment against it was, as
aforestated, an application therefor with the Court, with due notice to the surety, and a
proper hearing, i.e., that it be formally notified that it was in truth being made responsible
for its co-principal's adjudicated prestation (in this case, the payment of the balance of the
purchase price of the automobile which could no longer be found and therefore could not
be ordered returned), 17 and an opportunity, at a hearing called for the purpose, to show to
the Court why it should not be adjudged so responsible. A separate action was not
necessary; it was in fact proscribed. 18 And again, the record shows substantial compliance
with these basic requirements, obviously imposed in deference to due process.
Appellant surety undoubtedly received copy of Zaragoza's Motion to Amend
Decision. 19 That motion made clear its purposethat the decision "be amended, or an
appropriate order be issued, to include .. (the surety) as a party jointly and severally liable
with the defendant to the extent of the sums awarded in the decision to be paid to
plaintiff'-as well as the basis thereof-the counter-bond filed by it by the explicit terms of
which it bound itself "jointly and severally (with the defendant) .. for the payment of such
sum to him (plaintiff) as may be recovered against the defendant and the cost of the
action." The motion contained, at the foot thereof, a "notice that on Saturday, March 23,
1968, at 8:30 a.m., or as soon thereafter as the matter may be heard, the .. (plaintiffs
counsel would) submit the foregoing motion for the consideration of the Court." And
likewise indubitable is the fact that, as the Court a quo has observed, "neither .. Fidelinos
counsel nor the surety company filed any opposition to said motion, nor did they appear in
the hearing of the motion on March 23, 1968 .. (for which reason) the motion was deemed
submitted for resolution." 20 The surety's omission to appear at the hearing despite notice
of course constituted a waiver of the right to be heard on the matter.
The surety's theory that never having been served with summons, it never came under the
Lower Court's jurisdiction, is untenable. The terms of the counter-bond voluntarily filed by
it in defendant's behalf leave no doubt of its assent to be bound by the Court's adjudgment
of the defendant's liability, i.e., its acceptance of the Court's jurisdiction. For in that
counterbond, it implicitly prayed for affirmative relief; the release of the seized car, in
consideration of which it explicitly bound itself solidarily with said defendant to answer for
the delivery of the car subject of the action "if such delivery is adjudged," i.e., commanded
by the Court's judgment, or "for the payment of such sum as may be recovered against the
defendant and the costs of the action," the reference to a possible future judgment against
the defendant, and necessarily against itself, being certain and unmistakable. The filing of
that bond was clearly an act of voluntary submission to the Court's authority, which is one
of the modes for the acquisition of jurisdiction over a party. 21
The same theory as that espoused by appellant surety in this case was, in substance,
passed upon and declared to be without merit in a 1962 decision of this Court, Dee v.
Masloff. 22 There, a surety on a counter-bond given to release property from receivership,
also sought to avoid liability by asserting that it was not a party to the case, had never
been made a party, and had not been notified of the trial. The Court overruled the
contention, and upheld the propriety of the amendment of the judgment which ordered the
appellant surety company to pay to the extent of its bond and jointly and severally with
defendant the judgment obligation. The Court ruled that since such "amended judgment
.. (had been) rendered after the appellant surety company as party jointly and severally

liable with the defendant .. for the damages already awarded to the appellees, to which the
appellant surety company filed its "Opposition" and "Rejoinder" to the "Reply to Opposition
filed by the appellees, without putting in issue the reasonableness of the amount awarded
for damages but confining itself to the defense in avoidance of liability on its bond that it
was not a party to the case and never made a party therein and was not notified of the
trial of the case, and that the appellees were guilty of laches, the requirement of hearing
was fully satisfied or complied with; .. (in any case,) appellant surety company never
prayed for an opportunity to present evidence in its behalf."
The appellant surety's last argument that by the time the Court amended its decision, the
decision had already become final, and therefore unalterable, is also untenable. The
motion for amendment of the decision was unquestionably in the nature of a motion for
reconsideration under Section 1 (c), Rule 37 of the Rules of Court which, having been filed
within "the period for perfecting an appeal," had the effect of interrupting said period of
appeal. 23
WHEREFORE, judgment is hereby rendered AFFIRMING in toto the Decision of the Court a
quo dated February 12, 1968, as amended by the Order of April 16, 1968. Costs against
the appellant surety.

G.R. No. L-57957 December 29, 1982


ZENITH INSURANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, HON. RICARDO J. FRANCISCO, as Presiding Judge of
Branch VI, Court of First Instance of Rizal, PROVINCIAL SHERIFF OF RIZAL JEZZER
BOTE, Deputy Sheriff of Rizal and PEDRO F. MEJORADA respondents.
Pelaez, Adriano & Gregorio Law Offices for petitioner.
AngeI R. Gonzales for respondents.

MELENCIO-HERRERA, J.:
The issue for resolution is the correctness of the Order for the issuance of the Alias Writ of
Execution by the Court of First Instance of Rizal, Branch VI, in Civil Case No. 9490, which
was affirmed by the Court of Appeals in CA-G.R. No. SP-12295, making petitioner Zenith
Insurance Corporation liable for more than the amount of the bond it had issued in favor of
its principal, William B. Murphy.
The controversy stemmed from the following facts:
On September 5, 1966, William B. Murphy filed a case for collection of a sum of money,
accounting and damages, in the Court of First Instance of Rizal, Branch VI, Pasig, against
private respondent Pedro Mejorada (Civil Case No. 9490). Murphy likewise prayed for a Writ
of Preliminary Attachment, which the Trial Court granted upon a bond of P250,000.00
issued by petitioner Zenith Insurance Corporation in favor of Murphy.
After hearing on the merits, the Trial Court rendered its Decision, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the plaintiff's Complaint dated September 3, 1966 and filed on September 5,
1966;
2. Declaring the Agreement dayed July 20, 1966 (Exhs. B and 30) null and void and without
any legal effect whatsoever.
3. Ordering the plaintiff to pay the defendant P250,000.00 for cash advances and
P146,092.48 for spare parts and materials
4. Ordering plaintiff to pay the defendant P330,000.00 representing unrealized profits;
5. Ordering plaintiff to pay defendant P20,000.00 by way of attorney's fees; and
6. On the action of defendant against the attachment bond ordering the plaintiff and the
respondent Zenith Insurance Corporation to pay the defendant, jointly and severally
against the attachment bond but not exceeding the amount secured thereby in the sum of
P250,000.00, the following amounts:

a. P67,822.65 as actual damages plus interest of 6o/o per annum on the yearly premiums
paid by the defendant on the two counterbounds posted, from their dates of payment until
satisfied by the plaintiff and/or his surety;
b. Actual damages representing the simple legal interest of 6% per annum on 93,336.85,
posted by the defendant in securing his initial counterbond for the same amount, from
September 12, 1966 when the writ of preliminary attachment was served on the
defendant's bank until January 8, 1970 when said writ was dissolved;
c. P30,000.00 as compensatory damages for injury to the business and goodwill of the
defendant;
d. P66,526.00 as compensatory damages for the unrealized value(s) of the properties of
the defendant which were sold in haste, or auctioned in public bidding(s) therefor;
e. P30,000.00 as moral damages;
f. P30,000.00 as exemplary or corrective damages; and
g. P20,000.00 as attorney's fees.
Plaintiff shall pay costs.
From the said Decision, Murphy and petitioner, as surety, appealed to the Court of Appeals
(CA-G.R. No. 53497-R). Pending appeal, and upon motion of respondent, judgment was
partially executed in the amount of P115 ,680.55
On May 22, 1979, the Court of Appeals rendered judgment affirming in toto the Decision of
the Trial Court, thus:
WHEREFORE, the decision appealed from being in accordance with law and evidence, the
same is AFFIRMED in toto subject to the partial execution in the sum of P115,680.55 earlier
enforced. No costs.
Murphy moved for reconsideration. This was denied by the Court of Appeals. Murphy then
appealed by way of certiorari to this Court (G.R. No. 53536). The petition was denied for
late filing in this Court's Resolution of June 13, 1980.
Thereafter, private respondent proceeded against the balance of petitioner's attachment
bond coverage, and collected P80,000.00 on July 24, 1980 and P54,319.45 on August 15,
1980, adding up to the full value of the bond of P250,000.00, including the amount of
P115,680.55 already partially executed. Private respondent acknowledged the last
payment on August 15, 1980 to be "in full satisfaction of the writ of execution issued."
On November 26, 1980, private respondent filed a Motion for the Issuance of an Alias Writ
of Execution to enforce the judgment award. The Trial Court initially denied alias execution
as against petitioner on January 26, 1981, reasoning that, in executing the judgment, only
the dispositive portion is to be looked into in the absence of such ambiguity as would
justify resort to the body of the Decision, and that as the judgment is clear, the liability of
petitioner is confined to the amount of the bond.

Private respondent moved for reconsideration. On April 9, 1981, the Trial Court issued the
questioned Order reconsidering its Order of January 26, 1981, and granting the Motion for
the issuance of an Alias Writ of Execution, petitioner's liability "not (being) limited to the
amount of the bond it has put up but includes all the actual and consequential damages
suffered by private respondent, there having intervened malice and bad faith" on
petitioner's part. Alias Writ was issued and served upon petitioner. The latter's cash deposit
at the Commercial Bank and Trust Company, Escolta Branch, and at the Philippine Bank of
Communications, Juan Luna Branch, were garnished.
Petitioner filed with the Court of Appeals, a Petition for "Certiorari and Prohibition with
Preliminary Mandatory Injunction" (CA-G.R. No. SP-12295) imputing grave abuse of
discretion to respondent Judge in the issuance of the Order of April 9, 1981 granting the
Alias Writ.
On May 21, 1981, respondent Court of Appeals upheld the Alias Writ of Execution,
petitioner's "solidary liability (having) been clearly pronounced by this Court in case CAG.R. No. 53497-R" when it held that petitioner is equally liable for all the damages that
resulted from the wrongful issuance of the writ (of attachment)." Petitioner moved for
reconsideration arguing that liability on the attachment bond is not to be confounded with
liability on the judgment, and that its liability cannot exceed the amount of the attachment
bond. Reconsideration was denied for lack of merit.
Petitioner filed the present Petition stating that respondent Judge acted without or in
excess of jurisdiction in issuing the Order for the issuance of the Alias Writ of Execution for
the further enforcement of the judgment against petitioner; and that respondent Court of
Appeals acted with grave abuse of discretion or erred in sustaining the said Order
considering that:
1) private respondent has been paid the full value of the P250,000.00 attachment bond
posted by petitioner for plaintiff, as required by the judgment and has, upon receipt of the
last installment completing such payment, acknowledged the same to be "in full
satisfaction of the writ of execution",
2) the alias writ of execution would have petitioner surety company satisfy, not the
judgment with respect to the damages resuming from the wrongful issuance of the writ of
attachment, but the judgment on the causes of action asserted by defendant (herein
private respondent) in his counterclaims against plaintiff;
3) the alias writ of execution would have petitioner surety company pay more than the
value of the attachment bond, in disregard of the express limitation in the judgment of its
liability to the value, of the bond as well as of settled jurisprudence."
On September 16, 1981, we issued a Temporary Restraining Order enjoining enforcement
of the Order dated April 9, 1981 and on November 4, 1981, we resolved to give due course
and required the filing of Memoranda by the parties, which they have done.
The only issue to be determined in this Petition is whether or not respondent Court
committed grave abuse of discretion in ordering the issuance of the Alias Writ of Execution
making petitioner solidarily liable for all costs and damages, or, for more than the amount
of its bond.

We find for petitioner.


