Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 166719 March 12, 2007

SILANGAN TEXTILE MANUFACTURING CORPORATION, TRADEWORLD SYNERGY,

INCORPORATED, and CELLU INDUSTRIES, INCORPORATED, Petitioners,*
vs.
HON. AVELINO G. DEMETRIA, PRESIDING JUDGE, REGIONAL TRIAL COURT, LIPA CITY,
BRANCH 85, and LUZON SPINNING MILLS, INCORPORATED, Respondents.

DECISION

CHICO-NAZARIO, J.:

Luzon Spinning Mills, Incorporated (LSMI) filed before the Regional Trial Court (RTC) of Lipa City,
Branch 85, a Complaint dated 23 August 2000, for Collection of Sum of Money1 against Silangan
Textile Manufacturing Corporation (STMC). In its Complaint, LSMI alleged that from 19 November
1998 to 14 June 1999, Anita, Jimmy and Benito, all surnamed Silangan, in their capacity as
stockholders and officers of STMC ordered 111,161.60 kilograms of yarn, valued in the total amount
of 9,999,845.00. The yarns were delivered at the office of STMC as evidenced by delivery
receipts.2 In payment of the yarns, STMC issued 34 postdated checks in the total amount of
9,999,845.00. Among these postdated checks are the following:

Check No. Date Amount

0239973 5-12-99 P317,952.00
0239990 1-05-99 316,125.00
0239991 1-05-99 229,110.00
0239992 1-07-99 288,771.00
0239994 1-12-99 200,025.00
0239995 1-12-99 287,748.00
0296801 1-29-99 207,970.00
0296802 1-30-99 206,127.00
0296803 2-01-99 316,577.00
TOTAL 2,370,405.003

When presented for payment, the foregoing postdated checks were dishonored for the reason,
"Drawn Against Insufficient Fund" (DAIF). LSMI demanded from STMC the immediate payment of
the obligation.4 STMC failed and refused to heed the demand of LSMI; hence, the latter filed the
Complaint before the RTC.

In accordance with the prayer of LSMI, and finding the same to be sufficient in form and substance,
the RTC issued a writ of preliminary attachment against STMCs properties.5 In this connection, a
notice of attachment on the properties in the name of STMC covered by Transfer Certificates of Title
No. 202686 and No. 202685 was issued.6

Apparently, LSMI had already previously instituted before the Municipal Trial Court (MTC) of Lipa
City, Branch 1, criminal cases against the Silangans for violation of Batas Pambansa Blg. 22. Thus,
STMC was prompted to file a Motion, praying to dismiss the civil Complaint before the RTC, to cite
STMCs lawyer for contempt for forum shopping, and to discharge the writ of preliminary attachment
issued by the trial court.7 After LSMI filed its Comment/Opposition to the motion of STMC, the RTC
resolved the said motion by denying it for lack of merit.8

The RTC held that:

For forum-shopping to exist, both actions must involve the same transactions and same essential
facts and circumstances. There must also be identical causes of action, subject matter and issues
(PRC vs. CA, 292 SCRA 155). Forum-shopping also exists where the elements of litis pendencia are
present or where a final judgment in one case will amount to res judicata in the other (Alejandro vs.
CA, 295 SCRA 536).

In the case at bar, the two (2) cases, one for violation of BP 22 and the other for collection of sum of
money although concerning the same amount of money are distinct litigations, neither involving
exactly the same parties nor identical issues.

The accused in the criminal cases for violation of BP 22 are the persons who signed the worthless
checks while the defendants in the instant case are the corporations which have outstanding
obligations to the plaintiff. Hence, there is no identity of parties in the aforesaid cases.

As to whether or not the requisites prescribed by law for the issuance of a writ of preliminary
attachment have been complied with, record show (sic) that the contents of the affidavit required for
the issuance of a writ of preliminary attachment were incorporated in the complaint, verified and
certified as correct by Mr. Vicente Africa, Jr. Thus, there was substantial compliance of Section 3,
Rule 57 of the Rules of Court.9

The Motion for Reconsideration and Motion to Discharge Attachment and Admit Counter-bond10 filed
by STMC were denied by the RTC in its Order dated 9 April 2001.11

STMC elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the
Rules of Court12which was dismissed by the appellate court in a Decision13 dated 25 October 2004,
holding that:

But it is also true that when the bounced check involved is issued by a corporation, B.P. Blg. 22
imposes the criminal liability only on the individual/s who signed the check, presumably in keeping
with the principle that generally only natural persons may commit a crime. Thus:

"Where the check is drawn by a corporation, company or entity, the person or persons who actually
signed the check in behalf of such drawer shall be liable under this Act."

We hold, at any rate, that with respect to the civil liability, the corporation concerned should bear the
responsibility, the drawing of the bum check being a corporate act. And a corporation has a legal
personality of its own different from that of its stockholders/officers who signed the check/s.

Accordingly, since the herein petitioners, as drawers of the checks in question, are not parties to the
criminal cases for violation of B.P. Blg. 22, the private respondent was and is not prohibited from
filing an independent civil action against them.

Moreover, the civil liability of the accused Silangan(s), the signatories of the checks in the criminal
cases, is based on Article 20 of the Civil Code as declared in Banal vs. Tadeo, Jr.

On the other hand, the liability of petitioners corporations arose from contract. Under Article 31 of the
Civil Code and also Section 1(a), Rule 111 of the 2000 Revised Rules on Criminal Procedure, the
offended party has the right to institute a separate civil action when its nexus is liability not arising
from the crime, like a liability arising from contract.

In fine, there is no violation of SC Administrative Circular No. 57-97, now Section 1(b) of the 2000
Revised Rules of Criminal Procedure. The civil actions for the liability of the Silangans as the
signatories to the subject checks are deemed included in the criminal actions filed against them. The
separate action filed against the petitioners corporations for the recovery of the purchase price of the
yarn sold to them did not detract from it as this is an entirely different suit.

xxxx

WHEREFORE, for being deficient both in form and in substance, the instant petition is DISMISSED,
with costs against the petitioners.

STMC filed a Motion for Reconsideration thereon which was denied by the Court of Appeals in a
Resolution dated 24 January 2005.14
Hence, the instant petition.

STMC submits the following issues for our resolution:

I. Whether or not the Honorable Court of Appeals erred in affirming the conclusion of public
respondent Judge Demetria that the certification against forum-shopping is inapplicable in
this case?

II. Whether or not the Honorable Court of Appeals erred in affirming the conclusion of the
public respondent Judge Demetria when it failed to apply Section 1(b), Rule 111 of the 2000
Revised Rules of Criminal Procedure?

III. Whether or not the Honorable Court of Appeals erred in affirming the conclusion of the
public respondent Judge Demetria when it issued the writ of preliminary attachment in favor
of the private respondent.

In its first assigned error, STMC argues that LSMI through its Operation Manager, Mr. Vicente Africa,
failed to certify under oath that he had earlier filed criminal cases for violation of Batas Pambansa
Blg. 22 against the Silangans before the MTC. These cases are as follows:

Case Number Name of Accused

(a) 00-0295 to 00- 0299 and 00-305 Anita Silangan and Benito Silangan

(b) 00-0294, 0300-04 and 306-09 Anita Silangan and Jimmy Silangan
(c) 00-1246 Anita Silangan and Benito Silangan

(d) 99-2145 to 99-2154 99-2154 Anita Silangan and Benito Silangan

The criminal cases for violation of Batas Pambansa Blg. 22 and the collection of sum of money have
the same issues, i.e., the recovery of the subject checks. The subsequent filing of the civil case for
sum of money constitutes forum shopping.

Forum shopping exists when the elements of litis pendentia are present, or when a final judgment in
one case will amount to res judicata in another. There is forum shopping when the following
elements concur: (1) identity of the parties or, at least, of the parties who represent the same interest
in both actions; (2) identity of the rights asserted and relief prayed for, as the latter is founded on the
same set of facts; and (3) identity of the two preceding particulars, such that any judgment rendered
in the other action will amount to res judicata in the action under consideration or will constitute litis
pendentia.15

We grant the petition.

The case of Hyatt Industrial Manufacturing Corporation v. Asia Dynamic Electrix Corporation16 is
instructive. In that case, Hyatt Industrial Manufacturing Corporation (HIMC) instituted before the
Regional Trial Court of Mandaluyong City a complaint for recovery of sum of money against
respondent Asia Dynamic Electrix Corporation (ADEC). The complaint alleged that ADEC purchased
from HIMC various electrical conduits and fittings amounting to 1,622,467.14. ADEC issued several
checks in favor of HIMC as payment. The checks, however, were dishonored by the drawee bank on
the ground of insufficient funds/account closed. Before the filing of the case for recovery of sum of
money before the RTC of Mandaluyong City, HIMC had already filed separate criminal complaints
for violation of Batas Pambansa Blg. 22 against the officers of ADEC, Gil Santillan and Juanito
Pamatmat. They were docketed as I.S. No. 00-01-00304 and I.S. No. 01-00300, respectively, and
were both pending before the Metropolitan Trial Court (MeTC) of Pasig City. These cases involved
the same checks which were the subjects of Civil Case No. MC-01-1493 before the RTC of
Mandaluyong City.

In holding that the civil case filed subsequent to the criminal cases was deemed instituted in the
criminal cases, this Court held:

It is clear from the records that the checks involved in I.S. No. 00-01-00304 and I.S. No. 00-01-
00300 are the same checks cited by petitioner in Civil Case No. MC 01-1493. The Court will certainly
not allow petitioner to recover a sum of money twice based on the same set of checks. Neither will
the Court allow it to proceed with two actions based on the same set of checks to increase its
chances of obtaining a favorable ruling. Such runs counter to the Courts policy against forum
shopping which is a deplorable practice of litigants in resorting to two different fora for the purpose of
obtaining the same relief to increase his chances of obtaining a favorable judgment. It is a practice
that ridicules the judicial process, plays havoc with the rules on orderly procedure, and is vexatious
and unfair to the other parties of the case.17

In dismissing Civil Case No. MC-01-1493, this Court applied and interpreted Supreme Court Circular
No. 57-97 effective 16 September 1997, which reads:

1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to necessarily
include the corresponding civil action, and no reservation to file such action separately shall be
allowed or recognized.

From this Supreme Court Circular was adopted Rule 111(b) of the 2000 Revised Rules of Criminal
Procedure which reads:

(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.

In the Hyatt case, the Court further negated the claim that there are no identity of parties and causes
of action in the criminal and civil complaints for violation of Batas Pambansa Blg. 22 where a criminal
case against the corporate officers is filed ahead of the civil case against the corporation. The parties
in the civil case against the corporation represent the same interest as the parties in the criminal
case. As to the issue of identity or non-identity of relief sought, this Court held that the criminal case
and the civil case seek to obtain the same relief. Thus:

With the implied institution of the civil liability in the criminal actions before the Metropolitan Trial
Court of Pasig City, the two actions are merged into one composite proceeding, with the criminal
action predominating the civil. The prime purpose of the criminal action is to punish the offender to
deter him and others from committing the same or similar offense, to isolate him from society, reform
or rehabilitate him or, in general, to maintain social order. The purpose, meanwhile, of the civil action
is for the restitution, reparation or indemnification of the private offended party for the damage or
injury he sustained by reason of the delictual or felonious act of the accused. Hence, the relief
sought in the civil aspect of I.S. No. 00-01-00304 and I.S. No. 00-01-00300 is the same as that
sought in Civil Case No. MC 01-1493, that is, the recovery of the amount of the checks, which,
according to [HIMC], represents the amount to be paid by [ADEC] for its purchases. To allow [HIMC]
to proceed with Civil Case No. MC 01-1493 despite the filing of I.S. 00-01-00304 and I.S. No. 00-01-
00300 might result to a double payment of its claim.18

The purpose of Section 1(b) of Rule 111 is explained by Justice Florenz D. Regalado, former
chairman of the Committee tasked with the revision of the Rules of Criminal Procedure. He clarified
that the special rule on Batas Pambansa Blg. 22 cases was added because the dockets of the
courts were clogged with such litigations and creditors were using the courts as collectors. While
ordinarily no filing fees are charged for actual damages in criminal cases, the rule on the necessary
inclusion of a civil action with the payment of filing fees based on the face value of the check
involved was laid down to prevent the practice of creditors of using the threat of a criminal
prosecution to collect on their credit free of charge.19

Applying the Hyatt case to the case before us, the dismissal of Civil Case No. 00-0420 before the
RTC is warranted. It is not denied that LSMI likewise filed several criminal complaints against the
officers of STMC before the MTC prior to the filing of Civil Case No. 00-0420. As provided in
Supreme Court Circular No. 57-97, as re-echoed in Rule 111, Section 1(b), of the 2000 Rules of
Criminal Procedure, the civil action now filed against STMC arising from its issuance of the bouncing
checks is deemed instituted in the criminal cases filed against its officers pending before the MTC.

Finally, as to the prayer of STMC for the discharge of the Writ of Preliminary Attachment issued by
the RTC, Rule 57 of the Revised Rules of Court provides:

SECTION 1. Grounds upon which attachment may issue. At the commencement of the action or at
any time before entry of judgment, a plaintiff or any proper party may have the property of the
adverse party attached as security for the satisfaction of any judgment that may be recovered in the
following cases:
(a) In an action for the recovery of a specified amount of money or damages, other than moral and
exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict
against a party who is about to depart from the Philippines with intent to defraud his creditors.

xxxx

SEC. 2. Issuance and contents of order. An order of attachment may be issued either ex parte or
upon motion with notice and hearing by the court in which the action is pending, or by the Court of
Appeals or the Supreme Court, and must require the sheriff of the court to attach so much of the
property in the Philippines of the party against whom it is issued, not exempt from execution, as may
be sufficient to satisfy the applicants demand, unless such party makes deposit or gives a bond as
hereinafter provided in an amount equal to that fixed in the order, which may be the amount
sufficient to satisfy the applicants demand or the value of the property to be attached as stated by
the applicant, exclusive of costs. Several writs may be issued at the same time to the sheriffs of the
courts of different judicial regions.

SEC. 3. Affidavit and bond required. An order of attachment shall be granted only when it appears
by the affidavit of the applicant, or of some other person who personally knows the facts, that a
sufficient cause of action exists, that the case is one of those mentioned in Section 1 hereof, that
there is no other sufficient security for the claim sought to be enforced by the action, and that the
amount due to the applicant, or the value of the property the possession of which he is entitled to
recover, is as much as the sum for which the order is granted above all legal counterclaims. The
affidavit, and the bond required by the next succeeding section, must be duly filed with the court
before the order issues.

Attachment is an ancillary remedy. It is not sought for its own sake but rather to enable the attaching
party to realize upon relief sought and expected to be granted in the main or principal action.20 Being
an ancillary or auxiliary remedy, it is available during the pendency of the action which may be
resorted to by a litigant to preserve and protect certain rights and interests therein pending rendition,
and for purposes of the ultimate effects, of a final judgment in the case. They are provisional
because they constitute temporary measures availed of during the pendency of the action and they
are ancillary because they are mere incidents in and are dependent upon the result of the main
action.21

A writ of preliminary attachment is a species of provisional remedy. As such, it is a collateral

proceeding, permitted only in connection with a regular action, and as one of its incidents; one of
which is provided for present need, or for the occasion; that is, one adapted to meet a particular
exigency.22 On the basis of the preceding discussion and the fact that we find the dismissal of Civil
Case No. 00-00420 to be in order, the writ of preliminary attachment issued by the trial court in the
said case must perforce be lifted.23

Wherefore, premises considered, the petition is GRANTED. The Decision of the Court of Appeals
dated 25 October 2004 and Resolution dated 24 January 2005 affirming the Resolution dated 9 April
2001 of the Regional Trial Court of Lipa City, Branch 85, are hereby reversed and set aside. Civil
Case No. 00-0420 before the Regional Trial Court of Lipa City, Branch 85, is ordered DISMISSED.
The attachment over the properties by the writ of preliminary attachment issued by the same trial
court is hereby ordered LIFTED.

SO ORDERED.

G.R. No. L-56565 June 16, 1988

RICARDO L. COOTAUCO petitioner,

vs.
THE HON. COURT OF APPEALS, HON. DOMINGO M. ANGELES, Presiding Judge of Branch 1,
CFI, Camarines Norte, and FELIX L. LUZARRAGA, respondents.
Appeal from CA decision penned by Justice Milagros German and concurred in by Justices Emilio
Gancayco and Venicio Escolin.

GRIO-AQUINO, J.:

This is a contest which began in 1980 between two rival cockpit operators for the right to operate in the one-cockpit town of Labo, Camarines
Norte, whose population does not exceed 100,000 residents. The temporary restraining order (later replaced by a writ of preliminary
injunction) which the trial court issued, and which the Court of Appeals declined to set aside, is before Us for determination.