Paragraph " 6 " of the dispositive portion of the Trial Court's Decision, which states:
6. On the action of the defendant against the attachment bond, ordering the plaintiff and
the respondent Zenith Insurance Corporation to pay defendant, jointly and severally
against the attachment bond but not exceeding the amount secured thereby in the sum of
P250,000.00 the following amounts:
xxx xxx xxx
is clear and correct. There is no ambiguity that would "justify resort to the entire contents
of the decision in order to determine the extent of the liability of a party litigant". 1 The
liability of petitioner is expressly limited to P250,000.00, the amount of the attachment
bond. "A guaranty is not presumed, it must be express and cannot extend to more than
what is stipulated therein." 2
It is true that in CA-G.R. No. 53497-R (the appeal from the Trial Court's Decision), petitioner
was pronounced "equally liable with its principal for all damages sustained resulting from
the wrongful issuance of the Writ (of Preliminary Attachment)". The phrase "all damages"
refers to those resulting from the undertaking itself. It does not mean that the surety is
answerable for all costs and damages that may be adjudged against its principal over the
above what is adjudged against it in the dispositive portion of the Decision, as it would be
unreasonable to expand debtor."
When a surety executes a bond, it does not guarantee that the plaintiff's cause of action is
meritorious, and that it will be responsible for all the costs that may be adjudicated against
its principal in case the action fails. 3 The extent of a surety's liability is determined only by
the clause of the contract of suretyship. 4 It cannot be extended by implication, beyond the
terms of the contract. 5
Specifically, this Court in Rocco vs. Meads supra ruled:
Liability on the bond is contractual in nature, and is ordinarily restricted to the obligation
expressly assumed therein. Liability on an attachment bond is created by, and rests on, its
stipulations. The obligor has a right to stand on the very terms of his contract, and his
liability will not be extended beyond the fair import of the words used; his liability is one
not to be extended by implication, and it will not be inferred that he agreed to do more
than that which is fairly expressed in the bond.
The ruling in PNB vs. Luzon Surety Co., Inc. 68 SCRA 207 (1975), which increased the
surety's liability beyond the maximum of the bond by making it liable to pay interest
because of its failure to pay its obligation on demand, does not apply in this case, because
petitioner herein has settled its obligation, and its liability had already been fully satisfied,
unlike in the cited case where the increased liability was "not because of the contract but
because of the default and the necessity of judicial collection. "
WHEREFORE, the Petition is hereby granted. The questioned Order of April 9, 1981 of the
Court of First Instance of Rizal, Branch VI, in Civil Case No. 9490, entitled William B.
Murphy vs. Pedro F. Mejorada defendant, and Zenith Insurance Corporation, Surety" and
the Decision of the Court of Appeals in CA-G.R. No. SP-12295, entitled "Zenith Insurance

Corporation vs. Hon. Judge Ricardo Francisco, et. al., are hereby REVERSED and SET ASIDE.
The "Temporary Restraining Order" heretofore issued is hereby made permanent.
No costs.
SO ORDERED.

G.R. No. L-12736

July 31, 1961

FRANCISCO L. LAZATIN, plaintiff-appellant,


vs.
ANGEL C. TWAO and GREGORIO T. CASTRO, defendants-appellees.
Leonardo Abola for plaintiff-appellant.
Manuel O. Chan for defendants-appellees.
PAREDES, J.:
The case at bar had its genesis in Civil Case No. 213, CFI, Manila, entitled "Angel C. Twao
and Gregorio T. Castro, plaintiffs, versus F. L. Lazatin, et al., defendants, Dionisio P. Tanglao,
Intervenor," for the recovery of P35,000.00, plus interest, realized in connection with the
purchase by them (plaintiffs and defendants) from the U.S. government, and the
subsequent sale, of some 225 auto-trucks. After trial, the CFI of Manila dismissed the
complaint as well as the intervention. The order of dismissal was taken to the Court of
Appeals (CA-G.R. No. 4533-R), which, on November 3, 1950, rendered judgment reversing
the said order and declaring that plaintiffs and defendants were co-owners in the business
of buying and selling surplus auto-trucks, and ordered the defendants (one of them
Lazatin) to pay to the plaintiff s therein, the sum of P10,000.00, with legal interest from the
filing of the complaint. The said decision became final; it was executed, with the levy of the
properties of defendant Lazatin and their subsequent sale at public auction, wherein the
plaintiffs Twao and Castro were the purchasers. Before the expiration of the redemption
period, on August 2, 1952, defendant Lazatin, deposited with the Sheriff of Pampanga the
sum of P13,849.88, redemption price. On August 9, 1952, the same Francisco Lazatin, filed
the present action, to recover from the same Twao and Castro the sum of P19,676.09,
supposedly a balance of the proceeds of auto-trucks, sold directly to purchasers by said
defendants. On the same date, plaintiff Lazatin, alleging that "there is no security
whatsoever for the payment of the amount claimed in the complaint and that the
defendant defendants are removing or are about to remove or dispose of their property
with intent to defraud their creditors, particularly the plaintiff," secured a writ of
attachment on the amount he deposited, and pursuant thereto, the Sheriff of Pampanga
refused to deliver the sum of P13,849.88, which should have been paid to the herein
defendants.
On August 12, 1952, the herein defendants filed an Urgent Motion to Dissolve the Writ of
Preliminary Attachment on the following grounds:
1. That the plaintiff has no cause of action because (a) the right of action, if any, has
prescribed, and (b) the cause of action is barred by a prior judgment; and
2. That the allegations in the petition for the issuance of the writ and in the affidavit in
support thereof are false.
On September 10, 1952, the lower court, after due hearing, dissolved the writ.
Subsequently, the defendants filed their answer and after the customary admissions and
denials, interposed as special defenses, the same grounds averred in the motion to lift the
writ and counterclaimed:

1. That the plaintiff herein has filed a clearly unfounded civil action against the herein
defendants as a result of which the latter had suffered actual or compensatory damages by
way of attorney's fees in the sum of P3,000.00
2. That as a result of the wrongful attachment and the false statements made by the
plaintiffs, under oath, in support of his Ex-Parte Petition for the Writ, the herein defendants
have suffered moral damages to the amount of P10,000.00
3. That the wrongful attachment against the properties and the sum of P13,849.88 had
caused actual damages to the herein defendants, represented by the legal interest on such
amount.
On May 9, 1953, plaintiff Lazatin died and on March 10, 1954, Gil Gotiangco was appointed
and qualified as administrator of plaintiff's estate.
On the date set for hearing, the defendants herein were granted, a preliminary hearing on
their special defenses (Sec. 5, Rule 8). The lower court on November 12, 1954, entered an
order, dismissing the complaint on the ground that it was barred by a prior judgment and
by the statute of limitations. At the same time, the Court set the case for hearing on
defendants' counterclaim. On October 28, 1955, the trial court rendered judgment,
ordering the estate of Lazatin to pay the defendants therein the following sums:
(1) P3,000.00 for the fees of Attorney Manuel O. Chan;
(2) P,500.00 for moral damages to each of the defendants;
(3) Six percent (6%) interest on the amount of P13,849.88 from August 6, 1952 until said
amount is actually delivered to and receipted by the defendants; and
(4) To pay the costs.
Judgment is also rendered against the Central Surety and Insurance Co., which is solidarily
liable with the Estate of the deceased plaintiff Francisco L. Lazatin on its bond for the sum
of P20,000.00, filed by said Company for the issuance on the writ of attachment for the
amounts mentioned in Nos. (2) and (3) of the dispositive part of this decision.
Upon appellant's request, the appeal was certified by the Court of Appeals to this Court, as
the issues involved therein are purely legal in character.
The law on damages is found on Title XVII of the Civil Code (Arts. 2195 to 2235). The rules
governing damages laid down in other laws, and the principles of the general law on
damages are adopted in so far as they are not in consistent with the Code (Arts. 2196 and
2198). Article 2197 mentions the kind of damages recoverable, among which are (1) actual
or compensatory and (2) moral Article 2219 provides that moral damages may be
recovered in the following and analogous cases . . . (3) malicious prosecution. There is an
abundance of case holding that the action to recover damages from the attachment
plaintiff, for the wrongful issuance and levy of an attachment (malicious attachment) is
identical or is analogous to the ordinary action for malicious prosecution (Eastern v. Bank
of Stockton, 66 Cal. 123, 56 Am. Rep. 77, 4 Pac. 1106; Robinson v. Kellum 6 Cal. 399; Grant
v. Moore, 29 Cal. 644; King v. Montgomery 50 Cal. 115; Gonzales v. Cobliner 68 Cal 151, 8
Pac. 697; Asevado v. Orr 100 Cal. 293, 34 Pac. 777). It may logically be inferred, therefore,

that in order hat moral damages may be recovered in connection with he writ of
attachment under consideration, malice is an essential ingredient thereof. In Songco v.
Sellner, 37 Phil. 154, where the evidence showed that defendant offered damages to his
credit, as a result of writ of attachment wrongfully issued, the Court declared that such
damages were remote and speculative and that there was no 'ending that the attachment
was maliciously sued out. In Aboitiz v. Da Silva, 45 Phil. 883, the Court refused to grant
damages for loss of reputation by reason of an improper attachment, on the ground that
there was no evidence from which malice on the part of the plaintiff or loss of credit to the
defendant, may be inferred or presumed. In Masterson v. Smith Navigation, 60 Phil. 366 '
damages to good name, allegedly suffered by the defendant as a result f a writ of
attachment wrongfully issued, were disallowed in the ground that such damages were very
problematical. In American jurisdictions where the principles of the general laws on
damages in common law (adopted by Art. 198 of the new Civil Code), are in force, only
actual or compensatory damages are recoverable for wrongful but not malicious
attachment. An allowance may be made r injury to feeling if the attachment was sued out
maliciously and without probable cause; but in the absence of his element there can be no
recovery (6 C.J. 533- 534; 541). "The authorities are quite uniform in holding that, in the
absence of malice, injuries to credit, reputation and business are too remote and
speculative to be recovered" (Union Nat. Bank v. Cross, 100 Wis. 174, 75 NW 992). There is
no issue of malice, damages must be compensatory merely, and confined to the actual
loss from deprivation of the property attached or injury to it, or in case of closing business,
to the probable profits of the business, during the time of its stoppage (Holiday Bros.
Cohen 34 Ark. 707). All of which go to show that the attachment defendant is not entitled
to moral damages, unless it is alleged and established that the writ was maliciously sued
out.
This notwithstanding the defendants-appellees invoke the following rule, in support of their
thesis.
SEC. 4. Bond required from plaintiff. The party applying for the order must give a bond
executed to the defendant in amount to be fixed by the judge, not exceeding the plaintiff
claim that the plaintiff will pay all the costs which it may be adjudged to the defendant and
all damages which he may sustain by reason of the attachment, if the court shall finally
adjudge that the plaintiff was not entitled thereto. (Rule 59, R.C.)
They claim that under the above section, malice and want of probable cause are not
essential (II Moran's Rules of Court , 2nd Ed. pp. 19-20); that the language used therein is
clear and its intent and purpose are obvious; its provision cannot be given a broader scope
than what it imports; and the element of malice cannot be implied from the terms thereof.
It is finally argued that as the attachment-plaintiff, according to the rule, should pay "all
the damages" which the attachment defendant might sustain by reason of the attachment,
if the court shall finally adjudge that the plaintiff was not entitled thereto, the ruling of the
trial court that the appellant should pay the appellees moral damages, is correct. We do
not share this view. It should be observed that Sec. 4 of Rule 59, does not prescribe the
remedies available to the attachment defendant in case of a wrongful attachment, but
merely provides an action for recovery upon the bond, based on the undertaking therein
made and not upon the ability arising from a tortious act, like the malicious suing of an
attachment. Under the first, where malice is not essential, the attachment defendant, is
entitled to recover only the actual damages sustained by him by reason of the attachment.