The petitioner, Ricardo L. Cootauco is a duly licensed operator of a cockpit, known as "Gallera Lapu-
Lapu" in Labo, Camarines Norte. In 1979 he built another cockpit in the new recreational zone in Bo.
Bocal where he planned to transfer the Gallera Lapu-Lapu.

The private respondent Felix L. Luzarraga, is the owner and operator of a rival cockpit, known as
"Gallera Plaridel" whose license was revoked by the Municipal Mayor of Labo on September 14,
1977, on recommendation of the PC Provincial Commander because it was inside the residential
district and near public buildings and the church, in violation of Section 5 (c) of P.D. 449
(Cockfighting Law of 1974).

In 1979, Raul Luzarraga, brother of Felix, filed an application with the PC Regional Commander for a
Renewal Permit to operate the "Plaridel Cockpit." The application was denied on the ground that the
Plaridel had been phased out or ceased to operate in 1977, hence, "the application for renewal is out
of place." Furthermore, as explained by PC General A. Racela:

Under Section 5(b) of PD 449, otherwise known as the Cockfighting Law of 1974,
only one cockpit is allowed to operate in a city or municipality with a population of not
exceeding 100,000. There is no dispute that the population of the Municipality of
Labo, Camarines Norte is less than 100,000.

Inasmuch as one cockpit has already been licensed or authorized to operate,

represented by one Ricardo Cootauco and Associates, it would be a wanton defiance
of the above-quoted law to issue another license to Mr. Raul Luzarraga who desires
to re-open or resume operation of his cockpit, the Gallera Plaridel, which has been
earlier phased out and ceased to operate since 1977.

On May 2, 1980, Luzarraga filed against Ricardo Cootauco, Sergio Cootauco and Mayor Mario
Villafuerte of Labo in the Court of First Instance of Camarines Norte Civil Case No. 4753 entitled
"Felix Luzarraga, plaintiff, versus Ricardo Cootauco, et al., defendants" for Specific Performance,
Annulment of Ordinance, Damages with a Prayer for Preliminary injunction. The complaint prayed for
annulment of the permit which Mayor Villafuerte had issued to the Gallera Lapu-Lapu, as well as of
the Municipal Council's Resolution No. 85 amending Municipal Ordinance No. 10, and also asked for
the issuance of a writ of preliminary injunction to stop the operation of the Lapu-Lapu and the
construction of a new cockpit by the Cootaucos in Barangay Bocal, Labo. The defendants filed
separate answers to the complaint.

On June 2,1980, the Court of First Instance issued a temporary restraining order, enjoining
Cootauco and his agents from proceeding with the construction of their new cockpit in Barangay
Bocal and from conducting cockfights therein. On June 4, 1980, Cootauco filed an urgent motion to
lift the temporary restraining order. The court set it for hearing together with Luzarraga's application
for a writ of preliminary injunction.

On June 9, 1980, the trial court issued an order of injunction whose dispositive portion reads as
follows:

WHEREFORE, premises considered, defendant Ricardo Cootauco's Urgent motion

to recall and set aside the temporary restraining order of June 2, 1980 is hereby
DENIED; and upon the filing of a bond by the plaintiff Felix Luzarraga in the amount
of P15,000.00, to respond to all damages which defendant Ricardo Cootauco may
sustain by reason of the writ of preliminary injunction if this Court finally decides that
the plaintiff is not entitled thereto, let a writ of preliminary injunction be issued
ordering defendant Ricardo Cootauco or any other person, employee or agent, acting
for him and in his behalf, to refrain from proceeding with the further construction of
 the New Cockpit (not the old and existing Gallera Lapu-Lapu), situated at Barrio
Bokal, Labo, Camarines Norte, except to complete its unfinished pipe and plastic
roofing on the eastern side, the joining of the concrete fence at the rear and the
placing of a door on the entrance to the premises; if defendant Ricardo Cootauco still
opts to do so; and, from conducting cockfights in the said new cockpit, until further
orders from this Court.

Cootauco filed a petition for certiorari in the Court of Appeals on June 11, 1980 (CA-G.R. No. 10832-
SP), entitled "RlCARDO COOTAUCO v. JUDGE DOMINGO ANGELES, ET AL." assailing the
temporary restraining order/writ of preliminary injunction issued by the lower court. Upon receipt of
the petition, the Court of Appeals enjoined the lower court "from proceeding with the pre-trial in Civil
Case No. 4753 set for September 29, 1980 and any other hearing in the said case, until further
orders from this Court." (Annex J.)

However, on January 12,1981, it denied the petition for certiorari and lifted the temporary restraining
order which it had issued. It held that the error, if any, of the respondent Judge in issuing the Order
of June 2, 1980, was "an error of judgment correctable by appeal in due time, but definitely not one
made in grave abuse of discretion ..." (Annex K, Petition).

Cootauco appealed to the Supreme Court, praying for the issuance of a writ of preliminary injunction
which this Court issued on April 29,1981 upon the petitioner's filing an injunction bond of Pl 5,000.
The writ restrained the lower court "from enforcing the restraining and injunction orders dated June
2, 1980 and June 9,1980 issued in Civil Case No. 4753 ... and from taking any further action, and/or
proceeding in said Civil Case No. 4753" "effective immediately and until further order from this
Court." (p. 152, Rollo.)

In a nutshell, the petition alleges that the Court of Appeals erred in denying the petition for certiorari
and in not holding that the lower court acted with grave abuse of discretion amounting to lack of
jurisdiction in enjoining the operation of the petitioner's new cockpit.

The appeal is meritorious.

Under PD No. 449 dated May 9, 1974, otherwise known as the Cockfighting Law of 1974
[superseded since 1981 by PDs 1802,1802-A, and by the Local Government Code of 1983 (B.P.
Blg. 837)], the Chief of the Constabulary was vested with authority to approve the issuance of
licenses by the city and municipal mayors for the operation of cockpits (Sec. 6). He could promulgate
rules and regulations implementing the law in order to effectively control and regulate cockfighting in
the Philippines. City and Municipal Mayors could issue licenses for the operation and maintenance of
cockpits, subject to the approval of the Chief of Constabulary or his authorized representative in the
provinces.

A writ of preliminary injunction is a provisional remedy to which parties litigant may resort for the
preservation or protection of their rights or interests, and for no other purpose, during the pendency
of the principal action (Calo v. Roldan, 76 Phil. 445; Commissioner of Customs v. Cloribel, 19 SCRA
234). Thus, Section 3, Rule 58 enumerates only three (3) grounds for the issuance of a preliminary
injunction, and they are:

(a) That the plaintiff is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the acts complained
of, or in the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission or continuance of some act complained of during the
litigation or the non-performance thereof would probably work injustice to the plaintiff;
or

(c) That the defendant is doing, threatens, or is about to do, or is procuring or

suffering to be done, some act, probably in violation of the plaintiff's rights respecting
the subject of the action, and tending to render the judgment ineffectual.

The issuance of the injunction order by the trial court, at the instance of Luzarraga, to stop the
petitioner Cootauco from operating his cockpit at its new site in Barrio Bocal was improper for
several reasons: First, because the plaintiff Luzarraga had no right that needed to be protected or
preserved by a writ of preliminary injunction during the pendency of the case. The operation of
petitioner's cockpit did not, and would not, violate any right of Luzarraga who was not operating, and
had no license to operate, a cockpit.

Secondly, the status quo at the commencement of Civil Case No. 4753 and 1980 was that Cootauco
was duly licensed to operate, and was operating, the "Gallera Lapu-Lapu," had been authorized to
transfer its location to the new recreational zone in Barrio Bocal, and had constructed a new cockpit
arena there which was almost completed and was operational. On the other hand, the plaintiff
Luzarraga was not operating the "Gallera Plaridel" because his license had been cancelled in 1977,
three (3) years before the filing of the case. The issuance of the writ of preliminary injunction for the
purpose of closing the new "Gallera Lapu-Lapu" during the pendency of the case, disturbed that
status quo instead of preserving it.

Thirdly, the issuance of the writ of preliminary injunction would irreperably damage the petitioner
because it would, for no lawful cause, deprive him of the use of his license to operate his cockpit. On
the other hand, Luzarraga would not be prejudiced by the lifting of the writ for the simple reason that
he does notfor want of a licenseoperate a cockpit with which Cootauco's cockpit would compete.

Another issue raised by the petitioner in the Court of Appeals was the lower court's lack of
jurisdiction over the subject matter of Civil Case No. 4753. The courts have no authority to grant or
cancel permits to operate cockpits duly issued by the municipal or city mayors with the approval of
the PC provincial commander. Under P.D. No. 449, the power to approve or disapprove the issuance
of cockpit licenses by the city and municipal mayors was reposed in the Chief of the Philippine
Constabulary. The denial by the PC Provincial Commander of Luzarraga's application for renewal of
his cockpit license was appealable to the PC Chief. He should have exhausted that administrative
remedy. In view of his failure to do so, his judicial action was premature. The court had no
jurisdiction to intervene and grant him relief. (Manuel vs. Jimenez, 17 SCRA 55; Bongkawil vs.
Provincial Board of Lanao del Norte, 10 SCRA 327; Acting Collector of Customs vs. Caluag, 20
SCRA 204; Garcia vs. Teehankee, 27 SCRA 937.)

We, therefore, hold that Civil Case No. 4753 was filed prematurely and that the Court of First
Instance of Camarines Norte does not have jurisdiction to hear and decide the case, hence all its
proceedings therein are null and void.

We should mention, in this connection, that on January 16, 1981, barely four (4) days after the Court
of Appeals rendered its decision in CA-G.R. No. 10832-SP, the Philippine Gamefowl Commission
(PGC) was created under P.D. No. 1802-A. This decree has given to city and municipal mayors, with
the concurrence of their respective Sanggunians, the authority "to license and regulate regular
cockfighting pursuant to the rules and regulations of the Commission and subject to its review and
supervision." As indicated by this Court in Philippine Gamefowl Commission vs. Intermediate
Appellate Court, 146 SCRA 294, the PCG's "power of review includes the power to disapprove." The
respondent should exhaust its remedies in the Commission.

WHEREFORE, the appealed decision of the Court of Appeals in CA-G.R. No. 10832-SP, and the
orders dated June 2, 1980 and June 9,1980 and the writ of preliminary injunction which were issued
by the Court of First Instance (now Regional Trial Court) of Camarines Norte in Civil Case No. 4753,
are set aside. Civil Case No. 4753 is dismissed.

SO ORDERED.

Narvasa, Gancayco and Medialdea, JJ., concur.

FIRST DIVISION

PURISIMO BUYCO, G.R. No. 177486

Petitioner,
 Present:

PUNO, C.J., Chairperson,

- versus - CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

NELSON BARAQUIA,
Respondent. Promulgated:

December 21, 2009

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DECISION

CARPIO MORALES, J.:

Nelson Baraquia (respondent) filed before the Regional Trial Court (RTC) of Iloilo
City a complaint[1] against Dominico Buyco and Clemente Buyco (Buycos), for the
establishment of a permanent right of way, injunction and damages with
preliminary injunction and temporary restraining order, to enjoin the Buycos from
closing off a private road within their property which he has been using to go to
and from the public highway to access his poultry farm.

The Buycos died during the pendency of the case, and were substituted by
Purisimo Buyco (petitioner) and his brother Gonzalo.
Branch 39 of the Iloilo RTC granted respondents application for preliminary
injunction.

By Decision[2] of February 14, 2007, the trial court dismissed respondents

complaint for failure to establish the concurrence of the essential requisites for the
establishment of an easement of right of way under Articles 649 and 650 of the
Civil Code.[3] It accordingly lifted the writ of preliminary injunction.

Respondent filed a notice of appeal of the trial courts decision. Petitioner

filed too a notice of partial appeal bearing on to the non-award of prayer for
damages.

Respondent later filed with the trial court a motion to cite petitioner and his
brother Gonzalo in contempt, alleging that they had closed off the subject road,
thus violating the writ of preliminary injunction. The trial court, by Resolution of
March 13, 2007,[4] noting that respondent received on March 5, 2007 his copy of
its decision while petitioner received his on February 21, 2007, held that the
February 14, 2007 decision had not yet become final and executory, hence, the writ
of preliminary injunction remained to be valid, efficacious and obligatory,
rendering petitioners act of closing the road on March 1, 2007 an indirect contempt
of court. It thus declared petitioner and his brother in contempt of court.

Petitioner moved for reconsideration of the trial courts March 13, 2007
Resolution, contending that a preliminary injunction, once quashed, ceases to exist,
and that he and his brother cannot be held guilty of indirect contempt by mere
motion.

By Resolution[5] of April 18, 2007, the trial court set aside the March 13,
2007 Resolution and granted petitioners motion for reconsideration, ruling that
petitioner and his brother cannot be held in contempt of court by mere motion and
not by verified petition.

On the lifetime of the writ of preliminary injunction, the trial court held that
it is its illumined opinion that the matter of whether a writ of preliminary
injunction remains valid until the decision annulling the same attains finality is not
firmly entrenched in jurisprudence, contrary to the position of the defendants. It
thereupon quoted a portion of the ruling in the 2006 case of Lee v. Court of
Appeals,[6] to wit:

Furthermore, notwithstanding the stand of both parties, the fact remains

that the Decision of the Court of Appeals annulling the grant of
preliminary injunction in favor of petitioners has not yet become final on
14 December 2000. In fact, such Decision has not yet become final and
executory even on the very date of this Decision, in view of petitioners
appeal with us under Rule 45 of the 1997 Rules of Civil Procedure. The
preliminary injunction, therefore, issued by the trial court remains valid
until the Decision of the Court of Appeals annulling the same attains
finality, and violation thereof constitutes indirect contempt which,
however, requires either a formal charge or a verified
petition.[7] (underscoring in the original decision)

Hence, this petition for review, raising a question of law whether the lifting of a
writ of preliminary injunction due to the dismissal of the complaint is immediately
executory, even if the dismissal of the complaint is pending appeal.
The petition is meritorious.

A writ of preliminary injunction is an order granted at any stage of an action or

proceeding prior to the judgment or final order, requiring a party or a court, agency
or a person to refrain from a particular act or acts.[8] It is merely a provisional
remedy, adjunct to the main case subject to the latters outcome.[9] It is not a cause
of action in itself.[10] Being an ancillary or auxiliary remedy, it is available during
the pendency of the action which may be resorted to by a litigant to preserve and
protect certain rights and interests therein pending rendition, and for purposes of
the ultimate effects, of a final judgment in the case.

The writ is provisional because it constitutes a temporary measure availed of

during the pendency of the action and it is ancillary because it is a mere incident in
and is dependent upon the result of the main action.[11]

It is well-settled that the sole object of a preliminary injunction, whether

prohibitory or mandatory, is to preserve the status quo until the merits of the
case can be heard. It is usually granted when it is made to appear that there is a
substantial controversy between the parties and one of them is committing an act or
threatening the immediate commission of an act that will cause irreparable injury
or destroy the status quo of the controversy before a full hearing can be had on
the merits of the case.[12]

Indubitably, in the case at bar, the writ of preliminary injunction was granted
by the lower court upon respondents showing that he and his poultry business
would be injured by the closure of the subject road. After trial, however, the lower
court found that respondent was not entitled to the easement of right of way prayed
for, having failed to prove the essential requisites for such entitlement, hence, the
writ was lifted.

The present case having been heard and found dismissible as it was in fact
dismissed, the writ of preliminary injunction is deemed lifted, its purpose as
a provisionalremedy having been served, the appeal therefrom notwithstanding.

Unionbank v. Court of Appeals[13] enlightens:

x x x a dismissal, discontinuance or non-suit of an action in which a
restraining order or temporary injunction has been
granted operates as a dissolution of the restraining order or
temporary injunction, regardless of whether the period for filing a
motion for reconsideration of the order dismissing the case or appeal
therefrom has expired. The rationale therefor is that even in cases
where an appeal is taken from a judgment dismissing an action on
the merits, the appeal does not suspend the judgment, hence the
general rule applies that a temporary injunction terminates
automatically on the dismissal of the action. (italics, emphasis and
underscoring supplied)

The lower courts citation of Lee v. Court of Appeals[14] is

misplaced. In Lee, unlike in the present case, the original complaint for specific
performance and cancellation of real estate mortgage was not yet decided on the
merits by the lower court. Thus, the preliminary injunction therein issued subsisted
pending appeal of an incident.
 There being no indication that the appellate court issued an injunction in
respondents favor, the writ of preliminary injunction issued on December 1, 1999
by the trial court was automatically dissolved upon the dismissal of Civil Case No.
26015.

WHEREFORE, the petition is GRANTED. The Resolution dated April 18,

2007 of the trial court is REVERSED. The writ of preliminary injunction which
Branch 39 of the Iloilo Regional Trial Court issued on December 1, 1999 was
automatically dissolved upon its dismissal by Decision of February 14, 2007 of
Civil Case No. 26015.

SO ORDERED.

G.R. No. L-10414 April 18, 1958

MANILA SURETY and FIDELITY CO., INC., plaintiff-appellee,

vs.
TEODULO M. CRUZ, defendant-appellant.

Teodulo M. Cruz for appellant.

De Santos, Herrera & Delfino for appellee.

BAUTISTA ANGELO, J.:

This a replevin case instituted by plaintiff against, defendant to recover possession of certain
personal properties described in paragraph 2 of the complaint. In his answer, defendant set up
certain special defenses and a counterclaim.

The court after hearing rendered judgment declaring plaintiff entitled to the possession of the
properties involved and ordering, defendant to pay damages in the sum of P500.00, plus the costs of
suit. Defendant took the case directly to this Court on the plea that the only questions he would raise
are of law.

The facts found by the court a quo are: On November 10, 1949 defendant executed a deed of
chattel mortgage in favor of plaintiff in consideration of the latter having posted two bonds in behalf
of Herminia Cruz and Felicisima Policarpio in favor of the National Rice and Corn Corporation.These
bonds were issued pursuant to certain indemnity agreements executed by Herminia Cruz, Felicisima
Policarpio and defendant Cruz in favor of plaintiff on the same day, November 10, 1949.

On October 20, 1950, the Price Stabilization Corporation as legal successor of the National Rice and
Corn Corporation, filed Civil Case No. 12379 in the Court of First Instance of Manila seeking to make
the Manila Surety and Fidelity Co., Inc., liable on the bond it has posted on behalf of Felicisima
Policarpio in the sum of P2,472.75. Subsequently, or on November 8, 1950, the Price Stabilization
Corporation filed also Civil Case No. 12510 of the same court seeking to make the same company
liable on the bond it has posted on behalf of Herminia Cruz for P2,472.75. Before Cruz could be
served with summons, the latter case was dismissed without prejudice to its reinstatement.
On May 23, 1952, the personal properties mortaged to plaintiff were levied on by virtue of a writ of
execution issued in Civil Case No. 846 of the Court of First Instance of Rizal, entitled Jose Estrada
vs. Teodulo M. Cruz. Upon learning of said levy in execution, plaintiff on May 29, 1952, presented a
third party claim based on the deed of chattel mortgage executed in its favor by the defendant.
Thereupon, the sheriff of Rizal informed the plaintiff in Civil Case No. 846 that in view of said third
party claim he would release the properties levied upon to the claimant unless an indemnity bond be
posted in his favor. On May 31, 1952, defendant bound himself to settle Civil Case No. 12379 with
the Naric authorities on or before June 9, 1952 with the express, stipulation that plaintiff may take
possesion of the mortgaged properties should he fail to effect the settlement. However, defendant
failed to effect such settlement and merely obtained a postponement of the trial. On June 11, 1952,
plaintiff requested the sheriff to effect the delivery to it of the properties covered by the mortgage. But
despite the rights asserted by plaintiff under the letter agreement approved by defendant and as a
third party claimant and chattel mortgaged, the defendant refused to deliver the properties.

On June 13, 1952, the court issued a warrant for the seizure of the properties. On April 27, 1954, the
Naric demanded payment of the unsettled accounts of certain bonded rice dealers among whom
were Herminia Cruz for P2,672.75 and Felicisima Policarpio for P1,472.75. The demand was
followed by a reminder from the Insurance Commissioner to plaintiff to pay P12,732.00 on the Naric
bonds. Accordingly, plaintiff made several payments to the Naric on the accounts of those bonded
rice dealers including the sum of P100.00 on the account of Felicisima Policarpio and the sum of
P500.00 on the account of Herminia Cruz.

Appellant's main assignment of error is predicated on the fact that the action instituted against him
by appellee is premature because the principal debtors for whom appellee had posted a bond have
not yet been made actually liable for any obligation to the Naric as in fact its claim is still being
disputed in Civil Case No. 12379 of the court of First Instance of Manila. The same is true, it is
claimed, with regard to the liability of Herminia Cruz involved in Civil Case No. 12510 of the same
court.

There is no merit in this contention. In the indemnity agreements executed by appellant in favor of
appellee, the appears the following clause: "Said indemnity shall be paid to the COMPANY as soon
as it has become liable for the payment any amount, under the above mentioned bond, whether or
not it shall have paid such sum or sums of money, or any part thereof." This clause is clear enough
to be disputed. It is there said that the liability of appellee as bondsman would attach as soon as it
has become liable for the payment of any amount, regardless of whether said amount shall have
been paid or not. This the situation that actually obtains here. The Naric,or its legal successor, the
Prisco, has actually filed an action in court demanding payment of the obligation from appellee under
the bond it has posted on behalf of both Felicisima Policarpio and Herminia Cruz, which action is
more than enough to entitle appellee to enforce the indemnity agreements executed by appellant.
This constitutes the cause of action of appellee in the present. case (Alto Surety and Insurance
Company vs. Aguilar, G.R. No. L-5625, promulgated March 16, 1954).

Appellant also argues that the trial court should have dismissed the case on the ground of novation
of the undertaking assumed by appellee in behalf of its principal debtors in favor of, the Naric which
has the effect of relieving appellant from his liability under the indemnity agreement.

To have a clear view of the factual background giving rise to this claim of appellant, a few facts need
be stated. The Naric was the creditor which delivered rice and corn commodities on credit to
Felicisima Policarpio and Herminia Cruz. These two obliged themselves to pay their obligations
within seven days from delivery. Appellee is the surety company which undertook to pay the Naric in
the event that the two debtors should fail to pay their obligations on their dates of maturity. These
two debtors, together with appellant, in turn bound themselves to indemnify appellee for all losses
and damages which said appellee may sustain by reason of its having posted the surety bond in
favor of the Naric. Subsequent to the institution of the two,suits by the Naric against appellee, the
Insurance Commissioner intervened and prevailed upon appellee to make partial payments on
account of the obligations of its bondees in favor of the Naric. And the appellee obligingly agreed to
do so by making partial payments in behalf of its bondees, including Felicisima Policarpio and
Herminia Cruz. These payments however were within the amounts covered by the indemnity
agreements signed by appellant. It is now claimed that these partial payments amounted to a
novation of the original obligations of said debtors which has the effect of discharging appellant from
his liability to the surety.

This contentlon is untenable. What was actually done by appellee was not to change the nature of
the obligations of the principal debtors, nor modify the terms of the bond posted by appellee, but
merely to make partial payments of the accounts in order to accede to the demand of the Insurance
Commissioner to ease up the situation of the Naric. In other words, the nature of the liability of the
principal debtors remained the same, with the only difference that certain payments were made in
advance within the framework of the indemnity agreements. Certainly, such payments can not have
the effect of discharging appellant from his liability because in the indemnity agreements he signed,
he assumed to pay and make good "any damage, loss, costs, charges or expenses of whatever kind
and nature, including counsel or attorneys' fees, which the company may, at any time, sustain or
incur, as a consequence of having become surety" upon the surety bonds.

Appellant finally argues that the trial court should have declared itself without jurisdiction to act on
the claim of appellee because the same has arisen in Civil Case No. 846 of the Court of First
Instance of Rizal where appelee intervened as third party claimant to obtain possession of the
properties levied on by the sheriff by virtue of the writ of execution issued in said case.

This claim is also not well taken. Under the procedure provided for in the Rules Court, after a third
party claim has been asserted and the plaintiff fails to post the indemnity bond in favor of the sheriff,
the duty of this officer is to release the property from his custody and relinquish it to the third party
claimant whose preferential right must have been recognized by the plaintiff. In this particular case,
appellee, it is true, asserted its third party claim to the property but the sheriff did not continue with
his custody thereof in view of the failure of the plaintiff to put, up the bond required by the rule. The
result was that the property never came under the jurisdiction of the court cognizance of said case.
Instead the property continued in posssession of appellant who refused to relinguish it in spite of its
commitment to do so both under the chattel mortgaged as well as compromise he subsequently
entered into with appellee relative to the possession of the property. There was therefore no
occasion for appellee to intervene in said Civil Case No. 846, while on the other hand the adamant
attitude of appellant in clinging to the property gave sufficient justification to appellee to institute the
present action.

Another factor which removes any doubt as to the right of appellee to take possession of the
property in question is the contents of the letter agreement of May 31, 1952, to which appellant gave
his conformity, which in part provides:

. . . in view of your request that we hold in abeyance action on the matterto give you an
oppurtunity to settle the pending case between the NARIC and Felicisma Policarpio where
our Company is sued as surety, we are willing to give you a last and final opportunity to
effect such settlement not later than June 10, 1952, it being understood that upon your
failure to effect such settlement for any reason whatsoever we shall proceed, to take over
your properties through the help of the Sheriff of Rizal, with your express conformity,
considering such a step as a mere continuation of the turning over to us of said properties as
third party claimant in the aforesaid Civil Case No. 846.

Whereof, the decision appealed from is affirmed, without pronouncement as to costs.

Paras, C.J., Bengzon, Labrador, Reyes, J.B.L., Endencia and Felix, JJ., concur.
Concepcion, J., concurs in the result.

G.R. No. L-24266 January 24, 1969

AMPARO D. SANTOS, petitioner,

vs.
HON. ANGEL H. MOJICA, EMMA R. GENIZA, AURELIO GENIZA, CATALINA CARREON-
RIVERA, ZACARIAS RIVERA, LORENZO RIVERA, THE SHERIFF OF MANILA and THE
SHERIFF OF QUEZON CITY, respondents.

Diaz and Enriquez for petitioner.

Vicente J. Francisco for respondents.

CONCEPCION, C.J.:
 Original action for certiorari to annul an order of execution of the decision in Civil Case No. 2043-P
of the Court of First Instance of Rizal, entitled "Emma R. Geniza, et al. v. Roque M. Garcia, et al."
and the writ of execution issued in pursuance of said order, as well as to strain the enforcement of
both, during the pendency of this case.

Petitioner, Amparo D. Santos, hereinafter referred to as Mrs. Santos, although she is, also, Mrs.
Moreno was one of the defendants in said Civil Case No. 2043-P. Her co-defendants therein were
Roque M. Garcia and her husband by second marriage, Miguel Moreno. The three (3) of them are
hereinafter referred to collectively as the defendants. The plaintiffs in said case private
respondents herein were Emma R. Geniza, her husband, Aurelio Geniza, her brother, Zacarias
Rivera, the latter's wife, Catalina Carreon-Rivera, and Lorenzo Rivera, father of Emma R. Geniza
and Zacarias Rivera. All of them are hereinafter referred to collectively as the plaintiffs.

On April 30, 1964, decision was rendered in said case sentencing the defendants to pay, jointly and
severally, to the plaintiffs:

(1) P100,000.00 plus 12% interest thereon from July 9, 1959, up to the date of payment;

(2) P97,000.00 as compensatory damage to Aurelio Geniza and Lorenzo Rivera, and
P195,000.00 as compensatory damage to Catalina Carreon;

(3) P30,000.00 as moral damage;

(4) P10,000.00 as exemplary damage;

(5) P25,000.00 as attorney's fees and costs of the suit.

From said decision the defendants appealed to this Court, in which the case is docketed as G.R.
No. L-24071. Owing to the failure of Garcia and Moreno to file their briefs on time, their respective
appeals were dismissed on February 7, 1966, thereby leaving Mrs. Santos as the only appellant in
that case.1awphil.t

Pending the perfection of defendants' appeal, or on November 6, 1964, the plaintiffs filed, with the
lower court a motion for the immediate execution of its decision, upon the ground that the appeal
taken therefrom was dilatory in nature. Despite defendants' opposition thereto, said court, then
presided over by Honorable Angel A. Mojica, Judge, now Associate Justice of the Court of Appeals,
issued an order, dated November 19, 1964 or before the approval of defendants' record on
appeal, on December 23, 1964 granting said motion, "unless defendants file a supersedeas bond
in the amount of the judgment within ten (10) days from receipt" of said order. No such bond having
been filed, the corresponding writ of execution was issued on January 12, 1965. Acting in pursuance
thereof, the Sheriffs of Quezon City and Manila levied upon various properties as follows:

1. On January 16, 1965 certain movables belonging to petitioner and her husband, and
issued notice that said movables would be sold at public auction on January 26, 1965
(Annex "H");

2. On January 18, 1965 the rights, title, interest or participation which petitioner Amparo
D. Santos may have on the real properties and improvements thereon covered by TCT No.
22744, Quezon City, and issued notice that said properties would be sold at public auction
on February 16, 1965 (Annex "I");

3. On February 2, 1965 the Pampanga Sugar Mills, Marilag Bldg., Ayala Blvd., Makati,
Rizal, was served notice of Garnishment (Annex "K") of all goods, effects, etc., and
specifically the salaries, bonuses, per diems, and allowances of herein petitioner in the
possession or under the control of, or receivable from, said company; and

4. On February 3, 1965 the Pasumil Planters, Inc., 2930 Sta. Mesa Blvd., Manila, was
served notice of Garnishment (Annex "L") of 8,010 shares therein registered in the name of
herein petitioner evidenced by Stock Certificates Nos. 430, 474 and 566.

The projected sheriffs' sales mentioned in paragraphs (1) and (2) were, however, suspended on
account of a third party claim filed by Luis D. Santos and other heirs of Demetrio Santos, and an
order, issued in an action, filed by the third party claimants, with the Court of First Instance of
Quezon City, directing the preservation of the status quo, pending final determination of said action.

Upon the other hand, Mrs. Santos had moved to lift the garnishment referred to in paragraphs (3)
and (4), insofar as it affected her salary and per diems as treasurer of the Pampanga Sugar Mills
hereinafter referred to as the PASUMIL upon the ground that they are necessary for her support
and that of her children by her first husband, the late Demetrio Santos. Moreover, these children filed
a third party claim with respect to the shares of stock described in said paragraph (4).

On March 4, 1965, Mrs. Santos commenced the present action for certiorari with preliminary
injunction, against the plaintiffs in the main case and Judge Mojica, as well as the Sheriffs of Manila
and Quezon City. Upon the filing of a bond in the sum of P5,000, this Court issued said writ of
preliminary injunction, on March 11, 1965.

Mrs. Santos maintains that Judge Mojica had gravely abused his discretion in ordering the
execution of the decision in the main case because, in the language of Aguilos vs. Barrios: 1

... If the judgment is executed and, on appeal, the same is reversed, although there are
provisions for restitution, oftentimes damages may arise which cannot be fully compensated.
Accordingly, execution should be granted only when these considerations are clearly
outweighed by superior circumstances demanding urgency, and the provision contained in
Rule 39, sec. 2, requires a statement of those circumstances as a security for their
existence.

It is further urged, on behalf of Mrs. Santos, that her participation in and liability for the fraud
allegedly practiced upon private respondents herein is a matter divorced from the participation and
liability of Garcia and Moreno inasmuch as: the proof linking her to said fraud is not of the same
nature or weight as that introduced against her co-defendants in the main case; the decision therein
rendered was based upon allegedly spurious and non-existent preponderance of evidence; her
motion for new trial in the main case had been unjustly and erroneously denied; and excessive
damages and damages not suffered have been awarded. Needless to say, however, these
arguments deal with the merits of the decision in the main case, which is the subject-matter of G.R.
No. L-24071 and cannot be passed upon in the present action for certiorari, in which the issue is
whether or not Judge Mojica had exceeded his jurisdiction in authorizing the execution of said
decision.

Upon a review of the record, we are fully satisfied that petitioner has not made out a case against
respondents herein. Indeed, it is well-settled that the question whether or not a decision should be
executed pending appeal is mainly addressed to the sound discretion of the court, which appears to
have properly exercised it, for:

(1) The co-defendants of Mrs. Santos do not seemingly have any property upon which the judgment
against them may be satisfied. Upon the other hand, Mrs. Santos has a house and lot in Quezon
City with a total assessed value of P136,150. This property is, however, subject to a mortgage for
P150,000, in favor of the Philippine Trust Company. Besides, due to non-payment of interest, the
mortgage debt aggregated, as of October 12, 1964, to P191,863, which has probably increased
owing to the interest accruing subsequently thereto. In other words, petitioner is in imminent danger
of insolvency. 2

(2) No other property appears to be available for the satisfaction of said judgment. The movables
described in the aforementioned paragraph (1) are the object of a third party claim of Luis D. Santos
and other alleged heirs of the late Demetrio Santos. The shares of stock above referred to are the
object of a similar claim, filed by the children begotten by Mrs. Santos to her first husband. Then
again Mrs. Santos maintains that her salary and bonuses as treasurer of the PASUMIL are needed
for her support and that of her children.