Under the second, where the attachment is maliciously sued out, the damages recoverable
may include a compensation for every injury to his credit, business or feelings (Tyler v.
Mahoney 168 NC 237, 84 SE 362; Pittsburg etc. C 73, 47 SE 234). And considering the fact
that the rules of court are of older vintage than the new Civil Code, the matter of damages
in the said rules should be encompassed within the framework Of the Civil Code (Art. 2196
Civil Code). It is quite true that said section 4 employs the expression "all damages", but
this should be understood to refer to the damages resulting from the undertaking itself, the
recovery of which is subject to "the principles of the general law on damages", earlier
discussed. (Art. 2198, Civil Code, supra).
A cursory perusal of the decision would show that the trial court did not make any express
ruling that the writ of attachment was maliciously sued out by the plaintiff or any finding of
facts or circumstances from which it may be necessarily inferred that the attachment was
thus obtained. The decision does not make any finding that the defendants-appellees did
in fact suffer mental anguish or injury to their credit or reputation. The decision simply
states: "Coming now to the moral damages which defendants have suffered consisting of
mental anguish, serious anxiety and besmirched reputation, it is believed that sing
businessmen of good commercial standing and reputation, each of them should be
awarded at least P2,500.00." Moreover the dissolution of the writ was due to a technicality
No moral damages can be inferred from the mere act that the redemption price to which
defendants were entitled, had been retained by the provincial sheriff for a period of 38
days. The trial court held that the present action was already investigated and adjudged in
CA-G.R. To 4533-R and the right of action was barred by the state of limitations, and that
since the writ of attachment was only a remedy adjunct to the main suit, plaintiff-appellant
was not entitled to the writ. While the lower court declared that the defendants-appellees
had an outstanding balance of P171,947.80, in the bank and that they were not disposing
their property in fraud of creditors or of the plaintiff, as alleged in the petition for the
issuance of the writ still the said court did not make any finding that the said petition was
maliciously sued out. We are, therefore, the opinion that the defendants-appellants are not
entitled to moral damages.
In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be covered, except: . . .
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff.
xxx

xxx

xxx

(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered." (Art. 2208, Civil Code).
Defendants' counterclaim for the recovery of attorney's fees is based on paragraph 4 of
the cited provision, for legal services rendered in defending the main suit. There is no
showing in the decision appealed from that plaintiffs' action is "clearly unfounded".
Plaintiffs-appellants' complaint was not dismissed because the facts alleged therein were
found untrue, but on purely technical grounds; the special defenses of prescription of the
action andres adjudicata. While it may be hard to believe that the plaintiff had labored
under the impression that the matters involved in his complaint had not been adjudicated
in the previous litigation between the same parties (Civil Case No. 213 CFI Manila),

because plaintiff himself was a lawyer such error of judgment on his part would not justify
the inference that the action was "clearly unfounded". As aptly observed by appellants'
counsel, defenses as the one interposed by appellee in their counterclaim "raise questions
of law not always of obvious and easy solution." While it may appear also that the move
was a scheme to prevent the defendants-appellees from reaping the benefits of the final
judgment rendered in their favor in said case CA- G.R. No. 5433-R, still one cannot nullify,
without cause, the good and honest motive, which should be presumed, when a litigant
goes to court for the determination of his alleged right.
Withal, and considering the fact that defendants-appellant lees were drawn into this
litigation by plaintiff-appellant and were compelled to hire an attorney to protect and
defend them, and taking into account the work done by said attorney, as reflected in the
record, throughout the proceedings, we deem it just and equitable to award at attorney's
fees for defendants-appellees. The sum of P3,000.00 adjudicated by the trial court, is
reasonable under the circumstances (par. 11 Art. 2208, Civil Code).
It appears that plaintiffs-appellants have abandoned their appeal with respect to the
payment of 6% interest in the amount of P13,849.88.
Modified, with the elimination of moral damages, the decision appealed from is affirmed in
all other respects. Costs against plaintiff-appellant.
MC ENGINEERING, INC., petitioner, vs. THE COURT OF APPEALS, GERENT
BUILDERS, INC. and STRONGHOLD INSURANCE CO., INC., respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking the
reversal of the decision of the Court of Appeals dated November 14, 1991 [1] and its
resolution dated February 5, 1992.[2]The Court of Appeals reversed the decision dated July
15, 1989 of the Regional Trial Court, Branch 85, [3] Quezon City, in Civil Case No. Q-44392
dismissing the Complaint for Sum of Money With Preliminary Attachment and Damages
filed by respondent Gerent Builders, Inc. (respondent Gerent for brevity) against
petitioner MC Engineering, Inc., (petitioner for brevity). The trial court ordered
respondents Gerent and Stronghold Surety and Insurance Company (respondent Surety
for brevity) to pay petitioner, jointly and severally, damages and attorneys fees.
The Facts

buildings and land improvement, while the P3,000,000.00 was for the restoration of the
electrical and mechanical works.
The next day, on October 30, 1984 defendant Mc Engineering and plaintiff Gerent Builders,
Inc. entered into an agreement wherein defendant subcontracted to plaintiff the
restoration of the buildings and land improvement phase of its contract with Sucodeco but
defendant retained for itself the restoration of the electrical and mechanical works. The
subcontracted work covered the restoration of the buildings and improvement
forP1,665,000.00 (Exh. C, also Exh. 6).
Two (2) months later, on December 3, 1984, Sucodeco and defendant Mc Engineering
entered into an agreement amending provision No. VII, par 1 of their contract dated
October 29, 1984, by increasing the price of the civil works from P2,250,000.00
to P3,104,851.51, or an increase of P854,851.51, with the express proviso that except for
the amendment above specified, all the other provisions of the original contract shall
remain the same (Exh. L).
The civil work aspect consisting of the building restoration and land improvement from
which plaintiff would get P1,665,000.00 was completed (TSN., p. 14, July 30, 1986) and the
corresponding certificate of acceptance was executed (Exh. F), but the electrical works
were cancelled (Tsn., p. 8, July 30, 1986; Tsn., p. 19, Feb. 11, 1987). On January 2, 1985,
plaintiff received from defendant the amount of P1,339,720.00 * as full payment of the subcontract price, after deducting earlier payments made by defendant to plaintiff, as
evidenced by the affidavit executed by plaintiffs president, Mr. Narciso C. Roque (Exh. 1),
wherein the latter acknowledged complete satisfaction for such payment on the basis of
the Statement of Account (Exh. 2, 2-a & 2-b) which plaintiff had earlier forwarded to
defendant.
Nevertheless, plaintiff is still claiming from defendant the sum of P632,590.13 as its share
in the adjusted contract cost in the amount of P854,851.51, alleging that the sub-contract
is subject to the readjustment provided for in Section VII of the agreement, and also the
sum of P166,252.00 in payment for additional electrical and civil works outside the scope
of the sub-contract.[4]
Petitioner refused to pay respondent Gerent. Thus, on March 21, 1985, respondent Gerent
filed the complaint against petitioner. On March 28, 1985, the trial court issued the
corresponding writ of preliminary attachment upon the filing by respondent Gerent of
a P632,590.13 bond issued by respondent Surety.[5] On April 24, 1985, petitioner moved to
quash the writ on the ground that it was improperly issued. The trial court denied the
motion.

The undisputed facts in this case as found by the trial court and quoted by the Court of
Appeals in its assailed decision are as follows:

Petitioner assailed the denial in a petition for certiorari[6] filed with the Court of Appeals. In
a resolution dated October 17, 1986, the Court of Appeals [7] rendered a decision granting
the petition, as follows:

x x x On October 29, 1984, Mc Engineering, Inc. and Surigao Coconut Development


Corporation (Sucodeco, for short) signed a contract (Exh. B, also Exh. 5), for the restoration
of the latters building, land improvement, electrical, and mechanical equipment located at
Lipata, Surigao City, which was damaged by typhoon Nitang. The agreed consideration
was P5,150,000.00* of which P2,500,000.00** was for the restoration of the damaged

Wherefore, finding merit to the petition, the writ of attachment dated March 28, 1985, and
the order dated August 14, 1985, denying the motion to quash writ of attachment should
be as it is hereby declared null and void, and the execution made by respondent Deputy
Sheriff Cristobal C. Florendo, under the writ of attachment issued should be as it is hereby

nullified. The respondent Sheriff is hereby directed to restore ownership of the properties
heretofore seized and attached to petitioner. No pronouncement as to costs. [8]

SUCODECO on December 27, 1984 (Exh. N). It is from this increase of P854,851.51 that
plaintiff-appellant sought to recover its share from the appellee. [13]

On July 13, 1987, the trial court ordered the return of petitioners properties that deputy
sheriff Cristobal C. Florendo attached and seized. The sheriff reported to the court that he
never seized a single property of petitioner but merely conducted a paper levy.

Appellee denies the submission of the second detailed estimates by plaintiff-appellant. It


must be observed, however, that appellee is an electro-mechanical engineering firm which
becomes an accredited civil contractor only for as long as it has civil engineers to do the
civil works. Thus, in the SUCODECO project, appellee hired plaintiff-appellant, an
undisputed civil contractor, to furnish civil engineering services. Taking into account the
technical expertise required to draw up such a detailed estimate of civil works as Exh. D
and the absence of proof that other civil contractors apart from plaintiff-appellant was ever
engaged by appellee, it is undoubtedly plausible that plaintiff-appellant made the
estimates which appellee submitted to SUCODECO, with the corresponding adjustments in
the costs.[14]

On January 5, 1988, petitioner filed an application against the attachment bond to recover
damages it suffered due to the wrongful issuance of the writ of attachment. Respondent
Surety opposed the application.
In its Answer, petitioner vigorously denied respondent Gerents causes of action. Petitioner
counterclaimed for damages and attorneys fees due to the improper issuance of the writ
of attachment.
On July 15, 1989, after trial on the merits, the trial court rendered its decision, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered against the plaintiff and in favor of the
defendant, as follows:
1. Dismissing the instant case;
2. Ordering the plaintiff and Stronghold Surety And Insurance Company to pay defendant
M.C. Engineering, Inc., jointly and severally, the sum of P70,000.00 as moral
damages; P30,000.00 as exemplary damages; andP50,000.00 as attorneys fees, plus
costs.
SO ORDERED.[9]
From the foregoing decision, respondents filed separate notices of appeal on September 5,
1989 and November 2, 1989, respectively.[10]
The Court of Appeals rendered the assailed Decision on November 14, 1991. [11] On
February 5, 1992, the Court of Appeals denied petitioners motion for reconsideration. [12]
The Ruling of the Court of Appeals
The Court of Appeals ruled respondent Gerents claim meritorious, declaring that Gerent is
entitled to share 74% of the price increase in the civil works portion of the main contract.
First, the Court of Appeals found that the price increase arose from a second detailed
estimate of the costs of civil works allegedly submitted by respondent Gerent to
petitioner. Thus, the Court of Appeals stated:
xxx. To obtain an adjustment in the contract price, it appears that plaintiff-appellant, as
sub-contractor, submitted a second detailed estimate of the costs of civil works (Exh. D) to
appellee which, after marking up the figures therein to reflect its share, attached the same
to its letter of proposal for an increase in the contract price eventually submitted to
SUCODECO. On the basis of the estimates, the latter agreed to increase the cost for the
full restoration of its typhoon damaged buildings and land improvement (civil works)
from P2,250,000.00 to P3,104,851.51 (Exh. L). Payment of this adjustment was made by

Second, the Court of Appeals noted that the price increase preceded the cancellation of
petitioners electrical and mechanical works portion of the main contract.
Petitioners president, Mario Cruel, testified that on December 3, 1984, Sucodeco approved
the price increase for the civil works portion of the main contract. A week later, or on
December 14, 1984, Sucodeco wrote to petitioner canceling the electrical and mechanical
works portion of the main contract.[15] The Court of Appeals thus reasoned:
From the foregoing, it is apparent that the adjustment in the price of civil works preceded
the cancellation of the electro-mechanical works. If it is indeed true that the adjustment
was for the sole benefit of appellee for its preparatory expenses and lost profits, the
increase would have been effected simultaneously with or after the cancellation of the
electrical and mechanical works. The fact that the amendment in the contract was made
before the cancellation could only mean that SUCODECO agreed to increase the cost of the
civil works not to compensate appellee for the then still subsisting original agreement but
as a result of the higher estimates submitted by the contractor and subcontractor on the
expenses for the civil works.[16]
Third, the Court of Appeals did not consider the absence of an itemized listing of material
and labor costs relevant to respondent Gerents right to a share in the price increase.
The Court of Appeals ruled that it is Sucodeco, the project owner, and not petitioner who
can question the true value of the material and labor costs. Since Sucodeco did not raise
any question, it must have agreed to the price increase even without the submission of the
true value. Consequently, the Court of Appeals held that it was petitioners obligation to
pay respondent Gerent its share of the price increase in accordance with the subcontract.
[17]

Fourth, the Court of Appeals found no evidence that petitioner spent substantial amounts
on the electrical and mechanical portion of the main contract to justify petitioners claim to
the entire price increase.
The Court of Appeals rejected petitioners claim that the price increase was intended to
compensate petitioner for the losses it suffered due to the cancellation of the electrical and
mechanical portion of the main contract. The Court of Appeals stated that:

It is important to note that despite appellees posturing that it incurred expenses prior to
the cancellation of its contract, thus entitling it to the whole adjustment price, the records
are bereft of proof showing substantial amounts expended by appellee. To justify its
entitlement to the whole amount, it could have presented receipts reflecting purchases of
materials, drawing plans of engineering designs, detailed estimates of electrical and
mechanical works and testimonies of engineers allegedly mobilized to start the
planning. As it is, the most that appellee could produce were three (3) purchase invoices
totaling P110,000.00. xxx.[18]

3. WHETHER OR NOT PETITIONER IS ENTITLED TO ACTUAL, MORAL, AND EXEMPLARY


DAMAGES DUE TO THE WRONGFUL ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT.