(3) Mrs. Santos had a plain, speedy and adequate remedy in the ordinary course of law to forestall
execution of the decision against her. She could have filed a supersedeas bond. In fact, the order
complained of conditioned the issuance of the writ of execution upon the absence of said bond,
which she did not file within the period given in said order, or any time thereafter. We have
repeatedly held that failure to avail of such remedy is sufficient ground to deny a writ of certiorari
against an order authorizing the execution of a decision pending appeal. 3
(4) The suit against the defendants in the main case was for the recovery of damages resulting from
fraud allegedly committed by them against the plaintiffs therein. The latter alleged and the lower
court found that, by fraudulently inducing them to believe that a barter license for P16,000,000 in
favor of Southern Luzon Coconut Producers Association, Inc. whom the defendants claimed to
represent had been approved and would be released within two (2) weeks after payment of
P100,000 as license fee, and that Emma R. Geniza would get a commission of P480,000 if she
found a buyer of said license - which in fact had never been approved - the defendants succeeded in
persuading her, her husband and her father to mortgage several parcels of land to one Henry Sy for
P50,000, as well as in inducing Catalina Carreon-Rivera and her husband to mortgage another
parcel of land to the Asia Mercantile Corporation for another P50,000, both sums payable within 40
days, and to deliver to the defendants, in the house of Mrs. Santos and her second husband, Miguel
Moreno, the aggregate sum of P100,000 thus borrowed, under promise on defendants' part to pay it
back within the same period of time, which promise they did not fulfill, in view of which the
mortgaged properties with an aggregate market value of P292,000 4 were foreclosed and title
thereto eventually consolidated in the respective mortgagees.

Mrs. Santos denied having performed the acts imputed to her by the plaintiffs, as well as the
genuineness of the signature purporting to be hers on the promissory note allegedly signed by her
when said sum of P100,000 was delivered, as above stated, to the defendants. Considering,
however, the evidence for the plaintiffs, including the testimony of a handwriting expert, on the
genuineness of the aforementioned signature of Mrs. Santos, and the other circumstances
surrounding the case, respondent Judge after comparing the questioned signature with standard
signatures of Mrs. Santos found the evidence for the defendants unworthy of credence, and
concluded that their appeal had been "taken for the purpose of delay." The record before us does
not warrant our disturbing this conclusion, which, in turn, is sufficient ground to justify, execution
pending appeal. 5

WHEREFORE, the petition herein is dismissed and the writ of preliminary injunction issued by this
Court on March 11, 1965, hereby dissolved, with costs against petitioner Amparo D. Santos. Writ
denied. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Capistrano, Teehankee and
Barredo, JJ., concur.

Mangila vs CA (Remedial Law)

Anita MANGILA V. CA and Loreta Guina

G.R. No. 125027 | AUGUST 12, 2002

FACTS:

Anita Mangila is an exporter of seafoods and doing business under the name of Seafoods Products.
Private respondent Loreta Guina is the President and General Manager of Air Swift International, a
single registered proprietorship engaged in the freight forwarding business.

In January 1988, Mangila contracted the freight forwarding services of Guina for shipment of
petitioners products, such as crabs, prawns and assorted fishes, to Guam (USA) where petitioner
maintains an outlet. Mangila agreed to pay cash on delivery. Guinas invoice stipulates a charge of 18
percent interest per annum on all overdue accounts, and in case of suit, stipulates attorneys fees
equivalent to 25 percent of the amount due plus costs of suit.

On the first shipment, Mangila requested for 7 days within which to pay private Guina. However, for the
next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private respondent shipping
charges amounting to P109, 376.95.
Despite several demands, Mangila never paid. Thus, on June 10, 1988, Guina filed before the RTC Pasay
City an action for collection of sum of money.

The Sheriffs Return showed that summons was not served on Mangila. A woman found at Mangilas
house informed the sheriff that petitioner transferred her residence to Guagua, Pampanga. The sheriff
found out further that petitioner had left the Philippines for Guam.

Thus, on September 1988, construing petitioners departure from the Philippines as done with intent to
defraud her creditors, Ginua filed a Motion for Preliminary Attachment, which the court subsequently
granted. A Writ of Preliminary Attachment was thereafter issued.

Through the assistance of the sheriff of RTC Pampanga, the Notice of Levy with the Order, Affidavit and
Bond was served on Mangilas household help in San Fernando, Pampanga on October 1988.

On November 1988, Mangila filed an Urgent Motion to Discharge Attachment without submitting
herself to the jurisdiction of the trial court. She pointed out that up to then, she had not been served a
copy of the Complaint and the summons. Hence, petitioner claimed the court had not acquired
jurisdiction over her person.

After the hearing on the motion, RTC granted the same on January 13, 1989 upon filing of petitioners
counter-bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of
the writ of preliminary attachment.

Thereafter, Guina applied for an alias summons and on January 26, 1989 summons was finally served on
petitioner.

On February 1989, Mangila moved for the dismissal of the case on the ground of improper venue,
claiming that as stipulated in the invoice of Guinas freight services, the venue in case a complaint is filed
would be in Makati and not Pasay. For her part, Guina explained that although Makati appears as the
stipulated venue, the same was merely an inadvertence by the printing press whose general manager
executed an affidavit admitting such inadvertence. Moreover, Guina claimed that Mangila knew that
private respondent was holding office in Pasay City and not in Makati.

The RTC ave credence to Guinas Opposition, denied the Motion to Dismiss, and gave petitioner 5 days
to file her Answer. Petitioner filed an MR but this too was denied. Thus she filed her Answer on June
1989, maintaining her contention that the venue was improperly laid.

The case was set for pre-trial. Meanwhile, Guina filed a Motion to Sell Attached Properties but the trial
court denied the motion.

On motion of Mangila, the RTC reset the pre-trial but Mangila failed to appear on the rescheduled date.
Without declaring Mangila to be in default, the court allowed Guina to present evidence ex parte.

Mangila filed an MR of the order terminating the pre-trial, and argued that there was no order decalring
him in default and that his attorney was only late but not absent during the rescheduled pre-trial.

Nevertheless, the RTC ruled in favor of Guina and ordered petitioner to pay respondent P109,376.95
plus 18 percent interest per annum, 25 percent attorneys fees and costs of suit. Mangila appealed to
the CA while Guina filed a Motion for Execution Pending Appeal but the trial court denied the same.

The CA affirmed the RTC decision. The Court of Appeals upheld the validity of the issuance of the writ of
attachment and sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed
the declaration of default on petitioner and concluded that the trial court did not commit any reversible
error.
ISSUES:

WON the CA erred in affirming the validity of the issuance of the writ of Preliminary Attachment

WON the venue was improperly laid

HELD:

1) Yes, because there was no proper service of summons, order, and the writ of attachment.

*Improper Issuance and Service of Writ of Attachment. In Davao Light & Power Co., Inc. v. Court of
Appeals, this Court clarified the actual time when jurisdiction should be had:

It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant issuance of summons, order of attachment and writ of
attachment these do not and cannot bind and affect the defendant until and unless jurisdiction over
his person is eventually obtained by the court, either by service on him of summons or other coercive
process or his voluntary submission to the courts authority. Hence, when the sheriff or other proper
officer commences implementation of the writ of attachment, it is essential that he serve on the
defendant not only a copy of the applicants affidavit and attachment bond, and of the order of
attachment, as explicitly required by Section 5 of Rule 57, but also the summons addressed to said
defendant as well as a copy of the complaint xxx.

Furthermore, we have held that the grant of the provisional remedy of attachment involves three
stages: first, the court issues the order granting the application; second, the writ of attachment issues
pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it
is not necessary that jurisdiction over the person of the defendant be first obtained. However, once the
implementation of the writ commences, the court must have acquired jurisdiction over the defendant
for without such jurisdiction, the court has no power and authority to act in any manner against the
defendant. Any order issuing from the Court will not bind the defendant.

2) Yes.

*Improper Venue. The Rules of Court provide that parties to an action may agree in writing on the
venue on which an action should be brought. However, a mere stipulation on the venue of an action is
not enough to preclude parties from bringing a case in other venues. The parties must be able to show
that such stipulation is exclusive. Thus, absent words that show the parties intention to restrict the
filing of a suit in a particular place, courts will allow the filing of a case in any venue, as long as
jurisdictional requirements are followed. Venue stipulations in a contract, while considered valid and
enforceable, do not as a rule supersede the general rule set forth in Rule 4 of the Revised Rules of Court.
In the absence of qualifying or restrictive words, they should be considered merely as an agreement on
additional forum, not as limiting venue to the specified place.

In the instant case, the stipulation does not limit the venue exclusively to Makati. There are no qualifying
or restrictive words in the invoice that would evince the intention of the parties that Makati is the only
or exclusive venue where the action could be instituted. We therefore agree with private respondent
that Makati is not the only venue where this could be filed.

The case was dismissed without prejudice.

TORRES V SATSATIN

2 FEB
GR 166759 | November 25, 2009 | J. Peralta
(A) belated service of summons on respondents cannot be deemed to have cured the fatal defect in
the enforcement of the writ. The trial court cannot enforce such a coercive process on respondents
without first obtaining jurisdiction over their person. The preliminary writ of attachment must be
served after or simultaneous with the service of summons on the defendant whether by personal
service, substituted service or by publication as warranted by the circumstances of the case.

Facts:
Siblings Torres (petitioners) each owned adjacent 20,000 square meters track of land in
Dasmarias, Cavite. Nicanor Satsatin, through petitioners mother Agripina Aledia, was able to
convince the siblings to sell their property and authorize him via SPA, to negotiate for its sale.
Nicanor offered to sell the properties to Solar Resources, to which Solar allegedly agreed to buy the
three parcels of land plus the property of one Rustica Aledia for P35, 000,000. Petitioners claimed
that Solar has already paid the entire purchase price, however Nicanor only remitted P9, 000,000
out of the P28, 000,000 sum they are entitled to and that Nicanor had acquired a house and lot and
a car (which he registered in the names of his children). Despite the repeated verbal and written
demands, Nicanor failed to remit the balance prompting the petitioners to file a complaint for sum of
money against the family Satsatin.

Petitioners filed an Ex Parte Motion for the Issuance of a Writ of Attachment, alleging among other
things, that respondent was about to depart the country and that they are willing to post a bond fixed
by court. After filing a Motion for Deputation of Sheriff, which the RTC granted, it issued a Writ of
Attachment (WOA) on November 15. On November 19, after serving a copy of the WOA upon the
Satsatins, the sheriff levied their real and personal properties. On November 21, the summons and
copy of complaint was served upon the respondents. Respondents filed their answer and a Motion to
Discharge Writ of Attachment, claiming, among others, that: the bond was issued before the issuance
of WOA, the WOA was issued before the summons was received. Respondents posted a counter-bond
for the lifting of WOA, which was denied along with MR. Aggrieved, they filed with CA a Petition for
Certiorari, Mandamus and Prohibition with Preliminary Injunction and TRO under Rule 65. CA
ruled in favor of respondents and denied petitioners MR hence the petition for review on certiorari
with the SC.

Issue:
W/N CA erred in finding that RTC was guilty of GADALEJ in the issuance and implementation of the
WOA

Held:
No. A writ of preliminary attachment is defined as a provisional remedy issued upon order of the
court where an action is pending to be levied upon the property or properties of the defendant
therein, the same to be held thereafter by the sheriff as security for the satisfaction of whatever
judgment that might be secured in the said action by the attaching creditor against the defendant.
In the case at bar, the CA correctly found that there was grave abuse of discretion amounting to lack
of or in excess of jurisdiction on the part of the trial court in approving the bond posted by
petitioners despite the fact that not all the requisites for its approval were complied with. In
accepting a surety bond, it is necessary that all the requisites for its approval are met; otherwise, the
bond should be rejected.

Moreover, in provisional remedies, particularly that of preliminary attachment, the distinction

between the issuance and the implementation of the writ of attachment is of utmost importance to
the validity of the writ. The distinction is indispensably necessary to determine when jurisdiction
over the person of the defendant should be acquired in order to validly implement the writ of
attachment upon his person.

In Cuartero v. Court of Appeals, this Court held that the grant of the provisional remedy of
attachment involves three stages: first, the court issues the order granting the application; second,
the writ of attachment issues pursuant to the order granting the writ; and third, the writ is
implemented. For the initial two stages, it is not necessary that jurisdiction over the person of the
defendant be first obtained. However, once the implementation of the writ commences, the court
must have acquired jurisdiction over the defendant, for without such jurisdiction, the court has no
power and authority to act in any manner against the defendant. Any order issuing from the Court
will not bind the defendant.
At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so
since the motion for its issuance can be filed at the commencement of the action or at any time
before entry of judgment. However, at the time the writ was implemented, the trial court has not
acquired jurisdiction over the persons of the respondent since no summons was yet served upon
them. The proper officer should have previously or simultaneously with the implementation of the
writ of attachment, served a copy of the summons upon the respondents in order for the trial court to
have acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if
the writ of attachment was validly issued, it was improperly or irregularly enforced and, therefore,
cannot bind and affect the respondents.
Moreover, again assuming arguendo that the writ of attachment was validly issued, although the trial
court later acquired jurisdiction over the respondents by service of the summons upon them, such
belated service of summons on respondents cannot be deemed to have cured the fatal
defect in the enforcement of the writ. The trial court cannot enforce such a coercive
process on respondents without first obtaining jurisdiction over their person. The
preliminary writ of attachment must be served after or simultaneous with the service
of summons on the defendant whether by personal service, substituted service or by
publication as warranted by the circumstances of the case. The subsequent service of
summons does not confer a retroactive acquisition of jurisdiction

SALGADO VS CA FACTS:

The Phil. Commercial & Industrial Bank filed an action against Petitioner in then CFI of Rizal to recover
on a PN in the amt of 1.5M. In its verified complaint, the Bank prayed for the issuance of a writ of
attachment. It was alleged that P had fraudulently misappropriated or converted to their own personal
use and benefit the sugar proceeds given as security for the payment of indebtedness and that the
obligation sought to be enforced is genuine and therefore, a sufficient cause of action exists.

Attached to the complaint was the affidavit of Mrs. Osias, Manager of the Bank, that there is no
sufficient security for the claim sought to be enforced by this action. TC granted Banks prayer for prel.
Attachment upon a bond in the sum of 1.5M. P moved to quash writ of attachment on the ground that
the Bank made fraudulent misrepresentation in securing the writ. TC: granted P motion and lifted the
writ of attachment previously issued. Banks MR denied. CA: petition for Certiorari to annul the order of
the TC in lifting the writ of attachment. DISMISSED for lack of merit. Hence this petition.

ISSUE:

WON the writ of attachment was properly issued?

HELD: NEGATIVE.

The chief purpose of the remedy of attachment is to secure a contingent lien on defendants property
until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its
satisfaction. The ground upon which attachment may issue are set forth in Sec. 1, Rule 57 of RC. And it is
further provided in Sec. 3 of Rule 57 that an order of attachment shall be granted only when it is made
to appear by the affidavit of the applicant or some other person who personally knows the facts, that
there is no other sufficient security for the claim sought to be enforced by the action.

In this case, in the affidavit of Mrs. Osias, the Manager, there is no sufficient security for the claim
sought to be enforced by this action HAS BEEN SHOWN TO BE FALSE. It is undisputed that the note
sued upon, is fully secured by a series of valid and existing real estate mortgage duly registered and
annotated in the titles of the affected real property in favor of the Bank. Sec. 13 of Rule 57 authorizes
the discharge of an attachment where the same had been improperly or irregularly issued. NCC vs
Pecson: Court ruled that when the facts of some of them, stated in the plaintiffs affidavit, are shown by
the defendant to be untrue, the writ of attachment may be considered as improperly or irregularly
issued.

G.R. No. L-49140 November 19, 1982

QUASHA ASPERILLA ANCHETA VALMONTE PEA & MARCOS, petitioner,
vs.
THE HONORABLE CELESTINO P. JUAN, FILIPINAS CARRIERS, INC., represented by its
President, FEDERICO TABORA, JR., APOLLO KOKIN TRADING CO., LTD., et al., respondents.

Quasha, Asperilla, Ancheta, Valmonte, Pea and Marcos Law Offices for petitioner.

Antonio V. Raquiza & Assoc. for respondent Eugene A. Tan.

DE CASTRO, J.:

In this petition for certiorari and prohibition with preliminary injunction, petitioner seeks the annulment
of the order of respondent Judge of the Court of First Instance of Manila in Civil Case No. 105048
dated August 25, 1978 which approved the sale of the subject cargo and prays instead that the writ
of preliminary attachment over the same property issued by Hon. Gregorio Pineda of the Court of
First Instance of Rizal in Civil Case No. 28710 be allowed to remain in force.