Fifth, the Court of Appeals found the quitclaim executed by respondent Gerent on January
2, 1985 vitiated with fraud since petitioner intentionally withheld from Gerent the
information that on December 3, 1984 Sucodeco had already agreed to the price
increase. The Court of Appeals ruled:

The Court finds for petitioner MC Engineering, Inc.

xxx. The mere fact that an affidavit or quitclaim was executed by Mr. Roque on behalf of
his company does not preclude or estop plaintiff-appellant from recovering its just share
for it appears that appellee intentionally withheld from Mr. Roque a vital information. Had
he known, it is highly unlikely that he will sign the quitclaim. We are more apt to believe
Mr. Roques protestations that he did not know about the adjustment. His testimony is
straightforward, consistent and unwavering. Moreover, a prudent man engaged in the
business of construction for decades and whose interests are amply protected by a written
instrument will not be easily convinced to acquiesce to have appellee get P1.4M of the
whole contractual price. Appellee apparently led Mr. Roque to believe that no adjustment
was made to hide its big share in the contract. Considering the fraud employed against
plaintiff-appellant, the quitclaim is not binding at all. [19]
Thus, in the dispositive portion of the assailed decision the Court of Appeals decreed:
WHEREFORE, premises considered, judgment is hereby rendered setting aside the
appealed decision of the lower court, and in lieu thereof defendant-appellee is ordered to
pay plaintiff-appellant the sum ofP632,590.13 representing the increased contract price in
the sub-contract agreement, with the civil works by SUCODECO, and attorneys fees
equivalent to 25% of P632,590.13. Plaintiff-appellant and the surety-appellant are hereby
adjudged to solidarily pay appellee the sum of P5,000.00 as attorneys fees, in connection
with the wrongful obtention of the writ of attachment. With costs against defendantappellee.
SO ORDERED.
Hence, this petition.
The Issues
In its Memorandum, petitioner raises the following issues:
1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AND GROSSLY ERRED IN HOLDING THAT RESPONDENT GERENT IS ENTITLED
TO P632,590.13 OR 74% OF THE PRICE INCREASE IN THE CIVIL WORKS PORTION OF THE
MAIN CONTRACT BETWEEN PETITIONER AND SUCODECO.
2. WHETHER OR NOT THE QUITCLAIM EXECUTED BY GERENT WAS VITIATED WITH FRAUD.

4. WHETHER OR NOT THE AMOUNT OF P5,000.00 AS ATTORNEYS FEES IS SUFFICIENT.


5. WHETHER OR NOT RESPONDENT GERENT IS ENTITLED TO ATTORNEYS FEES IN THE
AMOUNT EQUIVALENT TO TWENTY FIVE PERCENT (25%) OF P632,590.13.
The Ruling of the Court

The Quitclaim of Respondent Gerent


We begin with the issue of whether the so-called quitclaim executed by respondent Gerent
is valid. If the quitclaim is valid, then the quitclaim settles with finality all the claims of
respondent Gerent, rendering its complaint against petitioner without any legal basis. If
fraud vitiated the quitclaim, then it becomes necessary to determine if petitioner still owes
respondent Gerent any amount under their subcontract.
The quitclaim is embodied in the Affidavit executed on January 2, 1985 by respondent
Gerents president, Narciso Roque. The Affidavit is not the usual quitclaim which expressly
discharges and releases a party from any and all liabilities. The Affidavit does not contain
such express language. However, the Affidavit expressly acknowledges receipt by Gerent
of full payment of the subcontract price[20] from petitioner. The effect, nevertheless, is
the same because a creditor who receives and acknowledges full payment from his debtor
causes the extinguishment of his claim against the debtor. [21] Roque, however, now claims
that had petitioner informed him of the price increase granted by Sucodeco on December
3, 1984, he would not have signed the Affidavit of January 2, 1985.
The primary question to resolve is whether petitioner misled, deceived or coerced
respondent Gerent into signing the Affidavit. We rule petitioner did not. The Court of
Appeals erred in declaring that fraud vitiated the Affidavit.
Fraud is never presumed but must be established by clear and convincing evidence. There
is no evidence that petitioner misled, deceived or coerced respondent Gerents president
into signing the Affidavit. A mere preponderance of evidence is not even adequate to
prove fraud. Thus, in Maestrado vs. Court of Appeals, [22] the Court ruled that:
The deceit employed must be serious. It must be sufficient to impress or lead an
ordinarily prudent person into error, taking into account the circumstances of each
case. Silence or concealment, by itself, does not constitute fraud, unless there is
a special duty to disclose certain facts. Moreover, the bare existence of confidential
relation between the parties, standing alone, does not raise the presumption of
fraud.[23] (Emphasis supplied)
There was no proof of fraud presented by respondent Gerent other than its bare and
unsubstantiated allegations. On the contrary, respondent Gerents president, Roque,
admitted that he was fully aware and certain of the impending price increase. Thus, Roque
testified:

Q: Is it really true that you knew that there will be an increase because you were
discussing that already?
A:

I know that there will be an increase.

Moreover, the record shows that the P139,720.30 representing final and full payment of
the subcontract price was paid by petitioner to respondent Gerent based on the statement
of account Gerent itself prepared and submitted to petitioner. This can be gleaned from the
testimony of Roque, to wit:

Q:

Because you were discussing it?

Q: You have submitted likewise a statement of account?

A: Yes. I know that there will be an increase, that is why I am always inquiring
from Mr. Cruel whether there was already an increase made and adjustment of
the contract.

Q:

And this statement of account is this Annex 1 of the Answer?

Q:

A:

Yes, sir.

When was the increase being discussed?

A: Even during the time of the initial start of the project it was already
discussed.
Q:

What particular month?

A:

About November.

Q: And the contract was signed by Mario Cruel and Sucodeco in October? October 29,
1984?
A:

Yes, sir. [24] (Emphasis supplied)

Despite his certainty that a price increase was imminent, Roque still signed the Affidavit
without any reservation. Since respondent Gerent was fully aware of the impending price
increase, it cannot claim that it was misled or deceived into signing the Affidavit. The nondisclosure by petitioner of the price increase did not mislead or deceive respondent Gerent
because Roque fully knew that the price increase would in any event happen. Based on
his own testimony, Roque voluntarily, willingly and freely signed the Affidavit without any
compulsion or coercion from anyone. Thus, Roque testified:

A: Yes, sir.

ATTY. AGUINALDO
May we request that this statement of account be marked as Exh. 2.
And the signature above the typewritten name Narciso Roque including the words
submitted by, be marked as Exh. 2-A and the figure P139,720.30 be encircled and be
marked as Exh. 2-B.[26]
The Statement of Account signed and submitted by respondent Gerents president Roque
to petitioner provides as follows:
January 2, 1985
MC ENGINEERING, INC.
98 Sgt. J. Catolos St.,
Cubao, Quezon City
Subject: Breakdown for sub-contracted work at Sucodeco Proj.

Q: But you know before hand that what you signed is supposed to be an affidavit?

STATEMENT OF ACCOUNT

A:

Yes, sir.

CONTRACT AMOUNT..........P1,665,000.00

Q:

Did you make any complaint to MC Engineering?

Less: Previous Payments:

A:

No, sir.

October 30

xxx.
Q:

When you signed that affidavit Exh. 1, did you not make any protests?

A:

No, I did not make any protest.

- 50% downpayment

December 4 2nd partial payments.

400,000.00

December 13- 3rd partial payments.

200,000.00

[25]

Petitioner was under no obligation to disclose to respondent Gerent, a subcontractor, any


price increase in petitioners main contract with Sucodeco. Respondent Gerent is not a
party to the main contract. The subcontract between petitioner and respondent Gerent
does not require petitioner to disclose to Gerent any price increase in the main contract.
The non-disclosure by petitioner of the price increase cannot constitute fraud or breach of
any obligation on the part of petitioner.

P832,500.00

P1432,500.00
Deduction for cost of materials

92,779.70

1,525,279.70

taken from Sucodeco.


BALANCE DUE & COLLECTIBLE

P139,720.30
vvvvvvvvvvvv

Submitted by:

This voucher, stating that the amount of P139,091.56 was in full payment for the
subcontract work, was signed by Roque at the same time he received the check payment
for the same amount.

NARCISO C. ROQUE
Chairman

Finally, the Affidavit that Roque signed provides as follows:

Conforme:

A F F I D A V I T

__________________

[27]

(Emphasis supplied)

Again, nothing in the Statement of Account indicates any reservation relating to the
impending price increase. Thus, respondent Gerent was paid what it actually believed,
estimated and demanded should be its fair compensation for its subcontract work. The
voucher issued by petitioner to respondent Gerent in full payment of the subcontract price
states as follows:
MC ENGINEERING, INC.
Quezon City

CHECK VOUCHER NO. 21324

TO: GERENT BUILDERS INCORPORATED


Full payment for subcontracted work at Sucodeco
Project.....................................139,720.30

2. That my Company, GERENT BUILDERS, INC., has sub-contracted with MC ENGINEERING,


INC. for the restoration works of building and land improvement of SUCODECO OIL HILLS,
INC. located at Bo. Lipata, Surigao City;

4. That all taxes due in accordance with the project have been fully paid as of date;

3% of 15% withholding tax.628.74


P139,091.56

Amount paid by Check No. RCBC # 479476

1. That I am the CHAIRMAN/PRESIDENT of GERENT BUILDERS, INC.;

3. That in the prosecution of restoration works and land improvement of SUCODECO OIL
MILLS, INC. Buildings, GERENT BUILDERS, INC. had fully paid the wages of laborers, rentals
of equipment and machineries used; and fully paid materials used in the fabrication,
delivery and erection of same, and that no supplier, laborer, equipment and machinery
owner has standing claim against my company;

Date January 2, 1985

Less:

I, NARCISO C. ROQUE, of legal age, Filipino, married with residence and postal address at
No. 58 Lanzones Street, Quezon City, Metro Manila, Philippines, after being sworn to in
accordance with law, do hereby depose and say:

P139,091.56

5. That the ONE HUNDRED THIRTY NINE THOUSAND SEVEN HUNDRED TWENTY PESOS
AND 30/100 (P139,720.30) ONLY, released on January 2, 1985 REPRESENTS FULL
PAYMENT OF MY CONTRACT WITH MC ENGINEERING, INC.; (Emphasis supplied)
6. That this affidavit is being executed for purpose of collecting from MC ENGINEERING,
INC.;

Received the sum of PESOS one hundred thirty nine


thousand ninety one pesos & 56/100 only from MC
ENGINEERING, INC. in full payment of account.

7. That affiant, further sayeth none.


NARCISO C.

By:

ROQUE

____________
_________
Pa
yee
Checked and recommended by:
______________________________
Office Assistant
(Emphasis supplied)

A
ffiant [29]

APPROVED BY:
_______________________
President[28]

(Emphasis supplied)
The inescapable conclusion is that the Affidavit was meant to be a total quitclaim by
respondent Gerent, fully discharging petitioner from whatever amounts it may have owed
Gerent under the subcontract. There is nothing in the Affidavit that reserves respondent
Gerents right to collect a portion of any price increase in the main contract. On the other
hand, the Affidavit is clear, unequivocal and absolute that respondent Gerent had
received "full payment under the subcontract. Respondent Gerent is now estopped
from impugning the validity of the Affidavit simply because petitioner secured a higher
price for the main contract.

Thus, in Maestrado vs. Court of Appeals[30] we stated that:

Again, we do not agree. A perusal of the subcontract reveals the following stipulations:

The freedom to enter into contracts, such as the quitclaims, is protected by law and the
courts are not quick to interfere with such freedom unless the contract is contrary to law,
morals, good customs, public policy or public order. Quitclaims, being contracts of waiver,
involve the relinquishment of rights, with knowledge of their existence and intent to
relinquish them. xxx.

ARTICLE II

Quitclaims being duly notarized and acknowledged before a notary public, deserve full
credence and are valid and enforceable in the absence of overwhelming evidence to the
contrary.
In the instant case, the Affidavit is indisputably intended to document the fact that
petitioner had fully paid respondent Gerent for the subcontract work. Roques signature
thereon attests to the truth of the contents of the Affidavit. Thus, Roque again testified:
Q: But you read the contents of the affidavit?
A:

Yes, sir.

Q:

You understand the contents of the affidavit when you signed?

A:

Yes, sir.[31]

The execution of the Affidavit by Roque, president of respondent Gerent, finally puts to rest
all the claims of Gerent against petitioner under the subcontract. The very purpose of the
Affidavit, just like a quitclaim, is precisely to finally settle all the claims of respondent
Gerent, regardless of the merits of the claims. The Affidavit can be annulled only if it was
procured through fraud. There is no convincing evidence to establish that fraud vitiated the
Affidavit. The fact that petitioner received a windfall because of the price increase is not a
reason to annul the Affidavit. Consequently, the Affidavit renders moot and academic all
the other issues raised in this petition. Nevertheless, the Court will still painstakingly
discuss and resolve the remaining issues raised by petitioner.
The 74%-26% Sharing.
The Court of Appeals upheld respondent Gerents theory that the subcontract provides for
a 74%-26% sharing between Gerent and petitioner in any price increase for the civil woks
portion of the main contract. Ruled the Court of Appeals:
The question left to be determined is the amount of appellants share in the adjusted
price. The record reveals that out of the P2,250,000.00 originally earmarked for civil
works, plaintiff-appellant, as sub-contractor, was awarded P1,665,000.00 which is 74% of
the first amount. Moreover, in the second detailed estimate submitted by plaintiffappellant to appellee, the total cost of P2,297,590.00 was charged for civil works. This
amount was subsequently increased by appellee to P3,104,851.00* when it submitted the
estimates to SUCODECO. Again, the mark-up was 26% of plaintiff-appellants
estimate. Under the circumstances, the parties had clearly intended to split the cost
award to 74%-26% in plaintiff-appellants favor. This entitles plaintiff-appellant to the sum
of P632,590.13 as its share in the adjusted price. [32]

SUB-CONTRACT PRICE
2.1. In consideration of the full and satisfactory performance of the works by the SUBCONTRACTOR the CONTRACTOR shall pay the SUB-CONTRACTOR the Lump Sum amount of
ONE MILLION SIX HUNDRED SIXTY FIVE THOUSAND (P1,665,000.00) PESOS.
2.2. The SUB-CONTRACT PRICE above is subject to section VIII of MAIN CONTRACT. By
reason thereof, parties hereby declare and understand that the SUB-CONTRACT PRICE of
P1.665 is subject to change and verification pending the final submission of the true
value as maybe determined by evaluation and inspection by representatives of OWNER,
CONTRACTOR and SUB-CONTRACTOR.[33] (Emphasis supplied)
On the other hand, the main contract between petitioner and Sucodeco provides as
follows:
VIII. SPECIAL SIDE AGREEMENT. It is hereby declared and understood that Contract Price
of P5.25M is subject to changes and verification pending the final submission of the true
value as maybe determined by evaluation and inspection by representatives of both
parties, SURIGAO COCONUT DEVELOPMENT CORPORATION and MC ENGINEERING, INC. [34]
(Emphasis supplied)
The Court of Appeals was correct in holding that:
The above-cited stipulations are very clear and need no extraneous interpretation. The
lump sum amount of P1,665,000.00 due to plaintiff-appellant in payment of the civil works
subcontracted to it is subject to change depending on the true value to be submitted and
evaluated by the parties to the contracts.[35] (Emphasis supplied)
However, the Court of Appeals erred in upholding respondent Gerents claim that it was
entitled to a 74% share in the price increase of the main contract.
Respondent Gerent alleges that as a customary business practice petitioner and
respondent Gerent agreed to a 74%-26% sharing in the main contract price for the civil
works portion. The alleged 74%-26% sharing can be upheld only if such specific sharing
was agreed upon in the subcontract, or if the subcontract is a joint venture. A textual
examination of the terms of the subcontract shows no provision regarding any 74%-26%
sharing between petitioner and respondent Gerent. Instead, the subcontract specifically
provides for a fixed price for the civil works in the amount of P1,665,000.00, subject to
change only upon submission of the true value of the work undertaken by the
subcontractor.
Neither is there any stipulation in the subcontract indicating a joint venture between
petitioner and respondent Gerent. That the subcontract price corresponds to 74% of the
main contract price cannot by itself be interpreted to mean that the parties agreed to a
74%-26% sharing of any price increase in petitioners main contract with
Sucodeco. Roque, respondent Gerents president, testified that the 74%-26% arrangement

was not incorporated in the subcontract and was a mere gentlemans agreement. This can
be gleaned from the testimony of Roque, to wit:
Q: Mr. Witness, you mentioned under page 5 of the transcript when you gave your
direct testimony that the agreement between you and the defendant was a joint
venture, is that correct?
A:

Yes, sir.

Q:

Where is that agreement?

A: It was a verbal agreement between us. Among contractors there is such a


thing as gentlemans agreement.
Q:

Are you referring toyou mean to say that that agreement is not in writing?

A:

It is not in writing but it was verbally agreed between the defendant and myself.

xxx.
Q: Why was that 74%-26% sharing not placed in the agreement with MC Engineering by
your company?
xxx.
A: Prior to entering into our proposal we have already an agreement with Mr. Cruel that
whatever contract we will get, the civil work will be awarded to me on subcontract wherein
26% will be for MC Engineering and 74% will be for us.
Q:

That is verbal agreement?

A:

Verbal prior to the execution of the subcontract agreement.

Q: That was the verbal agreement prior to the execution and signing of the subcontract
agreement?

agreed upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement. Simply put,
evidence of a prior or contemporaneous verbal agreement is generally not admissible to
vary, contradict, or defeat the operation of a valid contract.[37] While parol evidence is
admissible to explain the meaning of written contracts, it cannot serve the purpose of
incorporating into the contract additional contemporaneous conditions which are not
mentioned at all in writing, unless there has been fraud or mistake. [38] It is basic that
parties are bound by the terms of their contract which is the law between them. [39]
Respondent Gerent claims that petitioner cannot be allowed to evade its lawful obligation
arising from the subcontract, citing the well-known principle of law against unjust
enrichment. Article 22 of the Civil Code provides that [e]very person who through an act
or performance by another, or by any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground, shall return the same
to him. Two conditions must generally concur before the rule on unjust enrichment can
apply, namely: (a) a person is unjustly benefited, and (b) such benefit is derived at
anothers expense or damage.[40]
Such a situation does not exist in this case. The benefit or profit derived by petitioner
neither comes from respondent Gerent nor makes the Gerent any poorer. The profit
derived by petitioner comes from Sucodeco by virtue of the main contract to which
respondent Gerent is not a party. Respondent Gerents rights under the subcontract are
not diminished in any way, and Gerent remains fully compensated according to the terms
of its own subcontract. The profit derived by petitioner is neither unjust, nor made at the
expense of respondent Gerent.
That a main contractor is able to secure a price increase from the project owner does not
automatically result in a corresponding price increase to the subcontractor in the absence
of an agreement to the contrary. In this case, there is no stipulation in the subcontract
that respondent Gerent will automatically receive 74% of whatever price increase
petitioner may obtain in the civil works portion of the main contract. Neither has the
subcontract been changed to reflect a higher subcontract price.

The terms of the subcontract are clear and explicit. There is no need to read into them any
alleged intention of the parties. If the true intention of the parties was a 74%-26% sharing
in any price increase in the main contract, the parties could have easily incorporated such
sharing in the subcontract, being a very important matter. They did not because that was
not their agreement.

In a subcontract transaction, the benefit of a main contractor is not unjust even if it does
less work, and earns more profit, than the subcontractor. The subcontractor should be
satisfied with its own profit, even though less than the main contractors, because that is
what it bargained for and contracted with the main contractor. Article 22 of the Civil Code
is not intended to insure that every party to a commercial transaction receives a profit
corresponding to its effort and contribution. If a subcontractor knowingly agrees to receive
a profit less than its proportionate contribution, that is its own lookout. The fact that a
subcontractor accepts less does not make it dumb for that may be the only way to beat its
competitors. The winning subcontractor cannot be allowed to later on demand a higher
price after bagging the contract and beating competitors who asked for higher
prices. Even if the subcontractor incurs a loss because of its low price, it cannot invoke
Article 22 of the Civil Code to save it from financial loss. Article 22 is not a safety net
against bad or overly bold business decisions.

Section 9, Rule 130 of the Revised Rules of Court provides that [w]hen the terms of an
agreement have been reduced to writing, it is to be considered as containing all the terms

Under the foregoing circumstances, we hold that Gerent is not entitled to any share in the
price increase in the main contract. Whatever price increase petitioner obtained in the

A:

It was.

xxx.
Q: This agreement, to reiterate your testimony for the alleged 74% and 26%
sharing, this has never been reduced into writing?
A:

It is not, sir.[36] (Emphasis supplied)

main contract, whether for the civil works portion or otherwise, was solely for the benefit of
petitioner.
The First and Second Detailed Estimates

A further perusal of the testimony of Narciso Roque clearly shows that the alleged second
estimate, assuming it was agreed to by petitioner and Sucodeco, was actually
even lower than the first estimate which was the basis of the original contract price for
the civil works. Thus, respondent Gerents Roque testified as follows:

There is no true valuation of the civil works.

Q: Now, you made a second estimate?

The main contract clearly provides that as a condition precedent for any upward or
downward adjustment in the contract price, there must first be a true valuation of the
materials and labor costs to be determined through evaluation and inspection by
representatives of petitioner and Sucodeco. [41] A similar provision is found in the
subcontract requiring, before any change in the subcontract price, for a true valuation to
be determined by Sucodeco, petitioner and respondent Gerent. The records establish that
respondent Gerent was responsible for making the estimates of the actual cost of the civil
works which served as basis for the original price of the main contract.

A:

However, the Court of Appeals erred in finding that the price increase in the main contract
was based on a second detailed estimate supplied by respondent Gerent. [42] The evidence
adduced reveals that the parties did not undertake any true valuation of the cost of the
civil works. The price increase could not have been based on a true valuation because no
true valuation was ever made as required by the main contract and subcontract. There is
no substantial evidence to support respondent Gerents assertion that the price increase
was based on a second estimate that Gerent allegedly supplied petitioner.

Q: How much again was the total of the first estimate?

The true valuation of the works must be based on the true value or estimates of the actual
materials and labor required for the work. An examination of the alleged second detailed
estimate reveals nothing but a plain summary of computation. Not only is it undated but
there is also nothing in the said estimate which indicates that it was indeed received,
evaluated and marked-up by petitioner as claimed by respondent Gerent. Neither was it
clearly established by convincing evidence that the same was the true and final valuation
of the civil works pursuant to the terms of the subcontract and main contract. This is
evident from the testimony of Roque, the president of respondent Gerent, to wit:
Q: So your conclusion is that based on the payment of SUCODECO to MC Engineering,
you are now entitled to your claim of alleged 74%?
A:

Yes, sir.

Yes, sir, I made a second estimate on November 5.

xxx.
Q: How much was that?
A:

P2,297,590.00, for the restoration of the civil works and land development.

xxx.

A:

In the first estimate the total

Q:

The breakdown first.

A:

For building is P2,257,351.20 and the land improvement is P247,361.40.

Q:

And this is the first estimate, am I correct?

A:

Yes, sir.

Q:

When was this made?

A:

That was October 15.

Q:

Then there was a second estimate?

A: The second estimate is the final adjusted cost submitted to MC Engineering by Gerent
Builders. The total for building and land improvement is P2,297,590.00.[44] (Underscoring
supplied)

A:

In the same manner as MC Engineering.it is not based on the true value.

If indeed the price increase in the main contract were based on the lower second
estimate, then the actual price adjustment would have been downward and not upward.
The fact that the main contract price went up from the original P2,250,000.00 to
P3,104,851.51 shows that the price increase was not made on the basis of the second
estimate.

Q:

It is not based on the true value?

There was no itemized listing of material and labor costs.

A:

Yes sir.[43] (Underscoring Supplied)

Moreover, the record is bereft of proof of an itemized listing of the costs of materials and
labor to be used upon which respondent Gerent could have based its second estimate. This
negates further respondent Gerents claim that the price increase was based on its second
estimate.

Q: And it is not based on the actual determination of the true value of the materials and
labor spent and utilized in the project?

Clearly, the price increase did not result from a true valuation of materials and labor, which
is the only valid ground for any adjustment in the subcontract price.
The second estimate is lower than the first estimate.