It appears that on October 22, 1976, respondent Filipinas Carriers, hereinafter referred to as Filcar,
filed a complaint for sum of money, enforcement of lien and damages with the Court of First Instance
of Manila, and the same was assigned to Branch X, which was presided by respondent Judge,
against AB Charles Thorburn & Co., through its receiver Sjoegren and Winstrand; Estero Shipping
and Trading; Bank of Melli of Iran, Jeddah Branch; Perstorp AB; Skogshgarnas Industries; Ekman
and Company AB; and Abdullah Baroom. In the complaint which was docketed as Civil Case No.
105048, Filcar alleged that it is the disponent owner of a vessel, MV San Vicente, which was duly
registered with the Republic of the Philippines; that on April 2, 1976, defendant Carles Thorburn &
Co. chartered said vessel by time charter for two or three months for a voyage from Sweden to
Jeddah, Saudi Arabia at three thousand two hundred US dollars (US $3,200.00) a day, that Abdullah
Baroom was impleaded as defendant for being the agent of Charles Thorburn & Co. at Jeddah and
Sjoegren and Winstrand of Sweden for being the receiver of Charles Thorburn & Co.; that the vessel
left Sweden with construction materials as cargoes belonging to the following shippers and
consignees, namely, defendants Bank of Melli of Iran, Jeddah Branch; the National Commercial
Bank, Jeddah Branch; Perstorp AB of Perstorp, Sweden; Skogshgarnas Industries of Sweden;
Ekman and Company of Sweden; that after the second month, Charles Thorburn failed to pay the
daily hire, that the vessel has been in Jeddah since May 19, 1976 and is now in international waters;
that in view of Thorburn's failure to pay the charter hire, it had struck a lien through the vessel's
captain; that the charter party has expired but the vessel has not yet discharged the cargoes due to
inadequate port facilities and failure of the shippers, consignees and charterer to pay the charter
hire; that Filcar demanded from Charles Thorburn the payment of the charter hire but Thorburn failed
to pay and instead declared bankruptcy and is now under receivership in Sweden; that on demand,
Baroom, the agent of Thorburn in Jeddah, and the consignees and shippers refused to pay; that
consequently, Filcar was forced to exercise its lien on the cargoes consistent with Clause 18 of the
Charter Party, notice of which was sent to defendants. The plaintiff thus prayed, among others, that
the defendants pay the daily charter hire from the time they were in arrears until payment is made
and that the Court allow the sale of the cargoes to satisfy its claims.

On November 25, 1976, Sierra Madre Wood Industries, Inc., hereinafter called Sierra Madre, the
alleged owner, end-user and operator of MV San Vicente filed a motion to intervene in the Court of
First Instance of Manila (Civil Case No. 105048) for the purpose of enforcing its lien over the cargo,
claiming that it had chartered the vessel to Filcar for six months renewable every six months at
agreed charter hire fee (US $825,000.00 per year). Respondent Judge allowed the intervention of
Sierra Madre as plaintiff-intervenor.

On December 2, 1976, Filcar filed an extra-parte motion to sell the goods subject of lien, alleging
among others, that the MV San Vicente had arrived in the Philippines, and was due for dry-docking
and needed urgent repairs; and that the goods subject of its lien were in danger of deteriorating and
losing their market value and if the goods were not sold immediately, the plaintiff would have to pay
a staggering amount for warehousing so that the value of the goods would not even be enough to
pay for warehousing expenses.

Thereafter, respondent Judge conducted hearings in Civil Case No. 105048 and an ocular
inspection of the vessel. On April 18, 1977, respondent Judge, convinced that the vessel as well as
the cargoes were in a very bad condition, issued an order, the dispositive portion of which reads:

WHEREFORE, in view of all the above and due to the condition of the vessel and/or
its cargo, while we are not convinced as asserted that Section 17, Rule 14 and 15 of
the Rules of Court, do not apply, for we still believe that one of the four modes of
service must at least be observed, yet on the ground of extreme necessity, this Court
believes that somehow, somebody must act boldly in order to protect the interest of
parties and of the owner of the vessel which is believed to be the government of the
Philippines. On the ground of extreme necessity and partly by virtue of the provisions
of Rule 57, Section 1 1, the cargo on board the MV San Vicente, is ordered sold
privately, so that the vessel may immediately be sent for drydock, subject to the
following conditions:

l. That the negotiations for the sale of the cargo shall be the sole responsibility of
plaintiff Filcar subject to the supervision by this Court and the intervention of plaintiff-
intervenor, the Sierra Madre Wood Industries, Inc.;

2. That the Court and the plaintiff-intervenor be fully informed regarding the progress
of the negotiations and that the sale shall not be finalized without first securing the
approval of this Court is to the selling price;

3. The proceeds of the sale shall be deposited with a banking institution as approved
by this Court and shall be disposed of only upon order of this Court, subject to the
first lien of plaintiff-intervenor; and

4. Defendant AB Charles Thorburn & Co., etc. shall be notified of the Order of this
Court together with a copy of the amended complaint and the complaint in
intervention, thru the Department of Foreign Affairs, and the Philippine Embassy at
Jeddah, Saudi Arabia. Proof of Service shall be submitted to this Court. After such
time afforded the defendant, in order to enable them to answer or appear in this
Court or make any claim whatsoever, and still they fail to make any manifestation,
hearing of this case shall resume regarding the final disposition of the proceeds to all
concerned.

On June 27, 1977, respondent Judge approved tentatively the sale of the cargo to Bengzon's
Industries. This Order was followed by another dated July 19, 1977, approving the Deed of Absolute
Sale of the cargo. 1
On August 15, 1977, petitioner law firm filed with respondent Judge a special appearance for
defendant Ahmed Baroom contesting the Court's jurisdiction over Baroom's person and property and
a Motion to Dismiss on the ground that the Court had not acquired jurisdiction over Baroom's 'person
or property aboard the MV San Vicente. 2

On August 29, 1977, respondent Judge issued an Order directing petitioner law firm to show on or before
September 20, 1977 a written authorization signed by its client, Baroom, "since the latter is a foreigner". 3

On November 15, 1977, petitioner, as Baroom's counsel, filed an answer with compulsory counterclaim,
claiming that defendant Baroom is not an agent of Charles Thorburn since the cargoes belong to him, and
denying the validity of plaintiff's lien over the cargo. Petitioner reiterates the defense that plaintiff's action
being in personam involving defendant who is not a resident within the territorial jurisdiction of the Court,
and there is no showing in the records that the provisions of Section 17, Rule 14 in relation to Section 1,
Rule 57, of the Rules of Court have been complied with to convert the action in rem, the Court had no
jurisdiction over the case. Baroom, through petitioner, prayed that plaintiff be directed to deliver the
cargoes to Jeddah, pay damages corresponding to the full value of the goods and to the lost income and
profits he could have realized had plaintiff delivered the cargo to him. Baroom, likewise, filed a cross-
claim against Sierra Madre, plaintiff-intervenor.

On January 23, 1978, petitioner filed with respondent Judge a manifestation and motion that it be
"allowed to withdraw from this case and charging lien be recorded against the properties of Mr.
Baroom now aboard MV San Vicente for unpaid professional fees and reimbursement expenses. " 4

Thereafter, on February 17, 1978, petitioner filed before the Court of First Instance of Rizal a
complaint with a prayer for a writ of preliminary attachment for the recovery of professional fees and
reimbursement of expenses against Baroom whom it alleged to have represented in Civil Case No.
105048, CFI, Manila. The case was docketed as Civil Case No. 28710 and the same was assigned
to Branch XXI presided over by Judge Gregorio C. Pineda.

By virtue of the order dated February 28, 1978 issued by Judge Pineda in the new case, petitioner
obtained a writ of preliminary attachment against Baroom's alleged cargoes which is the subject
matter in Civil Case No. 105048.

Meanwhile, in Civil Case No. 105048, on August 2, 1978, respondent Judge gave Attys. Quasha and
Valmonte ten (10) days from receipt of order within which to explain why they should not be held in
contempt of court for filing a case entitled "Quasha Asperilla Ancheta Valmonte Pea and Marcos
vs. AlSayed Abdullah Mohammed Baroom" docketed as Civil Case No. 28710 in the Court of First
Instance of Rizal, Branch XXI, where they obtained a writ of preliminary attachment over the
cargoes, which they knew to be subject matter of Civil Case No. 105048 pending before his
sala." 5 A compliance with said order was filed on August 24, 1978, with petitioner alleging that their
cause of action against Baroom was for payment of professional fees and reimbursement of expenses
while Case No. 105048 before Judge Juan was for alleged unpaid charter hire fees.

On August 25, 1978, respondent Judge issued an order approving the sale of the cargo in question
to Apollo Kokin Trading Co., Ltd. In accordance with the earlier order of April 28, 1977, respondent
Judge directed the deposit of the sale proceeds with a banking institution to be approved by the
Court and its disposition only on orders of the Court. 6

On September 8, 1978, Filcar filed with the Court of First Instance of Rizal an urgent omnibus motion
to be allowed to appear and to dismiss the case and to lift the writ of preliminary attachment and set
aside the order to auction the cargo, attaching thereto the order of respondent Judge dated August
25, 1978, approving the sale in favor of Apollo Kokin Trading Co., Ltd. of the subject cargo, the
proceeds of which after deducting all expenses shall be deposited with the court.

Thus, petitioner, on October 23, 1978, filed before this Court the instant petition. Petitioner assails
the order of August 25, 1978, not the earlier order of April 28, 1977 approving the sale in favor of
Apollo Kokin Trading Co., Ltd. of the questioned cargo for having been issued in grave abuse of
discretion considering that subject cargo was allegedly earlier attached by the Court of First Instance
of Rizal.

Without giving due course to the petition and pending the filing of comments by respondents, this
Court issued on October 24, 1978 a temporary restraining order,
 enjoining respondents to immediately cease and desist from taking, unloading,
transferring, conveying, transporting or disposing of the cargoes or any part thereof
aboard the MC San Vicente and Dong Myung, * or from taking the cargoes away, subject matter of
Civil Case No. 105048 entitled 'Filipinas Carriers, Inc. vs. AB Charles Thorburn & Co., et al.' of the Court of First
Instance of Manila, Branch X." 7

On October 30, 1978, petitioner filed a manifestation and motion informing this Court that notwithstanding
the restraining order, the MV Don Myung, with the cargo aboard left surreptitiously at midnight of October
24, 1978 without the assistance of any pilot in violation of Harbor rules. The goods were then allegedly
sold for US $220,200.43 under irrevocable letters of credit issued by the Fuji Bank of Osaka, Japan.
Petitioner, thus, prayed that several persons, namely, Mr. Federico Tabora, Jr., President of Filipinas
Carriers, Inc., Mr. Gregorio Gatchalian, allegedly operations manager of the American Steamship
Agencies, Inc. being the agent representing the MV Dong Myung, Lt. JG Godofredo Orcullo of the
Operations Center and Seaman 1st Class Avelino Lontoc of the Philippine Coast Guard be cited for
contempt.

In the meanwhile, a compromise agreement dated October 16, 1978 and filed on November 2, 1978
wherein Filcar assigned its interests and rights in the proceeds of the sale of the subject cargoes to
Sierra Madre which the latter accepted was approved by the respondent court in its decision of
November 3, 1978. An amended petition was thus filed in this Court impleading Sierra Madre as
partly respondent in his case with prayer that a writ of garnishment be issued on the proceeds of the
sale of the cargoes which are in the possession of Sierra Madre, and an order be issued directing
Sierra Madre and all those to whom such proceeds may subsequently be reassigned to deliver to
petitioner such portion of the proceeds of the sale as would satisfy the attorney's lien in the interest
of justice.

Coming back to the omnibus motion of Filcar for the lifting of the preliminary attachment issued by
the Court of First Instance of Rizal, the said court on December 7, 1978 dismissed petitioner's case
and lifted the preliminary attachment issued therein. Upon motion for reconsideration dated April 7,
1979, the said preliminary attachment was reinstated by the Court of First Instance of Rizal in its
order dated July 5, 1979. 8

After several pleading were filed in this Court, We gave due course to the petition. 9

Petitioner contends that respondent court did not acquire jurisdiction neither over any of the defendants
as they have not voluntarily submitted themselves to the jurisdiction of respondent court, nor over the res,
since there had been no seizure of the property under a legal process, as by a writ of attachment or other
process of similar effect. The instant case is allegedly neither a proceeding in rem as would place the
property under its potential power citing the leading case of Banco Espaol v. Palanca 10 which held:

Jurisdiction over the property which is the subject of litigation may result either from a
seizure of the property under legal process, whereby it is brought into the actual
custody of the law, or it may result from the institution of legal proceedings wherein
under special provisions of law, the power of the court over the property is
recognized and made effective. In the latter case the property, though at all times
within the potential power of the court, may never be taken into actual custody at all.
An illustration of the jurisdiction acquired by actual seizure is found in attachment
proceedings, where the property is seized at the beginning of the action, or some
subsequent stage of its progress and held to abide the final event of the litigation. An
illustration of what we term potential jurisdiction over the res is found in the
proceeding to register the title of land under our system for the registration of land.
Here the court, without taking actual physical control over the property assumes, at
the instance of some person claiming to be the owner, to exercise a jurisdiction in
rem over the property and to adjudicate the title in favor of the petitioner against all
the world.

Claiming that it was the Court of First Instance of Pasig that first acquired jurisdiction over the res to
the exclusion of respondent court, petitioner insists that the latter court's act is undue interference
which cannot be countenanced.

There is no pretense that respondent court has jurisdiction over the cause of action. It is much too
obvious to merit a fuller discussion. Suffice it to say that an action based upon an oral contract of
transportation of goods by water is an action in admiralty which comes under the original and
exclusive jurisdiction of the Court of First Instance irrespective of the value of the cargo. 11
As to the person of Baroom, it is to be conceded that at the initial stage of the proceeding in the
Court of First Instance of Manila prior to the issuance of the order of April 28, 1977 directing the sale
of the property and petitioner's firing of various pleadings, said court did not have jurisdiction over
Baroom. Baroom was a non-resident alien and he was beyond the reach of the court's legal
processes. But since the action is brought principally for the enforcement of maritime lien against the
property of defendants who failed to pay the charter hire fee, and therefore the same is in the nature
and character of a proceeding quasi in rem, jurisdiction over defendant Baroom is not essential. An
action quasi in rem has been defined as "an action between parties where the direct object is to
reach and dispose of property owned by them or of some interest therein." As such the properties
allegedly owned by him are primarily made liable. In elucidating the characteristic of a proceeding
where a non-resident defendant fails to appear, this Court in the aforecited leading case of Banco
Espaol Filipino v. Palanca said:

If however, the defendant is a non-resident and, remaining beyond the range of the
personal process of the court, refuses to come in voluntarily, the court never acquires
jurisdiction over the person at all. Here the property itself is in fact the sole thing
which is impleaded and is the responsible object which is the subject of the exercise
of judicial power. It follows that the jurisdiction of the court in such case is based
exclusively on the power which, under the law, it possesses over the property; and
any discussion relative to the jurisdiction of the court over the person of the
defendant is entirely apart from the case.

The foregoing ruling was applied in Mabanag vs. Ganimore: 12

As a general rule, when the defendant is not residing and is not found in the
Philippines, the Philippine courts cannot try any case against him because of
impossibility of acquiring jurisdiction over his person, unless he voluntarily appears in
court. But when the action ... is intended to seize or dispose of any property, real or
personal, of the defendant, located in the Philippines, it may validly be tried by the
Philippine courts, for then, they have jurisdiction over the res, i.e. ... the property of
the defendant, and their jurisdiction over the person of the non-resident is not
essential ... . (Citing I Moran's Comments on the Rules of Court, 2d Ed., 105).