The inevitable conclusion is that the price increase in the civil works portion of the main
contract was based on other factors and not on the alleged second estimate submitted by
respondent Gerent.
Third Issue: Award of actual, moral and exemplary damages.
We come to the issue of whether or not petitioner is entitled to its counterclaim for actual,
moral and exemplary damages due to the wrongful issuance of the writ of
attachment. The Court of Appeals held that:
xxx. In the instant suit, appellee failed to establish bad faith and malice against plaintiffappellant when it sought to attach the formers properties. The lower court itself in its
decision did not make any express pronouncement as to the existence of malice and bad
faith in the procurement of the writ of attachment. Instead the trial court concluded that
as a result of such attachment, the defendants business operation and credit standing
have been prejudiced and damaged and the defendant is entitled to recover moral and
exemplary damages by reason of the irregular issuance of the writ of attachment. Such
conclusions do not immediately warrant the award of moral damages. It is true that the
attachment was wrongful. But in the absence of proof of bad faith or malice, plaintiffappellants application cannot be said to be harassing or oppressing but merely an act
done to assert and protect a legal right. (Emphasis supplied)
The grant of exemplary damages is likewise improper. Since no moral damages is due to
appellee and it appearing that no actual damages was awarded by the lower court, the
grant of exemplary damages has no leg on which to stand (Art. 2234, Civil Code).
If at all, the wrongful issuance of the writ of attachment, as ruled out by this Court, merely
resulted in actual damages to appellee. But such is not automatically awarded for it is
subject to proof. Appellees claim that it lost major contracts after a credit investigation
revealed that its accounts were garnished is a bare allegation not merely unsupported by
solid evidence but is also speculative. The alleged $35,000.00 remittance refused by the
Hongkong and Shanghai Bank does not inspire belief for failure of appellee to produce
documentary proof to buttress its claim.[45]
We agree with the Court of Appeals that the trial court erred in awarding moral and
exemplary damages to petitioner. The mere fact that a complaint is dismissed for lack of
legal basis will not justify an award of moral damages to the prevailing party. [46] Even the
dismissal of a clearly unfounded civil action or proceeding will not entitle the winning
party to moral damages.[47] For moral damages to be awarded, the case must fall within
the instances enumerated in Article 2219, or under Article 2220, of the Civil Code.
[48]
Moreover, in the absence of fraud, malice, wanton recklessness or oppressiveness,
exemplary damages cannot be awarded.[49]
Fourth and Fifth Issues : Award of Attorneys Fees
The last matter to be determined is the reasonableness of the attorneys fees awarded to
both parties. The Court of Appeals held that:
xxx, the award of attorneys fees must vary. Considering the wrongful attachment made
against appellees accounts, it is understandable that it incurred attorneys fees in

procuring the discharge of the attachment for which reason the amount of P5,000.00 may
reasonably be awarded. However, inasmuch as plaintiff-appellant was constrained to file
this suit to protect its legal interest, and pursuant to the terms of the sub-contract,
appellee is adjudged to pay appellant 25% of P632,590.13, the amount involved in this
suit.[50]
The award must be modified. The Court of Appeals was partly correct in holding that the
award of attorneys fees to petitioner is justified considering that petitioner was
constrained to engage the services of counsel at an agreed attorneys fees. To secure the
lifting of the writ of attachment, petitioners counsel, Atty. Mario Aguinaldo testified that he
was paid P1,250.00 on January 1985, P10,000.00 on April 10, 1985 and
anotherP10,000.00 on June 30, 1985 for his legal services, totaling P21,500.00.
[51]
Accordingly, the award of P5,000.00 is hereby increased to P21,250.00. We deem it just
and equitable that attorneys fees be awarded when a party is compelled to incur expenses
to lift a wrongfully issued writ of attachment.[52]
WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals is
SET ASIDE. The decision of the trial court is AFFIRMED WITH MODIFICATION. The complaint
against petitioner is dismissed with prejudice. Respondents Gerent Builders, Inc. and
Stronghold Surety and Insurance Company are ordered to pay petitioner MC Engineering,
Inc., jointly and severally, the sum of P21,250.00 as attorneys fees. Costs against
respondents.
SO ORDERED.

D.M. WENCESLAO and ASSOCIATES, INC., and/or DOMINADOR S.


DAYRIT, petitioners, vs. READYCON TRADING AND CONSTRUCTION
CORP.,respondent.
DECISION
QUISUMBING, J.:
This petition for review assails the decision[1] of the Court of Appeals, dated January 30,
2002, as well as its resolution[2] dated June 20, 2002 in CA-GR CV No. 49101, denying
petitioners motion for reconsideration. The appellate court affirmed the decision[3] of the
Regional Trial Court of Pasig City, Branch 165, in Civil Case No. 61159, ordering petitioners
to pay the sum ofP1,014,110.45 with interest rate of 12% per annum (compounded
annually) from August 9, 1991, the date of filing of the complaint, until fully paid to
Readycon Trading and Construction Corp., plus damages.
Petitioner D.M. Wenceslao and Associates, Inc. (WENCESLAO, for brevity) is a domestic
corporation, organized under and existing pursuant to Philippine laws, engaged in the
construction business, primarily infrastructure, foundation works, and subdivision
development. Its co-petitioner, Dominador Dayrit, is the vice-president of said company.
[4]
Respondent Readycon Trading and Construction Corporation (READYCON, for brevity) is
likewise a corporate entity organized in accordance with Philippine laws. Its primary
business is the manufacture and sale of asphalt materials. [5]
The facts of this case are not in dispute.
WENCESLAO had a contract with the Public Estates Authority (PEA) for the improvement of
the main expressway in the R-1 Toll Project along the Coastal Road in Paraaque City. To
fulfill its obligations to the PEA, WENCESLAO entered into a contract with READYCON on
April 16, 1991. READYCON agreed to sell to WENCESLAO asphalt materials valued
at P1,178,308.75. The contract bore the signature of co-petitioner Dominador Dayrit, as
signatory officer for WENCESLAO in this agreement. Under the contract, WENCESLAO was
bound to pay respondent a twenty percent (20%) downpayment, or P235,661.75, upon
delivery of the materials contracted for. The balance of the contract price, amounting
to P942,647, was to be paid within fifteen (15) days thereof. It was further stipulated by
the parties that respondent was to furnish, deliver, lay, roll the asphalt, and if necessary,
make the needed corrections on a prepared base at the jobsite. [6]
On April 22, 1991, READYCON delivered the assorted asphalt materials
worth P1,150,531.75. Accordingly, WENCESLAO paid the downpayment of P235,661.75 to
READYCON. Thereafter, READYCON performed its obligation to lay and roll the asphalt
materials on the jobsite.[7]
Fifteen (15) days after performance of said work, READYCON demanded that WENCESLAO
pay the balance of the contract price. WENCESLAO, however, ignored said demand.
On May 30, 1991, the counsel for READYCON wrote a demand letter to WENCESLAO asking
that it make good on the balance it owed. Again, WENCESLAO failed to heed the demand.
It did not even bother to reply to the demand letter. [8]

In view of this development, on July 19, 1991, READYCON filed a complaint with the
Regional Trial Court of Pasig City for collection of a sum of money and damages, with
prayer for writ of preliminary attachment against D.M. Wenceslao and/or Dominador Dayrit,
docketed as Civil Case No. 61159. READYCON demanded payment of P1,014,110.45 from
petitioners herein withP914,870.75 as the balance of contract price, as well as payment
of P99,239.70, representing another unpaid account.[9]
As READYCON timely posted the required bond of P1,150,000, its application for the writ of
preliminary attachment was granted.
On September 5, 1991, the RTC Sheriff attached certain assets of WENCESLAO,
particularly, the following heavy equipments: One (1) asphalt paver, one (1) bulldozer, one
(1) dozer and one (1) grader.[10]
On September 16, 1991, WENCESLAO moved for the release of the attached equipments
and posted its counter-bond. The trial court granted the motion and directed the RTC
Sheriff to return the attached equipments.
On September 25, 1991, the Sheriff released the attached heavy machineries to
WENCESLAO.[11]
In the proceedings below, WENCESLAO admitted that it owed READYCON P1,014,110.45
indeed. However, it alleged that their contract was not merely one of sale but also of
service, namely, that respondent shall lay the asphalt in accordance with the specifications
and standards imposed by and acceptable to the government. WENCESLAO also alleged
that since the contract did not indicate this condition with respect to the period within
which the balance must be paid, the contract failed to reflect the true intention of the
parties.[12] It alleged READYCON agreed that the balance in the payments would be settled
only after the government had accepted READYCONs work as to its quality in laying the
asphalt. By way of counterclaim, WENCESLAO prayed for the payment of damages caused
by the filing of READYCONs complaint and the issuance of the writ of attachment despite
lack of cause.[13]
On December 26, 1994, the RTC rendered judgment in this wise:
WHEREFORE, judgment is hereby rendered ordering the defendant D.M. Wenceslao &
Associates, Inc. to pay plaintiff as follows:
1. The amount of P1,014,110.45 with interest at the rate of 12% per annum (compounded
annually) from August 9, 1991, date of filing of the complaint, until fully paid.
2. The amount of P35,000.00 as and for attorneys fees and expenses of litigation.
3. Costs of suit.
The counterclaim of the defendants is dismissed for lack of merit. [14]
Dissatisfied with the decision, the petitioners appealed to the Court of Appeals. The
appellate court, however, affirmed in toto the decision of the lower court.[15]

In denying the appeal, the appellate court found that contrary to WENCESLAOs assertion,
malice and bad faith in obtaining a writ of attachment must be proved before a claim for
damages on account of wrongful attachment will prosper, citing Philippine Commercial
International Bank v. Intermediate Appellate Court, 196 SCRA 29 (1991). The CA stressed
that the trial court found neither malice nor bad faith relative to the filing of the complaint
and the obtaining of the writ of attachment. Also, according to the CA, petitioners did not
adduce evidence to show that the attachment caused damage to the cited pieces of heavy
equipment.[16]
The appellate court also found that the trial court correctly interpreted the period for
payment of the balance. It held that the text of the stipulation that the balance shall be
paid within fifteen days is clear and unmistakable. Granting that the sales contract was not
merely for supply and delivery but also for service, the balance was already due and
demandable when demand was made on May 30, 1991, which was a month after
READYCON performed its obligation.[17]
Hence, the instant petition, wherein petitioners raise the following issues:
1.

WHETHER OR NOT QUESTIONS OF FACTS ARE RAISED IN THE APPEAL BY CERTIORARI;

2.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
RESPONDENT LIABLE FOR COMPENSATORY DAMAGES FOR THE WRONGFUL ISSUANCE OF
THE WRIT OF PRELIMINARY ATTACHMENT;
3.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING
THE OBLIGATION [AS] NOT YET DUE AND DEMANDABLE. [18]
We find proper for resolution two issues: (1) Is respondent READYCON liable to petitioner
WENCESLAO for damages caused by the issuance and enforcement of the writ of
preliminary attachment? (2) Was the obligation of WENCESLAO to pay READYCON already
due and demandable as of May 30, 1991?
On the first issue, petitioners rely mainly on Lazatin v. Twano and Castro, 112 Phil. 733
(1961), reiterated in MC Engineering v. Court of Appeals, 380 SCRA 116
(2002). In Lazatin, we held that actual or compensatory damages may be recovered for
wrongful, though not malicious, attachment. Lazatin also held that attorneys fees may be
recovered under Article 2208 of the Civil Code.[19] Petitioners contend that Lazatin applies
in the instant case because the wrongful attachment of WENCESLAOs equipment resulted
in a paralysis of its operations, causing it to sustain a loss of P100,000 per day in terms of
accomplishment of work. Since the attachment lasted 19 days it suffered a total loss
of P1.9 million. Aside from that, it had to spend P50,000 on the pullout of the equipment
and another P100,000 to repair and restore them to their former working condition. [20]
Respondent counters that inasmuch as a preliminary attachment is an available ancillary
remedy under the rules, a penalty cannot be meted out for the enforcement of a right,
such as in this case when it sought such relief. It stresses that the writ was legally issued
by the RTC, upon a finding that READYCON sought the relief without malice or bad faith.
Furthermore, WENCESLAO failed to show concrete and credible proof of the damages it
suffered. The issuance of a writ and its enforcement entail a rigorous process where the
court found that it was not attended by malice or bad faith. It cites Mindanao Savings and

Loan Association v. Court of Appeals, 172 SCRA 480 (1989), to the effect where a counterbond is filed, the right to question the irregularity and propriety of the writ of attachment
must be deemed waived since the ground for the issuance of the writ forms the core of the
complaint.[21]
We find for the respondent on this issue. However, its reliance upon Mindanao Savings
and Loan Association is misplaced.
It is to be stressed that the posting of a counter-bond is not tantamount to a waiver of the
right to damages arising from a wrongful attachment. This we have made clear in previous
cases, e.g., Calderon v. Intermediate Appellate Court, [22] where we ruled that:
Whether the attachment was discharged by either of the two (2) ways indicated in the law,
i.e., by filing a counterbond or by showing that the order of attachment was improperly or
irregularly issued, the liability of the surety on the attachment bond subsists because the
final reckoning is when the Court shall finally adjudge that the attaching creditor was not
entitled to the issuance of the attachment writ in the first place. The attachment debtor
cannot be deemed to have waived any defect in the issuance of the attachment writ by
simply availing himself of one way of discharging the attachment writ, instead of the other.
Moreover, the filing of a counterbond is a speedier way of discharging the attachment writ
maliciously sought out by the attaching party creditor instead of the other way, which in
most instances like in the present case, would require presentation of evidence in a
fullblown trial on the merits and cannot easily be settled in a pending incident of the case.
[23]