At any rate, defendant Baroom filed later, aside from a motion to dismiss, an answer with
counterclaim praying that plaintiff be directed to deliver the cargoes of defendant Baroom to Jeddah
and to pay damages, etc. and a cross-claim against Sierra Madre, thereby abandoning any question
on jurisdiction over the person and submitting himself to the jurisdiction of the court. In Tenchavez
vs. Escao, 13 this Court quoted with approval the ruling in Merchant's Heat and Light Co. vs. Clow &
Sons, 204 U. S. 286, 51 Law Ed. 488:

We assume that the defendant lost no rights by pleading to the merits, as required,
after saving its rights. Harkness vs. Hyde, 98 U.S. 476, 25 L. ed. 237; Southern P.
Co. vs. Denton, 146 U.S. 202, 36 L. ed. 943, 13 Sup. Ct. Rep. 44. But by setting up
its counterclaim the defendant became a plaintiff in its turn, invoked the jurisdiction of
the court in same action, and, by invoking submitted to it. It is true that the
counterclaim seems to have arisen wholly out of the same transaction that the
plaintiff sued upon, and so to have been in recoupment rather than in set-off proper.
But, even at common law, since the doctrine has been developed, as demand in
recoupment is recognized as a cross demand, as distinguished from a defense.
Therefore, although there has been a difference of opinion as to whether a
defendant, by pleading it, is concluded by the judgment from bringing a subsequent
suit for the residue of his claim, a judgment in his favor being impossible at common
law, the authorities agree that he is not concluded by the judgment if he does not
plead his cross demand, and that whether he shall do so or not is left wholly to his
choice. Davis vs. Hedges, L.R. 6 Q.B. 687; Mondel vs. Steel, 8 Mees & W. 858, 872;
O'Connor vs. Varney, 10 Gray, 231. This single fact shows that the defendant, if he
elects to sue upon his claim in the action against him, assumes the position of an
actor and must take the consequence. The right to do so is of modern growth, and is
merely a convenience that saves bringing another suit, not a necessity of the
defense.

In the aforecited case, the Court explains that the rule is such because "it cannot look with favor
upon a party adopting not merely inconsistent, but actually contradictory; positions in one and the
same suit, claiming that a court has no jurisdiction to render judgment against it, but has such
jurisdiction to give a decision its favor. 14

It may be noted that if the defendant voluntarily appears, the action becomes as to him a personal
action and is conducted as such. Even then, the court does not lose its jurisdiction over
the res, assuming that it has indeed jurisdiction over the res. The res still remains under its control
and disposition.

As regards jurisdiction over the res, We hold that respondent acquires jurisdiction over it. Where a
property is burdened by a lien, a writ of attachment is no longer necessary in order that jurisdiction
over the property may be obtained by the court. In the same cited case by petitioner, in the Banco
Espaol case, it was clarified:

In an ordinary attachment proceeding, if the defendant is not personally served, the

preliminary seizure is to be considered necessary in order to confer jurisdiction upon
the court. In this case the lien on the property is acquired by seizure; and the
purpose of the proceeding is to subject the property to that lien. If a lien already
exists, whether created by mortgage, contract, or statute, the preliminary seizure is
not necessary, and the court proceeds to enforce such lien in the manner provided
by law precisely as though the property had been seized upon attachment. (Roller v.
Holly, 176 U.S. 398, 405; 44 L. ed. 520).

The reason for the rule is obvious. An attachment proceeding is for the purpose of creating a lien on
the property to serve as security for the payment of the creditors' claim. Hence, where a lien already
exists, as in this case a maritime lien, the same is already equivalent to an attachment. Moreover,
since the property subject of the action for the enforcement of the maritime liens was already in the
possession of private respondent, there is no need for seizure for the court to obtain jurisdiction over
the rest.

Where a party in actual possession of the res subject to the lien is before the court,
the res is within the jurisdiction of the court for the enforcement of the lien A suit may
be maintained to foreclose a lien on property within the jurisdiction of the court,
although some interest or claim therein is held by a non-resident. 15

The other argument posed by petitioner to challenge respondents' right over the property is that there is
no privity of contract between Baroom and respondents. It avers that Baroom is not merely the agent of
Thorburn but himself the owner of some of the cargoes and whose contract to ship the same is with sub-
charterer Thorburn. It avers further that neither Thorburn could attach a lien on the property since Baroom
had allegedly paid fully for the shipment even before the vessel sailed, as evidenced by the clean freight
pre-paid bills of lading.

Claiming right over the cargo to answer for the unpaid professional fees, petitioner submits to this
Court the required written authority from Baroom claiming that due to snag in communication and
unreliability of the mailing system it did not receive the documents from its client on time.

The foregoing entails determination of facts. It would be highly irregular if this Court would have to
resolve those questions, this Court not being a trier of facts. The several documents mentioned by
petitioner and attached to its pleadings before this Court were never presented before the lower
court. After Baroom had abandoned his defense which created the presumption that he had no
defense, that he is not the owner of the cargo, petitioner should have pursued the same argument
before respondent court in claiming the alleged professional fee. This is in accordance with Article
1177 of the New Civil Code which provides:

Art. 1177. The creditors having pursued the property in possession of the debtor to
satisfy their claims may exercise all the rights and bring all the actions of the latter for
the same purpose, save those which are inherent in his person, they may also
impugn the acts which the debtor may have done to defraud them.

Indeed, petitioner should have maintained its action in respondent's court. After all, a court which
has in its possession, control or equivalent dominion, property or funds involved in litigation may
exercise exclusive jurisdiction over such property or funds to determine the rights therein, such as
questions respecting the title, possession or control, management and disposition thereof and
another court of concurrent or coordinate jurisdiction cannot interfere with such possession or
control. 16 The rights to be determined by said court necessarily include the attorney's fees due to the
lawyers who represented the parties. Significantly, the lower court which undoubtedly has in its favor the
presumption of regularity and which was never restrained by this Court from proceeding with the ease
issued an order dated January 25, 1979 17 making the following findings of fact:

1. Thorburn fails to pay the freight so that respondent Filcar had the right to impose
its lien on the cargo including sub-freights.

Paragraph 16 of the time charter contract provides:

That the owners shall have a lien upon all cargoes and all sub-
freights for any amounts due under this Charter including General
Average contributions and the charterers to have a lien on the ship
for all monies paid in advance and not earned, and any'overpaid hire
or excess deposit to be returned at once. Charterers will not suffer
nor permit to be continued, any lien or encumbrance incurred by them
or their agents, which might have priority over the title and interest of
the owners of the vessel.

2. Thorburn executed a liner term contract with Baroom who was playing the double
role of agent of said Thorburn and agent of three consignee banks in Jeddah.

3. Baroom appealed to Filcar to be its agent, but when it was discovered that he was
the agent of Charles Thorburn and the three (3) consignee banks, the application
was rejected due to conflict of interest.

4. The pre-paid freight representation of Baroom is false because the condition of the
L/C issued by the 3 consignee banks provides a C/F arrangement which means
payment of the goods, insurance and freight can only be made upon physical
delivery of the goods in Jeddah.

5. Baroom intervened in the case (before respondent court) using the Quasha law
office. He later withdrew upon knowing he has no defense. In fact, he did not even
give Quasha written authority to appear for him as his lawyer.

6. The court of respondent Judge "has jurisdiction over the person of defendant and
subject cargo of the vessel.

7. The Quasha law office is not entitled to any claim for attorney's lien

Prescinding from the foregoing, We find no abuse of discretion in issuing the questioned order of
August 25, 1978, and therefore the instant petition should be dismissed. It could not be claimed that
the act of respondent Judge in issuing the said order amounts to interference with the writ of
attachment dated February 28, 1978 issued by Judge Pineda, for by the time the said writ was
issued, respondent Judge had already control and disposition of the case. The order of August 25,
1978 was but an implementation of the earlier order of April 28, 1977 directing the sale of the
cargoes on the ground of extreme necessity as the cargoes as found by respondent Judge upon
ocular inspection were in danger of deteriorating and losing their market value and the vessel was
also in danger of sinking. By then, respondent Judge had also issued the order dated July 19, 1977
approving a Deed of Sale of subject cargoes.

It should be noted that at the time petitioner filed the action before Judge Pineda, it has already
submitted itself to the jurisdiction of respondent court and in fact its "charging lien" which is the same
cause of action before Judge Pineda was still pending before respondent court. Pending also before
respondent Judge were petitioner's answer with counterclaim, cross claim, motion to dismiss and
motion to withdraw from the case.

Petitioner may not enforce its attorney's lien, which accordingly is based on Section 37 of Rule 138
which provides:

Sec. 37. Attorney's lien. An attorney shall have a lien upon the funds, documents
and papers of his client which have lawfully come into his possession and may retain
the same until his lawful fees and disbursements have been paid and may apply
such funds to the satisfaction thereof. He shall also have a lien to the same extent
 upon all judgments for the payment of money, and executions issued in pursuance of
such judgments, which he has secured in a litigation of his client, from and after the
time when he shall have caused a statement's of his claim of such lien to be entered
upon the records of the court rendering such judgment, or issuing such execution,
and shad have caused written notice thereof to be delivered to his client and to the
adverse party; and he shall have the same right and power over such judgments and
executions as his client would have to enforce his lien and secure the payment of his
just fees and disbursements.

Based on the foregoing provision, the liens for attorney's fees and expenses apply only on the funds
or documents of clients which lawfully come to the possession of the counsel (called retaining lien)
and to all judgments secured by the counsel (called charging lien). In his manifestation and motion
before respondent Judge, petitioner is claiming for his charging lien But it should be noted that at the
time of its filing, the orders of April 27, 1977 ordering the sale of the cargoes and July 19, 1977
approving the Deed of Sale of cargoes were already in existence and both were in fact in favor of
private respondent. It is curious to note that petitioner never questioned said orders on appeal or by
a special civil action. Petitioner's client in fact even abandoned its case. Hence, having no favorable
judgment that could be anticipated, the charging lien has no leg to stand on. Perhaps because it was
aware of its predicament that petitioner filed an independent action for recovery of its professional
fees and for reimbursement of expenses which would have been proper, except that the ownership
of the property sought to be attached was questionable and the same was already sold by
respondent court. But just as We had said before, petitioner should have filed its claim for
professional fees in respondent's court for said court has the exclusive jurisdiction to determine the
real owner of the cargoes. We hasten to add, however, that the action should not be for a charging
lien, but a simple complaint in intervention for recovery of professional services and reimbursement
of expenses, thus avoiding multiplicity of suits.

On October 24, 1978, We issued a temporary restraining order enjoining the disposition or unloading
of the cargoes. It turned out, however, that before the said order could be served upon the private
respondents, all the cargoes subject of the petition had been loaded into the M.V. Dong Myung, of
which this Court has no jurisdiction being a foreign vessel. When the vessel sailed and the cargoes
eventually sold, everything became fait accompli and the case before Us moot and academic.

Petitioner prays for the garnishment of the proceeds, but to allow the same, there must first be a
determination of the ownership of the cargo. Again, We say We are not in a position to do so.
Petitioner failed to file motion for reconsideration of the order of August 25, 1978 approving the sale
of the cargo, and it abandoned its own case before respondent Judge. The result of its negligence in
allowing considerable period to lapse before claiming right over the cargo, and resorting to injunctive
relief must be borne by it. Petitioner is not entitled to any relief and the instant petition must be
dismissed. We shall also dismiss petitioner's charge of contempt against respondent since as We
said before, before the temporary restraining or order could be served everything was already fait
accompli .

Likewise, We also dismiss the respondents' charge against petitioner for direct contempt for
allegedly omitting material facts vital to the fun appreciation of this Court. In De Midgely vs.
Ferandos, 18 this Court ruled that such tactic is generally tolerated because understandably lawyers are
apt to slant the presentation of their clients' case so that they would have favorable judgments. "Courts
are not deceived by the exaggerations and distortions in a counsel's lopsided submission of his client's
case especially where, as in this case, the alert opposing counsel calls the court's attention to that fact. "

Indeed, "contempt of court presupposes a contumacious attitude, a flouting of arrogant belligerence,

a defiance of the court. 19 It is an offense against the authority and dignity of the court.

WHEREFORE, the petition is hereby dismissed.

SO ORDERED.

G. R. No. L-45948 September 10, 1985

MERCEDES GRUENBERG and ALBERT GRUENBERG, petitioners,

vs.
HONORABLE COURT OF APPEALS, HONORABLE LINO L. AOVER and ELDA R.
FLORES, respondents.
Perlas, Joven & Associate Law Office for private respondent.

GUTIERREZ, JR., J.:

This is a petition to review the decision of the Court of Appeals, now Intermediate Appellate Court,
which affirmed the order for the issuance of a writ of preliminary attachment, and other related orders
of the then Court of First Instance of Rizal in Civil Case No. Q-18444.

The antecedent facts are summarized by the appellate court as follows:

Petitioners are the defendants and private respondent is the plaintiff in Civil Case No.
Q-18444, Court of First Instance of Rizal, Branch XVII-B-Quezon City, for annulment
of sale, recovery of ownership and possession of the house and lot situated at No. 24
Scout Limbaga, Diliman, Quezon City, the same, allegedly, having been sold in fraud
of creditors.

Private respondent filed the complaint in Civil Case No. Q18444, in her capacity as
the administratrix of the intestate estate of the late William Gruenberg.

It is alleged in the complaint in Civil Case No. Q-18444 that the house and lot in
question, which were sold to defendant Albert Gruenberg (one of the petitioners),
form part of the conjugal partnership of the Gruenberg spouses, which must answer
for the obligations that deceased William Gruenberg might have incurred during his
lifetime in his capacity as manager and administrator of the conjugal partnership; and
that the sale of the house and lot before the death of William Gruenberg, when at
that time two creditors had already filed suits against him for collection of unpaid
obligations, and the latter had unpaid obligation to plaintiff Elda R, Flores (private
respondent) in the amount of P13,000.00, exclusive of interest and collection
charges, patently and clearly can no longer be paid or liquidated.

On March 1, 1974, petitioners filed their answer to the complaint.

Under date of February 7, 1976, private respondent filed a 'Motion for Issuance of
Writ of Preliminary Attachment' against the properties of petitioners, alleging, among
others, that the latter are indebted to her in the principal amount of P13,000.00,
which, according to her, she seeks to recover in Civil Case No. Q-18444.

On March 1, 1976, petitioners filed their opposition to the motion for the issuance of
writ of preliminary attachment, alleging among others, that Civil Case No. Q-18444 is
an action for annulment of sale and recovery of the house and lot mentioned therein,
and not for recovery of sum of money. It is contended that a writ of preliminary
attachment is not the proper remedy for the protection of the rights of the estate. In
the same opposition, petitioners refuted the allegations of private respondent in her
motion that the complaint in Civil Case No. Q-18444 is one for collection of a sum of
money allegedly contracted fraudulently by petitioners.

On March 26, 1976, respondent Judge issued an order, granting the motion of
private respondent and issuing a writ of preliminary attachment against the properties
of petitioners, respondent Judge stating that no opposition had been filed to the
motion.

In the latter part of July, 1976, respondent Sheriff and/or his deputies served on
petitioners and the managers of the Hollywood Theater, Palace Theater and Illusion
Theatre a writ of preliminary attachment and notice of garnishment against
petitioners and personally in favor of respondent Flores.

It is alleged that the order of respondent Judge was not received by petitioners' new
counsel but upon being informed by petitioners of the writ of preliminary attachment
and notice of garnishment, petitioners'new counsel promptly went to the court of
respondent Judge and then and there he discovered that petitioners' opposition to
 the motion was not attached to the record, because the same was forwarded to
Branch XVIII to which Civil Case No. Q-18444 was originally assigned,

On July 30, 1976, petitioners filed (a) a motion for reconsideration of the order
granting the motion for the issuance of a writ of preliminary attachment, and (b) a
motion to recall the writ of preliminary attachment and notice of garnishment, on the
ground that it is not true that petitioners did not oppose the motion of private
respondent, and that there is no valid basis to grant the motion.

On August 16, 1976, respondent Judge issued an order, denying the motions of
petitioners.

On October 28, 1976, respondent Judge issued an order, requiring petitioners to

appear before his court to explain why they should not be punished for contempt for
denying or disobeying the lawful processes of the court.

The issuance of the "show cause" order prompted the petitioners to file a petition for certiorari with
writ of preliminary injunction in the Court of Appeals. The petition was dismissed. Hence, the instant
petition

The issues raised to us are embodied in the petitioners' assignments of errors as follows:

I. THE COURT OF APPEALS ERRED IN OVERLOOKING THE FACT THAT WRIT

OF PRELIMINARY ATTACHMENT COULD ONLY BE GRANTED TO SECURE THE
SATISFACTION OF A JUDGMENT IN A CASE IN WHICH SAID WRIT IS PRAYED
FOR;

II. THE COURT ERRED IN SUSTAINING THE ISSUANCE OF THE WRIT OF

PRELIMINARY ATTACHMENT FOR THE PERSONAL BENEFIT OF PRIVATE
RESPONDENT IN CIVIL CASE NO. Q-18444, NOTWITHSTANDING THE FACT
THAT SAID RESPONDENT INSTITUTED SAID ACTION NOT IN HER PERSONAL
CAPACITY, BUT AS ADMINISTRATRIX OF THE ESTATE OF THE LATE WILLIAM
GRUENBERG, SR.;

III. THE COURT OF APPEALS ERRED IN RULING THAT PETITIONERS CAN BE

CITED FOR CONTEMPT FOR THE ALLEGED FAILURE TO COMPLY WITH THE
NOTICE OF GARNISHMENT ADDRESSED TO THIRD PARTIES.

The issues are interrelated and may be discussed together. They all focus on the proprietary of the
writ of attachment and garnishment against the petitioners' properties issued by the trial court and
affirmed by the appellate court.

In her affidavit supporting the motion for a writ of preliminary attachment, the private respondent
stated that her case "... is one of the situations covered by Section 1 (d), Rule 57 of the Rules of
Court whereby a writ of preliminary attachment may issue." Section 1 (d), Rule 57 provides:

Grounds upon which attachment may issue.A plaintiff or any proper party may, at
the commencement of the action or at any time thereafter, have the property of the
adverse party attached as security for the satisfaction of any judgment that may be
recovered in the following cases:

xxx xxx xxx

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

xxx xxx xxx

There are various reasons why this petition should prosper.

Private respondent Elda R. Flores, as a claimant for P13,000.00 against the estate of William
Gruenberg, Sr., was appointed administratrix of the estate of the deceased. In her capacity as
administratrix, she filed Civil Case No. Q-18444 against the petitioners. This main case was for the
annulment of a deed of sale executed by the late William Gruenberg, Sr., in favor of Albert
Gruenberg and for the recovery of possession and ownership of the house and lot involved in that
sale.

The motion for a writ of preliminary attachment filed by Flores, however, states:

1. Defendants are indebted to plaintiff in the amount of P13,000.00 exclusive of

accrued interest and collection charges, which plaintiff seeks to recover in the instant
action; and

2. Defendants are guilty of fraud in contracting the debt or incurring the obligation
due plaintiff in that they conspired and confederated with each other as mother End
son to defraud other creditors one of whom is plaintiff, by simulating the sale of
house and lot situated at No. 24 Scout Limbaga Street, Quezon City ... .

While the respondent filed the motion in her capacity as administratrix of the Gruenberg estate, the
motion for a writ of attachment and its supporting affidavit show that the attachment was intended to
secure only her P13,000.00 claim against the estate. Obviously, this cannot be done.

A writ of attachment is a remedy ancillary to the principal proceeding. The well-entrenched principle
is that:

Attachment is a juridical institution which has for its purpose to secure the outcome of
the trial, that is, the satisfaction of the pecuniary obligation really contracted by a
person or believed to have been contracted by him, either by virtue of a civil
obligation emanating from contract or from law, or by virtue of some crime or
misdemeanor that he might have committed, and the writ issued, granted it, is
executed by attaching and safely keeping all the movable property of the defendant,
or so much thereof as may be sufficient to satisfy the plaintiff's demands ... .
(Guzman v. Catolico, et al., 65 Phil. 257).

The purpose behind the filing of the complaint was to recover a piece of property allegedly belonging
to the intestate estate of the deceased. Hence, any writ of attachment necessary to secure the
judgment must be related to the protection of the estate. The writ may not issue if only to protect the
personal interests of the private respondent as a creditor of that estate.

The records show that the private respondent's interest in the estate is to recover a debt based on a
contract with the deceased Gruenberg, For this reason, she instituted the special proceedings for the
settlement of the intestate estate resulting to her appointment as administratrix. Under these
circumstances, the private respondent's remedy to recover the outstanding debt of the deceased is
to follow the procedure in Rule 86 on claims against an estate. As a matter of fact, if an administrator
has a claim against an estate, Section 8 of Rule 86 calls for the appointment of a special
administrator to defend the estate against such claim.

A court order which violates the Rules constitutes grave abuse of discretion as it wrecks the orderly
procedure prescribed for the settlement of claims against deceased persons designed to protect the
interests of the creditors of the decedent. (See Dy v. Enage, 70 SCRA 96). Allowing the private
respondent in the annulment case to attach the petitioners' properties for the benefit of her
P13,000.00 claim against the estate would give her an undue advantage over other creditors against
the estate,

Moreover, the P13,000.00 claim of the respondent cannot be settled in the case for annulment of the
deed of sale, wherein the writ of attachment is sought. What she seeks to be secured is not the
judgment in the main case but a mere claim against the estate which is still to be considered and
adjudicated by the court.

The rules on the issuance of a writ of attachment must be construed strictly in favor of the defendant.
The remedy of attachment is harsh, extraordinary, and summary in nature. If all the requisites for the
issuance of the writ are not present, the court which issues it acts in excess of its jurisdiction.
In Salas v. Adil (90 SCRA 121), we stated:

A preliminary attachment is a rigorous remedy, which exposes the debtor to

humiliation and annoyance, such it should not be abused as to cause unnecessary
prejudice. It is, therefore, the duty of the court, before issuing the writ, to ensure that
all the requisites of the law have been complied with; otherwise the judge acts in
excess of his jurisdiction and the writ so issued shall be null and void. (Guzman v.
Catolico, 65 Phil. 257, 261).

xxx xxx xxx

Considering the gravity of the allegation that herein petitioners have removed or
disposed of their properties or are about to do so with intent to defraud their
creditors, and further considering that the affidavit in support of the preliminary
attachment merely states such ground in general terms, without specific allegations
of circumstances to show the reason why plaintiffs believe that defendants are
disposing of their properties in fraud of creditors, it was incumbent upon respondent
Judge to give notice to petitioners and to allow them to present their position at a
hearing wherein evidence is to be received.

Following the principle of strict compliance with all requisites, this Court has also ruled that "when
the facts, or some of them, stated in the plaintiff's affidavit are shown by the defendant to be untrue,
the writ may be considered as improperly or irregularly issued." (National Coconut Corporation V.
Pecson, et al., 90 Phil. 809).

The February 7, 1976 motion for issuance of a writ of preliminary attachment and the affidavit of
preliminary attachment are misleading. First, the private respondent states that the "defendants are
indebted to plaintiff in the amount of P13,000.00" exclusive of interests and collection charges. Then,
she avers that the "defendants are guilty of fraud in contracting the debt or incurring the obligation
due plaintiff ".

The facts in the motion and the affidavit are deceptively framed. The obligation which the respondent
seeks to secure by an attachment was between her and the late William Gruenberg, Sr. What she
seeks to establish as fraudulent was the sale between the late Mr. Gruenberg and his son. These
are two entirely distinct transactions.

One of the reasons for granting the motion for the issuance of a writ of preliminary attachment was
the court's finding that the petitioners' failed to file an opposition thereto. It turns out, however, that
the petitioners filed a timely opposition to the motion but it was filed in another branch of the court
where the case had earlier been assigned. Nevertheless, despite this timely opposition, the motion
for reconsideration of the order for the issuance of a writ of preliminary attachment, was summarily
denied for lack of merit.

We also note that the order which directed the issuance of a writ of preliminary attachment merely
recited the grounds alleged in the private respondent's motion without any specific details as to the
supposed fraud committed by the petitioners when they contracted the debt and the alleged
disposition or concealment by the petitioners of their properties. The order of the trial court
disregards the rule that attachment being a harsh remedy, it must be issued on concrete and specific
grounds and not on general averments merely quoting the words of the pertinent rules. (Dy v.
Enage, supra). The absence of specific grounds highlights the fact that the petitioners are not
indebted to respondent Flores. It was the late William Gruenberg who incurred the alleged
indebtedness and it is his estate which owes Flores. The validity of the claim of Flores will have to be
threshed out in the special proceedings, not in the case for annulment of the deed of sale.

Finally, the transaction sought to be annulled in the main case refers to a questioned sale of a house
and lot. It would have been sufficient to annotate a notice of lis pendens in the title to that property.
Assuming the trial court could validly attach the house and lot involved in the sale, we see no
justification why the attachment should reach out to the petitioners' interests in the Hollywood
Theatre, the Palace Theatre, and the Illusion Theatre. The petitioners also point out that there is no
showing of any attempt on their part to conceal or to dispose of the house and lot nor of any change
in the title or condition of the property. Considering all the foregoing, we find the writ of preliminary
attachment to have been improvidently issued.
WHEREFORE, the petition is hereby GRANTED. The decision of the former Court of Appeals is SET
ASIDE. The writ of preliminary attachment and the notice of garnishment issued in Civil Case No. Q-
18444 are DISSOLVED. The other related orders issued in connection with the writ of attachment
are SET ASIDE.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Relova, De la Fuente and Alampay, JJ., concur.
G.R. No. L-825 July 20, 1948

ROMAN MABANAG, plaintiff-appellant,

vs.
JOSEPH M. GALLEMORE, defendant-appellee.

Santiago Catane for appellant.

No appearance for appellee.

TUASON, J.:

This case, here on appeal from an order dismissal by the Court of First Instance of Occidental
Misamis, raises the question of the court's jurisdiction. More specifically, the question is whether the
action is in personam or one in rem. The trial court opined that it is the first and that it "has no
authority nor jurisdiction to render judgment against the herein defendant, Joseph M. Gallemore for
being a non-resident.

The purpose of the action is to recover P735.18, an amount said to have been paid by the plaintiff to
the defendant for two parcels of land whose sale was afterward annulled. The defendant is said to
be residing in Los Angeles, California, U. S. A. He has no property in the Philippine except an
alleged debt owing him by a resident of the municipality of Occidental Misamis. This debt, upon
petition of the plaintiff, after the filing of the complaint and before the suit was dismissed, was
attached to the extent of plaintiff's claim for the payment of which the action was brought. But the
attachment was dissolved in the same order dismissing the case.

It was Atty. Valeriano S. Kaamino who has amicus curi filed the motion to dismiss and to set aside
the attachment. There is no appearance before this Court to oppose the appeal.

Section 2, Rule 5, of the Rules of Court provides:

If any of the defendants does not reside and is not found in the Philippines, and the action
effects the personal status of the plaintiff, or any property of the defendant located in the
Philippines, the action may be commenced and tried in the province where the plaintiff
resides or the property, or any portion thereof, is situated or found.

The Philippine leading cases in which this Rule, or its counterpart in the former Code of Civil
Procedure, section 377 and 395, were cited and applied, are Banco Espaol-Filipino vs. Palanca, 37
Phil. 921, and Slade Perkins vs. Dizon, 40 Off. Gaz., [3d Suppl.], No. 7, p. 216. The gist of this
Court's ruling in these cases, in so far as it is relevant to the present issues, is given in I Moran's
Comments on the Rules of Court, 2d Ed., 105:

As a general rule, when the defendant is not residing and is not found in the Philippines, the
Philippine courts cannot try any case against him because of the impossibility of acquiring
jurisdiction over his person, unless he voluntarily appears in court. But, when the action
affects the personal status of the plaintiff residing in the Philippines, or is intended to seize or
dispose of any property, real or personal, of the defendant, located in the Philippines, it may
be validly tried by the Philippine courts, for then, they have jurisdiction over the res, i.e., the
personal status of the plaintiff or the property of the defendant, and their jurisdiction over the
person of the non-resident defendant is not essential. Venue in such cases may be laid in
the province where the plaintiff whose personal status is in question resides, or where the
property of the defendant or a part thereof involved in the litigation is located.

Literally this Court said:

Jurisdiction over the property which is the subject of litigation may result either from a seizure
of the property under legal process, whereby it is brought into the actual custody of the law,
or it may result from the institution of legal proceedings wherein, under special provisions of
law, the power of the court over the property is recognized and made effective. In the latter
case the property, though at all times within the potential power of the court, may never be
taken into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is
found in attachment proceedings, where the property is seized at the beginning of the action,
or some subsequent stage of its progress, and held to abide the final event of the litigation.
An illustration of what we term potential jurisdiction over the res, is found in the proceeding to
 register the title of land under our system for the registration of land. Here the court, without
taking actual physical control over the property assumes, at the instance of some person
claiming to be owner, to exercise a jurisdiction in remover the property and to adjudicate the
title in favor of the petitioner against all the world. (Banco Espaol-Filipino vs.
Palanca, supra, 927-928.).

In an ordinary attachment proceeding, if the defendant is not personally served, the

preliminary seizure is to be considered necessary in order to confer jurisdiction upon the
court. In this case the lien on the property is acquired by the seizure; and the purpose of the
proceeding is to subject the property to that lien. If a lien already exists, whether created by
mortgage, contract, or statute, the preliminary seizure is not necessary; and the court
proceeds to enforce such lien in the manner provided by law precisely as though the
property had been seized upon attachment. (Roller vs. Holly, 176 U.S., 398, 405; 44 Law.
ed., 520.) It results that the mere circumstance that in an attachment the property may be
seized at the inception of the proceedings, while in the foreclosure suit it is not taken into
legal custody until the time comes for the sale, does not materially affect the fundamental
principle involved in both cases, which is that the court is here exercising a jurisdiction over
the property in a proceeding directed essentially in rem. (Id., 929-930.).

When, however, the action relates to property located in the Philippines, the Philippine courts
may validly try the case, upon the principles that a "State, through its tribunals, may subject
property situated within its limit owned by non-residents to the payment of the demand of its
own citizens against them; and the exercise of this jurisdiction in no respect infringes upon
the sovereignty of the State were the owners are domiciled. Every State owes protection to
its own citizens; and, when non-residents deal with them, it is a legitimate and just exercise
of authority to hold any appropriate any property owned by such non-residents to satisfy the
claims of its citizens. It is in virtue of the State's jurisdiction over the property of the non-
resident situated within its limits that its tribunals can inquire into the non-resident's
obligations to its own citizens, and the inquiry can then be carried only to the extent
necessary to control disposition of the property. If the non-resident has no property in the
State, there is nothing upon which the tribunals can adjudicate. (Slade Perkins vs. Dizon, 40
Off. Gaz. [3d Supplement], No. 7, p. 216.).

A fuller statement of the principle whereunder attachment or garnishment of property of a non-

resident defendant confers jurisdiction on the court in an otherwise personal action, appears in two
well known and authoritative works:

The main action in an attachment or garnishment suit is in rem until jurisdiction of the
defendant is secured. Thereafter, it is in personam and also in rem, unless jurisdiction of the
res is lost as by dissolution of the attachment. If jurisdiction of the defendant is acquired but
jurisdiction of the res is lost, it is then purely in personam. . . a proceeding against property
without jurisdiction of the person of the defendant is in substance a proceeding in rem; and
where there is jurisdiction of the defendant, but the proceedings against the property
continues, that proceedings is none the less necessarily in rem, although in form there is but
a single proceeding. (4 Am. Jur., 556-557.)

As the remedy is administered in some states, the theory of an attachment, whether it is by

process against or to subject the property or effects of a resident or non-resident of the state,
is that it partakes essentially of the nature and character of the proceeding in personam and
not of a proceeding in rem. And if the defendant appears the action proceeds in accordance
with the practice governing proceedings in personam. But were the defendant fails to appear
in the action, the proceeding is to be considered as one in the nature of a proceeding in rem.
And where the court acts directly on the property, the title thereof being charged by the court
without the intervention of the party, the proceeding unquestionably is one in rem in the
fullest meaning of the term.

In attachment proceedings against a non-resident defendant where personal service on him

is lacking, it is elementary that the court must obtain jurisdiction of the property of the
defendant. If no steps have been taken to acquire jurisdiction of the defendant's person, and
he has not appeared and answered or otherwise submitted himself to the jurisdiction of the
court, the court is without jurisdiction to render judgment until there has been a lawful seizure
of property owned by him within the jurisdiction of the court. (2 R. C. L., 800-804.).
Tested by the foregoing decisions and authorities, the Court has acquired jurisdiction of the case at
bar by virtue of the attachment of the defendant's credit. Those authorities and decisions, so plain
and comprehensive as to make any discussion unnecessary, are in agreement that though no
jurisdiction is obtained over the debtor's person, the case may proceed to judgment if there is
property in the custody of the court that can be applied to its satisfaction.

It is our judgment that the court below erred in dismissing the case and dissolving the attachment;
and it is ordered that, upon petition of the plaintiff, it issue a new writ of attachment and then proceed
to trial. The costs of this appeal will be charged to defendant and appellee.

Paras, Feria, Pablo, Perfecto, Bengzon, Briones and Padilla, JJ., concur.

G.R. No. 172242 August 14, 2007

PERKIN ELMER SINGAPORE PTE LTD., Petitioner,

vs.
DAKILA TRADING CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

The case before this Court is a Petition for Review1 on Certiorari under Rule 45 of the 1997 Revised
Rules of Civil Procedure seeking to annul and set aside the Decision,2 dated 4 April 2006, of the
Court of Appeals in CA-G.R. SP No. 78981, which affirmed the Orders, dated 4 November
20023 and 20 June 2003,4 of the Mandaluyong City Regional Trial Court (RTC), Branch 212, in Civil
Case No. MC99-605, which, in turn, denied the Motion to Dismiss and subsequent Motion for
Reconsideration of herein petitioner Perkin Elmer Singapore Pte Ltd.