The point in Mindanao Savings, alluded to by respondent, pertained to the propriety of


questioning the writ of attachment by filing a motion to quash said writ, after a counterbond had been posted by the movant. But nowhere in Mindanao Savings did we rule that
filing a counter-bond is tantamount to a waiver of the right to seek damages on account of
the impropriety or illegality of the writ.
We note that the appellate court, citing Philippine Commercial & Industrial Bank, 196 SCRA
29 (1991), stressed that bad faith or malice must first be proven as a condition sine qua
non to the award of damages. The appellate court appears to have misread our ruling, for
pertinently what this Court stated was as follows:
The silence of the decision in GR No. 55381 on whether there was bad faith or malice on
the part of the petitioner in securing the writ of attachment does not mean the absence
thereof. Only the legality of the issuance of the writ of attachment was brought in issue in
that case. Hence, this Court ruled on that issue without a pronouncement that
procurement of the writ was attended by bad faith. Proof of bad faith or malice in obtaining
a writ of attachment need be proved only in the claim for damages on account of the
issuance of the writ. We affirm the finding of the respondent appellate court that malice
and bad faith attended the application by PCIB of a writ of attachment. [24]
Plainly, we laid no hard and fast rule that bad faith or malice must be proved to recover
any form of damages. In Philippine Commercial & Industrial Bank, we found bad faith and
malice to be present, thereby warranting the award of moral and exemplary damages. But
we denied the award of actual damages for want of evidence to show said damages. For

the mere existence of malice and bad faith would not per se warrant the award of actual or
compensatory damages. To grant such damages, sufficient proof thereon is required.
Petitioners cite Lazatin and MC Engineering insofar as proof of bad faith and malice as
prerequisite to the claim of actual damages is dispensed with. Otherwise stated, in the
present case, proof of malice and bad faith are unnecessary because, just like
in Lazatin and MC Engineering, what is involved here is the issue of actual and
compensatory damages. Nonetheless, we find that petitioner is not entitled to an award of
actual or compensatory damages. Unlike Lazatin and MC Engineering, wherein the
respective complaints were dismissed for being unmeritorious, the writs of attachment
were found to be wrongfully issued, in the present case, both the trial and the appellate
courts held that the complaint had merit. Stated differently, the two courts found
READYCON entitled to a writ of preliminary attachment as a provisional remedy by which
the property of the defendant is taken into custody of the law as a security for the
satisfaction of any judgment which the plaintiff may recover. [25]
Rule 57, Section 4 of the 1997 Rules of Civil Procedure states that:
SEC. 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 damages which he may sustain by reason of
the attachment, if the court shall finally adjudge that the applicant was not entitled
thereto (italics for emphasis).
In this case, both the RTC and the Court of Appeals found no reason to rule that READYCON
was not entitled to issuance of the writ. Neither do we find now that the writ is improper or
illegal. If WENCESLAO suffered damages as a result, it is merely because it did not heed
the demand letter of the respondent in the first place. WENCESLAO could have averted
such damage if it immediately filed a counter-bond or a deposit in order to lift the writ at
once. It did not, and must bear its own loss, if any, on that account.
On the second issue, WENCESLAO admits that it indeed owed READYCON the amount
being claimed by the latter. However, it contends that while the contract provided that the
balance was payable within fifteen (15) days, said agreement did not specify when the
period begins to run. Therefore, according to petitioner, the appellate court erred when it
held the contract clear enough to be understood on its face. WENCESLAO insists that the
balance of the purchase price was payable only upon acceptance of the work by the
government. In other words, the real intent of the parties was that it shall be due and
demandable only fifteen days after acceptance by the government of the work. This is
common practice, according to petitioner.
Respondent argues that the stipulation in the sales contract is very clear that it should be
paid within fifteen (15) days without any qualifications and conditions. When the terms of a
contract are clear and readily understandable, there is no room for construction. Even so,
the contention was mooted and rendered academic when, a few days after institution of
the complaint, the government accepted the work but WENCESLAO still failed to pay
respondent.

Under Article 1582 of the Civil Code, the buyer is obliged to pay the price of the thing sold
at the time stipulated in the contract. Both the RTC and the appellate court found that the
parties contract stated that the buyer shall pay the manufacturer the amount
of P1,178,308.75 in the following manner:
20% downpayment - P235,661.75
Balance payable within fifteen (15) days P942,647.00
Following the rule on interpretation of contracts, no other evidence shall be admissible
other than the original document itself,[26] except when a party puts in issue in his pleading
the failure of the written agreement to express the true intent of the parties. [27] This was
what the petitioners wanted done.
However, to rule on whether the written agreement failed to express the true intent of the
parties would entail having this Court reexamine the facts. The findings of the trial court as
affirmed by the appellate court on this issue, however, bind us now. For in a petition for
certiorari under Rule 45 of the 1997 Rules of Civil Procedure, this Court may not review the
findings of fact all over again. Suffice it to say, however, that the findings by the RTC, then
affirmed by the CA, that the extra condition being insisted upon by the petitioners is not
found in the sales contract between the parties. Hence it cannot be used to qualify the
reckoning of the period for payment. Besides, telling against petitioner WENCESLAO is its
failure still to pay the unpaid account, despite the fact of the works acceptance by the
government already.
With submissions of the parties carefully considered, we find no reason to warrant a
reversal of the decisions of the lower courts. But since Dominador Dayrit merely acted as
representative of D.M. Wenceslao and Associates, Inc., in signing the contract, he could not
be made personally liable for the corporations failure to comply with its obligation
thereunder. Petitioner WENCESLAO is properly held liable to pay respondent the sum
of P1,014,110.45 with interest rate of 12% per annum (compounded annually) from August
9, 1991, the date of filing of the complaint, until fully paid, plus damages.
WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of
Appeals in CA-G.R. CV No. 49101, affirming the judgment of the Regional Trial Court of
Pasig City, Branch 165, in Civil Case No. 61159, are AFFIRMED. No pronouncement as to
costs.
SO ORDERED.

G.R. No. 155868

February 6, 2007

SPOUSES GREGORIO and JOSEFA YU, Petitioners,


vs.
NGO YET TE, doing business under the name and style, ESSENTIAL
MANUFACTURING, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing
the March 21, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 522462 and its
October 14, 2002 Resolution.3
The antecedent facts are not disputed.
Spouses Gregorio and Josefa Yu (Spouses Yu) purchased from Ngo Yet Te (Te) bars of
detergent soap worthP594,240.00, and issued to the latter three postdated checks 4 as
payment of the purchase price. When Te presented the checks at maturity for encashment,
said checks were returned dishonored and stamped "ACCOUNT CLOSED". 5 Te
demanded6 payment from Spouses Yu but the latter did not heed her demands. Acting
through her son and attorney-in-fact, Charry Sy (Sy), Te filed with the Regional Trial Court
(RTC), Branch 75, Valenzuela, Metro Manila, a Complaint, 7 docketed as Civil Case No. 4061V-93, for Collection of Sum of Money and Damages with Prayer for Preliminary Attachment.
In support of her prayer for preliminary attachment, Te attached to her Complaint an
Affidavit executed by Sy that Spouses Yu were guilty of fraud in entering into the purchase
agreement for they never intended to pay the contract price, and that, based on reliable
information, they were about to move or dispose of their properties to defraud their
creditors.8
Upon Tes posting of an attachment bond,9 the RTC issued an Order of
Attachment/Levy10 dated March 29, 1993 on the basis of which Sheriff Constancio
Alimurung (Sheriff Alimurung) of RTC, Branch 19, Cebu City levied and attached Spouses
Yus properties in Cebu City consisting of one parcel of land (known as Lot No. 11) 11 and
four units of motor vehicle, specifically, a Toyota Ford Fierra, a jeep, a Canter delivery van,
and a passenger bus.12
On April 21, 1993, Spouses Yu filed an Answer 13 with counterclaim for damages arising
from the wrongful attachment of their properties, specifically, actual damages amounting
to P1,500.00 per day; moral damages,P1,000,000.00; and exemplary
damages, P50,000.00. They also sought payment of P120,000.00 as attorneys fees
and P80,000.00 as litigation expenses.14 On the same date, Spouses Yu filed an Urgent
Motion to Dissolve Writ of Preliminary Attachment.15 They also filed a Claim Against Surety
Bond16 in which they demanded payment from Visayan Surety and Insurance Corporation
(Visayan Surety), the surety which issued the attachment bond, of the sum of P594,240.00,
representing the damages they allegedly sustained as a consequence of the wrongful
attachment of their properties.

While the RTC did not resolve the Claim Against Surety Bond, it issued an Order 17 dated
May 3, 1993, discharging from attachment the Toyota Ford Fierra, jeep, and Canter delivery
van on humanitarian grounds, but maintaining custody of Lot No. 11 and the passenger
bus. Spouses Yu filed a Motion for Reconsideration18 which the RTC denied.19
Dissatisfied, they filed with the CA a Petition for Certiorari,20 docketed as CA-G.R. SP No.
31230, in which a Decision21 was rendered on September 14, 1993, lifting the RTC Order of
Attachment on their remaining properties. It reads in part:
In the case before Us, the complaint and the accompanying affidavit in support of the
application for the writ only contains general averments. Neither pleading states in
particular how the fraud was committed or the badges of fraud purportedly committed by
the petitioners to establish that the latter never had an intention to pay the obligation;
neither is there a statement of the particular acts committed to show that the petitioners
are in fact disposing of their properties to defraud creditors. x x x.
xxxx
Moreover, at the hearing on the motion to discharge the order of attachment x x x
petitioners presented evidence showing that private respondent has been extending multimillion peso credit facilities to the petitioners for the past seven years and that the latter
have consistently settled their obligations. This was not denied by private respondent.
Neither does the private respondent contest the petitioners allegations that they have
been recently robbed of properties of substantial value, hence their inability to pay on
time. By the respondent courts own pronouncements, it appears that the order of
attachment was upheld because of the admitted financial reverses the petitioner is
undergoing.
This is reversible error. Insolvency is not a ground for attachment especially when
defendant has not been shown to have committed any act intended to defraud its creditors
x x x.
For lack of factual basis to justify its issuance, the writ of preliminary attachment issued by
the respondent court was improvidently issued and should be discharged. 22
From said CA Decision, Te filed a Motion for Reconsideration but to no avail. 23
Te filed with us a Petition for Review on Certiorari24 but we denied the same in a Resolution
dated June 8, 1994 for having been filed late and for failure to show that a reversible error
was committed by the CA.25 Entry of Judgment of our June 8, 1994 Resolution was made on
July 22, 1994.26 Thus, the finding of the CA in its September 14, 1993 Decision in CA-G.R.
SP No. 31230 on the wrongfulness of the attachment/levy of the properties of Spouses Yu
became conclusive and binding.
However, on July 20, 1994, the RTC, apparently not informed of the SC Decision, rendered
a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the Court finds that the plaintiff has established a valid
civil cause of action against the defendants, and therefore, renders this judgment in favor
of the plaintiff and against the defendants, and hereby orders the following:

1) Defendants are hereby ordered or directed to pay the plaintiff the sum of P549,404.00,
with interest from the date of the filing of this case (March 3, 1993);
2) The Court, for reasons aforestated, hereby denies the grant of damages to the plaintiff;
3) The Court hereby adjudicates a reasonable attorneys fees and litigation expenses
of P10,000.00 in favor of the plaintiff;
4) On the counterclaim, this Court declines to rule on this, considering that the question of
the attachment which allegedly gave rise to the damages incurred by the defendants is
being determined by the Supreme Court.
SO ORDERED.27 (Emphasis ours)
Spouses Yu filed with the RTC a Motion for Reconsideration 28 questioning the disposition of
their counterclaim. They also filed a Manifestation 29 informing the RTC of our June 8, 1994
Resolution in G.R. No. 114700.

Spouses Yu filed with the CA a Petition37 for Certiorari, Prohibition and Mandamus, docketed
as CA-G.R. SP No. 36205, questioning the denial of their Notices of Appeal; and seeking the
modification of the July 20, 1994 Decision and the issuance of a Writ of Execution. The CA
granted the Petition in a Decision38 dated June 22, 1995.
Hence, Spouses Yu filed with the CA an appeal39 docketed as CA-G.R. CV No. 52246,
questioning only that portion of the July 20, 1994 Decision where the RTC declined to rule
on their counterclaim for damages.40However, Spouses Yu did not dispute the specific
monetary awards granted to respondent Te; and therefore, the same have become final
and executory.
Although in the herein assailed Decision41 dated March 21, 2001, the CA affirmed in
toto the RTC Decision, it nonetheless made a ruling on the counterclaim of Spouses Yu by
declaring that the latter had failed to adduce sufficient evidence of their entitlement to
damages.

The RTC issued an Order dated August 9, 1994, which read:

Spouses Yu filed a Motion for Reconsideration 42 but the CA denied it in the herein assailed
Resolution43 dated October 14, 2002.

xxxx

Spouses Yu filed the present Petition raising the following issues:

(2) With regard the counter claim filed by the defendants against the plaintiff for the
alleged improvident issuance of this Court thru its former Presiding Judge (Honorable
Emilio Leachon, Jr.), the same has been ruled with definiteness by the Supreme Court that,
indeed, the issuance by the Court of the writ of preliminary attachment appears to have
been improvidently done, but nowhere in the decision of the Supreme Court and for
that matter, the Court of Appeals decision which was in effect sustained by the
High Court, contains any ruling or directive or imposition, of any damages to be
paid by the plaintiff to the defendants, in other words, both the High Court and the
CA, merely declared the previous issuance of the writ of attachment by this Court thru its
former presiding judge to be improvidently issued, but it did not award any damages of
any kind to the defendants, hence, unless the High Court or the CA rules on this, this Court
coud not grant any damages by virtue of the improvident attachment made by this Court
thru its former presiding judge, which was claimed by the defendants in their counter
claim.

I. Whether or not the appellate court erred in not holding that the writ of attachment was
procured in bad faith, after it was established by final judgment that there was no true
ground therefor.

(3) This Court hereby reiterates in toto its Decision in this case dated July 20,
1994. 30 (Emphasis ours)
The RTC also issued an Order dated December 2, 1994, 31 denying the Motion for
Reconsideration of Spouses Yu.32
In the same December 2, 1994 Order, the RTC granted two motions filed by Te, a Motion to
Correct and to Include Specific Amount for Interest and a Motion for Execution Pending
Appeal.33 The RTC also denied Spouses Yus Notice of Appeal34 from the July 20, 1994
Decision and August 9, 1994 Order of the RTC.
From said December 2, 1994 RTC Order, Spouses Yu filed another Notice of Appeal
the RTC also denied in an Order36 dated January 5, 1995.

35

which

II. Whether or not the appellate court erred in refusing to award actual, moral and
exemplary damages after it was established by final judgment that the writ of attachment
was procured with no true ground for its issuance.44
There is one preliminary matter to set straight before we resolve the foregoing issues.
According to respondent Te,45 regardless of the evidence presented by Spouses Yu, their
counterclaim was correctly dismissed for failure to comply with the procedure laid down in
Section 20 of Rule 57. Te contends that as Visayan Surety was not notified of the
counterclaim, no judgment thereon could be validly rendered.
Such argument is not only flawed, it is also specious.
As stated earlier, Spouses Yu filed a Claim Against Surety Bond on the same day they filed
their Answer and Urgent Motion to Dissolve Writ of Preliminary Attachment. 46 Further, the
records reveal that on June 18, 1993, Spouses Yu filed with the RTC a Motion to Give Notice
to Surety.47 The RTC granted the Motion in an Order48dated June 23, 1993. Accordingly,
Visayan Surety was notified of the pre-trial conference to apprise it of a pending claim
against its attachment bond. Visayan Surety received the notice on July 12, 1993 as shown
by a registry return receipt attached to the records.49
Moreover, even if it were true that Visayan Surety was left in the proceedings a quo, such
omission is not fatal to the cause of Spouses Yu. In Malayan Insurance Company, Inc. v.
Salas,50 we held that "x x x if the surety was not given notice when the claim for damages
against the principal in the replevin bond was heard, then as a matter of procedural due
process the surety is entitled to be heard when the judgment for damages against the

principal is sought to be enforced against the suretys replevin bond." 51 This remedy is
applicable for the procedures governing claims for damages

In ruling that Spouses Yu failed to adduce sufficient evidence to support their counterclaim
for actual damages, the CA stated, thus:

on an attachment bond and on a replevin bond are the same. 52

In this case, the actual damages cannot be determined. Defendant-appellant Josefa Yu


testified on supposed lost profits without clear and appreciable explanation. Despite her
submission of the used and unused ticket stubs, there was no evidence on the daily net
income, the routes plied by the bus and the average fares for each route. The submitted
basis is too speculative and conjectural. No reports regarding the average actual profits
and other evidence of profitability necessary to prove the amount of actual damages were
presented. Thus, the Court a quodid not err in not awarding damages in favor of
defendants-appellants.64

We now proceed to resolve the issues jointly.


Spouses Yu contend that they are entitled to their counterclaim for damages as a matter of
right in view of the finality of our June 8, 1994 Resolution in G.R. No. 114700 which
affirmed the finding of the CA in its September 14, 1993 Decision in CA-G.R. SP No. 31230
that respondent Te had wrongfully caused the attachment of their properties. Citing
Javellana v. D.O. Plaza Enterprises, Inc.,53 they argue that they should be awarded damages
based solely on the CA finding that the attachment was illegal for it already suggests that
Te acted with malice when she applied for attachment. And even if we were to assume that
Te did not act with malice, still she should be held liable for the aggravation she inflicted
when she applied for attachment even when she was clearly not entitled to it. 54
That is a rather limited understanding of Javellana. The counterclaim disputed therein was
not for moral damages and therefore, there was no need to prove malice. As early as in
Lazatin v. Twao,55 we laid down the rule that where there is wrongful attachment, the
attachment defendant may recover actual damages even without proof that the
attachment plaintiff acted in bad faith in obtaining the attachment. However, if it is alleged
and established that the attachment was not merely wrongful but also malicious, the
attachment defendant may recover moral damages and exemplary damages as
well. 56 Either way, the wrongfulness of the attachment does not warrant the automatic
award of damages to the attachment defendant; the latter must first discharge the burden
of proving the nature and extent of the loss or injury incurred by reason of the wrongful
attachment.57
In fine, the CA finding that the attachment of the properties of Spouses Yu was wrongful did
not relieve Spouses Yu of the burden of proving the factual basis of their counterclaim for
damages.
To merit an award of actual damages arising from a wrongful attachment, the attachment
defendant must prove, with the best evidence obtainable, the fact of loss or injury suffered
and the amount thereof.58 Such loss or injury must be of the kind which is not only capable
of proof but must actually be proved with a reasonable degree of certainty. As to its
amount, the same must be measurable based on specific facts, and not on guesswork or
speculation. 59 In particular, if the claim for actual damages covers unrealized profits, the
amount of unrealized profits must be estalished and supported by independent evidence of
the mean income of the business undertaking interrupted by the illegal seizure. 60
Spouses Yu insist that the evidence they presented met the foregoing standards. They
point to the lists of their daily net income from the operation of said passenger bus based
on used ticket stubs61 issued to their passengers. They also cite unused ticket stubs as
proof of income foregone when the bus was wrongfully seized. 62 They further cite the
unrebutted testimony of Josefa Yu that, in the day-to-day operation of their passenger bus,
they use up at least three ticket stubs and earn a minimum daily income of P1,500.00.63

We usually defer to the expertise of the CA, especially when it concurs with the factual
findings of the RTC.65Indeed, findings of fact may be passed upon and reviewed by the
Supreme Court in the following instances: (1) when the conclusion is a finding grounded
entirely on speculations, surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) where there is a grave abuse of discretion
in the appreciation of facts; (4) when judgment is based on a misapprehension of facts; (5)
when the lower court, in making its findings, went beyond the issues of the case and such
findings are contrary to the admissions of both appellant and appellee; (6) when the
factual findings of the CA are contrary to those of the trial court; (7) when the findings of
fact are themselves conflicting; (8) when the findings of fact are conclusions made without
a citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the
respondents; (10) when the findings of fact of the lower court are premised on the
supposed absence of evidence and are contradicted by the evidence on record. 66 However,
the present case does not fall under any of the exceptions. We are in full accord with the
CA that Spouses Yu failed to prove their counterclaim.
Spouses Yus claim for unrealized income of P1,500.00 per day was based on their
computation of their average daily income for the year 1992. Said computation in turn is
based on the value of three ticket stubs sold over only five separate days in 1992. 67 By no
stretch of the imagination can we consider ticket sales for five days sufficient evidence of
the average daily income of the passenger bus, much less its mean income. Not even the
unrebutted testimony of Josefa Yu can add credence to such evidence for the testimony
itself lacks corroboration.68
Besides, based on the August 29, 1994 Manifestation 69 filed by Sheriff Alimurung, it would
appear that long before the passenger bus was placed under preliminary attachment in
Civil Case No. 4061-V-93, the same had been previously attached by the Sheriff of
Mandaue City in connection with another case and that it was placed in the Cebu Bonded
Warehousing Corporation, Cebu City. Thus, Spouses Yu cannot complain that they were
unreasonably deprived of the use of the passenger bus by reason of the subsequent
wrongful attachment issued in Civil Case No. 4061-V-93. Nor can they also attribute to the
wrongful attachment their failure to earn income or profit from the operation of the
passenger bus.
Moreover, petitioners did not present evidence as to the damages they suffered by reason
of the wrongful attachment of Lot No. 11.

Nonetheless, we recognize that Spouses Yu suffered some form of pecuniary loss when
their properties were wrongfully seized, although the amount thereof cannot be definitively
ascertained. Hence, an award of temperate or moderate damages in the amount
of P50,000.00 is in order.70
As to moral and exemplary damages, to merit an award thereof, it must be shown that the
wrongful attachment was obtained by the attachment plaintiff with malice or bad faith,
such as by appending a false affidavit to his application. 71
Spouses Yu argue that malice attended the issuance of the attachment bond as shown by
the fact that Te deliberately appended to her application for preliminary attachment an
Affidavit where Sy perjured himself by stating that they had no intention to pay their
obligations even when he knew this to be untrue given that they had always paid their
obligations; and by accusing them of disposing of their properties to defraud their creditors
even when he knew this to be false, considering that the location of said properties was
known to him.72
The testimony of petitioner Josefa Yu herself negates their claim for moral and exemplary
damages. On cross-examination she testified, thus:
Q: Did you ever deposit any amount at that time to fund the check?
A: We requested that it be replaced and staggered into smaller amounts.

A: I dont know how much was there but we transferred already to the Solid Bank.
Q: Who transferred?
A: My daughter, sir.73 (Emphasis ours)
Based on the foregoing testimony, it is not difficult to understand why Te concluded that
Spouses Yu never intended to pay their obligation for they had available funds in their bank
but chose to transfer said funds instead of cover the checks they issued. Thus, we cannot
attribute malice nor bad faith to Te in applying for the attachment writ. We cannot hold her
liable for moral and exemplary damages.
As a rule, attorneys fees cannot be awarded when moral and exemplary damages are not
granted, the exception however is when a party incurred expenses to lift a wrongfully
issued writ of attachment.1awphi1.net74 Without a doubt, Spouses Yu waged a protracted
legal battle to fight off the illegal attachment of their properties and pursue their claims for
damages. It is only just and equitable that they be awarded reasonable attorneys fees in
the amount ofP30,000.00.
In sum, we affirm the dismissal of the counterclaim of petitioners Spouses Yu for actual,
moral, and exemplary damages. However, we grant them temperate damages and
attorneys fees.

Atty. Ferrer: The three checks involved?

WHEREFORE, the petition is partly GRANTED. The March 21, 2001 Decision of the Court of
Appeals isAFFIRMED with the MODIFICATION that petitioners counterclaim
is PARTLY GRANTED. Gregorio Yu and Josefa Yu are awarded P50,000.00 temperate
damages and P30,000.00 attorneys fees.

Atty. Florido: Already answered. She said that they were not able to fund it.

No costs.

Atty. Ferrer: And as a matter of fact, you went to the bank to close your account?

SO ORDERED.

COURT: Did you fund it or not?

A: We closed account with the bank because we transferred the account to another bank.
Q: How much money did you transfer from that bank to which the three checks were drawn
to this new bank?