Petitioner is a corporation duly organized and existing under the laws of Singapore. It is not
considered as a foreign corporation "doing business" in the Philippines. Herein respondent Dakila
Trading Corporation is a corporation organized and existing under Philippine laws, and engaged in
the business of selling and leasing out laboratory instrumentation and process control
instrumentation, and trading of laboratory chemicals and supplies.

The antecedents of the present case are as follows:

Respondent entered into a Distribution Agreement5 on 1 June 1990 with Perkin-Elmer Instruments
Asia Pte Ltd. (PEIA), a corporation duly organized and existing under the laws of Singapore and
engaged in the business of manufacturing, producing, selling or distributing various
laboratory/analytical instruments. By virtue of the said agreement, PEIA appointed the respondent as
the sole distributor of its products in the Philippines. The respondent was likewise granted the right to
purchase and sell the products of PEIA subject to the terms and conditions set forth in the
Distribution Agreement. PEIA, on the other hand, shall give respondent a commission for the sale of
its products in the Philippines.

Under the same Distribution Agreement, respondent shall order the products of PEIA, which it shall
sell in the Philippines, either from PEIA itself or from Perkin-Elmer Instruments (Philippines)
Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation duly organized and existing under
Philippine laws, and involved in the business of wholesale trading of all kinds of scientific,
biotechnological, and analytical instruments and appliances. PEIA allegedly owned 99% of the
shares of PEIP.

On 2 August 1997, however, PEIA unilaterally terminated the Distribution Agreement, prompting
respondent to file before the RTC of Mandaluyong City, Branch 212, a Complaint6 for Collection of
Sum of Money and Damages with Prayer for Issuance of a Writ of Attachment against PEIA and
PEIP, docketed as Civil Case No. MC99-605.
The RTC issued an Order,7 dated 26 March 1999, denying respondents prayer for the issuance of a
writ of attachment. The respondent moved for the reconsideration of the said Order but it was denied
in another Order, dated 11 January 2000.8

Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of Court to
Deputize Respondents General Manager, Richard A. Tee, to Serve Summons Outside of the
Philippines,9 which the RTC granted in its Order, dated 27 April 2000.10 Thus, an Alias Summons,
dated 4 September 2000, was issued by the RTC to PEIA. But the said Alias Summons was served
on 28 September 2000 and received by Perkinelmer Asia, a Singaporean based sole proprietorship,
owned by the petitioner and, allegedly, a separate and distinct entity from PEIA.

PEIP moved to dismiss11 the Complaint filed by respondent on the ground that it states no cause of
action. Perkinelmer Asia, on the other hand, through its counsel, sent letters, dated 12 October
200012 and 15 November 2000,13 to the respondent and to the RTC, respectively, to inform them of
the wrongful service of summons upon Perkinelmer Asia.

Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint, together with the
Amended Complaint claiming that PEIA had become a sole proprietorship14 owned by the petitioner,
and subsequently changed its name to Perkinelmer Asia. Being a sole proprietorship of the
petitioner, a change in PEIAs name and juridical status did not detract from the fact that all its due
and outstanding obligations to third parties were assumed by the petitioner. Hence, in its Amended
Complaint15 respondent sought to change the name of PEIA to that of the petitioner. In an Order,
dated 24 July 2001,16 the RTC admitted the Amended Complaint filed by the respondent.
Respondent then filed another Motion17 for the Issuance of Summons and for Leave of Court to
Deputize Respondents General Manager, Richard A. Tee, to Serve Summons Outside the
Philippines. In another Order, dated 4 March 2002,18 the RTC deputized respondents General
Manager to serve summons on petitioner in Singapore. The RTC thus issued summons19 to the
petitioner. Acting on the said Order, respondents General Manager went to Singapore and served
summons on the petitioner.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to Dismiss filed by
PEIP, compelling the latter to file its Answer to the Amended Complaint.

Petitioner subsequently filed with the RTC a Special Appearance and Motion to
Dismiss20 respondents Amended Complaint on 30 May 2002 based on the following grounds: (1) the
RTC did not acquire jurisdiction over the person of the petitioner; (2) the respondent failed to state a
cause of action against the petitioner because it is not the real party-in-interest; (3) even assuming
arguendo that the respondent correctly filed the case against the petitioner, the Distribution
Agreement which was the basis of its claim grants PEIA the right to terminate the contract at any
time; and (4) the venue was improperly laid. The RTC in its Order, dated 4 November 2002, denied
petitioners Motion to Dismiss, ratiocinating as follows:

Prescinding from the above arguments of both parties, the [RTC] is inclined to DENY the Motion to
Dismiss.

A careful scrutiny on (sic) the allegation in the (Amended) Complaint would show that [herein
respondent] alleges ownership by the [herein petitioner] of shares of stocks in the [PEIP]. Such
allegation of ownership of shares of stocks by the [petitioner] would reveal that there is an allegation
of personal property in the Philippines. Shares of stocks represent personal property of the
shareholder. Thus, it follows that even though the Amended Complaint is primarily for damages, it
does relate to a property of the [petitioner], to which the latter has a claim interest (sic), or an actual
or contingent lien, which will make it fall under one of the requisite (sic) for extraterritorial service
under Section 15, Rule 14, of the Rules of Court. Thus, it could be gainfully said that the summons
had been validly served for [RTC] to acquire jurisdiction over the [petitioner].

The [petitioner] hinges its dismissal on the failure of the [respondent] to state a cause of action. The
[RTC] would like to emphasize that in a Motion to Dismiss, it hypothetically admits the truth of the
facts alleged in a complaint.

When the ground for dismissal is that the complaint states no cause of action, such fact can be
determined only from the facts alleged in the complaint x x x and from no other x x x and the Court
cannot consider other matters aliunde x x x. This implies that the issue must be passed upon on the
basis of the allegations and declare them to be false, otherwise it would be a procedural error and a
denial of due process to the [respondent] x x x.
The three (3) essential elements of a cause of action are the following:

a) The plaintiffs legal rights;

b) A correlative obligation of the defendant;

c) The omission of the defendant in violation of the legal rights.

A cursory reading of the Amended Complaint would reveal that all of the essential elements of a
cause of action are attendant in the Amended Complaint.

As for the contention that venue was improperly laid, x x x, the [RTC] in its ultimate desire that the
ends of justice could be served in its fullest, cannot rule that venue was improperly laid.

xxxx

The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the
residence of the [respondent] under Section 2, Rule 4, Rules of Court, especially where the venue
stipulation was imposed by the [petitioner] for its own benefits.

xxxx

The [RTC] further believes that it is imperative that in order to ferret out the truth, a full-blown trial is
necessary for parties to be able to prove or disprove their allegations.21

Petitioner moved for the reconsideration of the aforesaid Order but, it was denied by the RTC in its
Order, dated 20 June 2003.

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997 Revised Rules of
Civil Procedure with application for temporary restraining order and/or preliminary injunction before
the Court of Appeals alleging that the RTC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in refusing to dismiss the Amended Complaint. The Court of Appeals never
issued any temporary restraining order or writ of injunction. On 4 April 2006, the Court of Appeals
rendered a Decision affirming the RTC Orders of 4 November 2002 and 20 June 2003.

This brings us to the present Petition before this Court wherein petitioner raised the following issues.

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT

RULING THAT THE SERVICE OF SUMMONS ON PETITIONER WAS DEFECTIVE AND THAT
THE TRIAL COURT THUS FAILED TO ACQUIRE JURISDICTION OVER THE PERSON OF THE
PETITIONER.

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING

THAT THE "SOLE ISSUE" IN THE PETITION FOR CERTIORARI FILED BEFORE IT IS THE
QUESTION OF WHETHER THE TRIAL COURT ACQUIRED JURISDICTION OVER THE PERSON
OF THE PETITIONER THROUGH THE EXTRATERRITORIAL SERVICE OF SUMMONS.

A.

WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE

PETITION FOR CERTIORARI AND REVERSED THE RTC ORDERS ON THE GROUND
THAT THE AMENDED COMPLAINT FAILED TO STATE A CAUSE OF ACTION AGAINST
PETITIONER.

1. BASED ON THE ALLEGATIONS IN THE EX-PARTE MOTION TO ADMIT

AMENDED COMPLAINT, AMENDED COMPLAINT, AND ALL DOCUMENTS
ATTACHED AND/OR RELATED THERETO, PETITIONER IS NOT THE REAL
PARTY-IN-INTEREST DEFENDANT IN THE CASE BELOW.
 2. ASSUMING ARGUENDO THAT RESPONDENT DAKILA FILED THIS CASE
AGAINST THE CORRECT [PARTY], INASMUCH AS THE DISTRIBUTION
AGREEMENT DATED 1 JUNE 1990 GRANTS [PEIA] THE RIGHT TO TERMINATE
THE CONTRACT AT ANY TIME, RESPONDENT DAKILA FAILS TO STATE A
CAUSE OF ACTION IN THE CASE BELOW.

B.

WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE

PETITION FOR CERTIORARI AND REVERSED THE RTC ORDERS ON THE GROUND
OF IMPROPER VENUE.

III.

WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY RESTRAINING ORDER

AND/OR WRIT OF INJUNCTION.

The foregoing issues raised by petitioner essentially requires this Court to make a determination of
the (1) proper service of summons and acquisition of jurisdiction by the RTC over the person of the
petitioner; (2) existence of a cause of action against petitioner in respondents Amended Complaint;
and (3) proper venue for respondents civil case against petitioner.

Petitioner contends that Civil Case No. MC99-605 involves an action for collection of sum of money
and damages arising from the alleged breach of the Distribution Agreement. The action is one in
personam, or an action against a person based on his personal liability; and for the court a quo to
acquire jurisdiction over the person of the petitioner, personal service of summons, and not
extraterritorial service of summons, must be made within the state even if the petitioner is a non-
resident. Petitioner avers that extraterritorial service of summons stated under Section 15, Rule 14 of
the 1997 Revised Rules of Civil Procedure, is only proper in in rem and quasi in rem cases; thus,
resort to an extraterritorial service of summons in the case at bar was erroneous. Petitioner
asseverates that the allegations in the respondents Amended Complaint that the petitioner has
personal properties within the Philippines does not make the present case one that relates to, or the
subject of which is, property within the Philippines warranting the extraterritorial service of summons
under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner states that for an
action to be considered as one that relates to, or the subject of which is, property within the
Philippines, the main subject matter of the action must be the property within the Philippines itself,
and such was not the situation in this case. Likewise, the prayer in respondents Amended Complaint
for the issuance of a writ of attachment over the personal property of PEIP, which is 99% owned by
petitioner (as the supposed successor of PEIA), did not convert the action from one in personam to
one that is quasi in rem. Also, the petitioner points out that since the respondents prayer for the
issuance of a writ of attachment was denied by the RTC in its Order, dated 26 March 1999, then the
nature of Civil Case No. MC99-605 remains in personam, contrary to the ruling of the Court of
Appeals that by the attachment of the petitioners interest in PEIP the action in personam was
converted to an action quasi in rem. Resultantly, the extraterritorial service of summons on the
petitioner was not validly effected, and did not give the RTC jurisdiction over the petitioner.

Petitioner further argues that the appellate court should have granted its Petition for Certiorari on the
ground that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction
in refusing to dismiss respondents Amended Complaint for failure to state a cause of action against
petitioner which was not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that
it had never used the name PEIA as its corporate name, and neither did it change its name from that
of PEIA. Petitioner stresses that PEIA is an entirely different corporate entity that is not connected in
whatever manner to the petitioner. Even assuming arguendo that petitioner is the real party-in-
interest in Civil Case No. MC99-605 or that petitioner and PEIA are one and the same entity,
petitioner still avows that the respondent failed to state a cause of action against it because the
Distribution Agreement expressly grants PEIA the right to terminate the said contract at any time.

Lastly, it is the contention of the petitioner that the appellate court should have granted its Petition for
Certiorari because the RTC committed grave abuse of discretion amounting to lack or excess of
jurisdiction in refusing to dismiss Civil Case No. MC99-605 for having been filed in an improper
venue. Petitioner asserts that in the Distribution Agreement entered into between the respondent
and PEIA, both had mutually agreed to the exclusive jurisdiction of the courts of Singapore or of the
Philippines as elected by PEIA. Absent any waiver by PEIA of its right to choose the venue of the
dispute, the Complaint filed by the respondent before the RTC in the Philippines should have been
dismissed on the ground of improper venue.

The Petition is meritorious.

Jurisdiction is the power with which courts are invested for administering justice; that is, for hearing
and deciding cases. In order for the court to have authority to dispose of the case on the merits, it
must acquire jurisdiction over the subject matter and the parties.22

Jurisdiction of the court over the subject matter is conferred only by the Constitution or by law. It is
determinable on the basis of allegations in the complaint.23

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over
the defendants in a civil case is acquired either through the service of summons upon them in the
manner required by law or through their voluntary appearance in court and their submission to its
authority. If the defendants have not been summoned, unless they voluntarily appear in court, the
court acquires no jurisdiction over their persons and a judgment rendered against them is null and
void. To be bound by a decision, a party should first be subjected to the courts jurisdiction.24

Thus, one of the modes of acquiring jurisdiction over the person of the defendant or respondent in a
civil case is through service of summons. It is intended to give notice to the defendant or respondent
that a civil action has been commenced against him. The defendant or respondent is thus put on
guard as to the demands of the plaintiff or the petitioner.25

The proper service of summons differs depending on the nature of the civil case instituted by the
plaintiff or petitioner: whether it is in personam, in rem, or quasi in rem. Actions in personam, are
those actions brought against a person on the basis of his personal liability; actions in rem are
actions against the thing itself instead of against the person; and actions are quasi in rem, where an
individual is named as defendant and the purpose of the proceeding is to subject his or her interest
in a property to the obligation or loan burdening the property.26

Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are only four
instances wherein a defendant who is a non-resident and is not found in the country may be served
with summons by extraterritorial service, to wit: (1) when the action affects the personal status of the
plaintiff; (2) when the action relates to, or the subject of which is property, within the Philippines, in
which the defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded
in such action consists, wholly or in part, in excluding the defendant from any interest in property
located in the Philippines; and (4) when the defendant non-residents property has been attached
within the Philippines. In these instances, service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any
other manner the court may deem sufficient.27

Undoubtedly, extraterritorial service of summons applies only where the action is in rem or quasi in
rem, but not if an action is in personam.

When the case instituted is an action in rem or quasi in rem, Philippine courts already have
jurisdiction to hear and decide the case because, in actions in rem and quasi in rem, jurisdiction over
the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the
court acquires jurisdiction over the res.28 Thus, in such instance, extraterritorial service of summons
can be made upon the defendant. The said extraterritorial service of summons is not for the purpose
of vesting the court with jurisdiction, but for complying with the requirements of fair play or due
process, so that the defendant will be informed of the pendency of the action against him and the
possibility that property in the Philippines belonging to him or in which he has an interest may be
subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest
if he is so minded.29 On the other hand, when the defendant or respondent does not reside and is not
found in the Philippines,30 and the action involved is in personam, Philippine courts cannot try any
case against him because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.31

In the case at bar, this Court sustains the contention of the petitioner that there can never be a valid
extraterritorial service of summons upon it, because the case before the court a quo involving
collection of a sum of money and damages is, indeed, an action in personam, as it deals with the
personal liability of the petitioner to the respondent by reason of the alleged unilateral termination by
the former of the Distribution Agreement. Even the Court of Appeals, in its Decision dated 4 April
2004, upheld the nature of the instant case as an action in personam. In the said Decision the
appellate court ruled that:

In the instant petition, [respondents] cause of action in Civil Case No. MC99-605 is anchored on the
claim that petitioner unilaterally terminated the Distribution Agreement. Thus, [respondent] prays in
its [C]omplaint that "Upon the filing of the Complaint, issue an Order fixing the amount of the bond
and issue a writ of attachment requiring the sheriff to attach the properties of [Perkin-Elmer
Philippines], which are not exempt from execution, and as much as may be sufficient to satisfy
[respondents] demands."

The action instituted by [respondent] affects the parties alone, not the whole world. Hence, it is an
action in personam, i.e., any judgment therein is binding only upon the parties properly impleaded.

xxxx

The objective sought in [respondents] [C]omplaint was to establish a claim against petitioner for its
alleged unilateral termination of [D]istribution [A]greement. Hence, to repeat, Civil Case No. MC99-
605 is an action in personam because it is an action against persons, namely, herein petitioner, on
the basis of its personal liability. As such, personal service of summons upon the [petitioner] is
essential in order for the court to acquire of (sic) jurisdiction over [its person].32 (Emphasis supplied.)

Thus, being an action in personam, personal service of summons within the Philippines is necessary
in order for the RTC to validly acquire jurisdiction over the person of the petitioner, and this is not
possible in the present case because the petitioner is a non-resident and is not found within the
Philippines. Respondents allegation in its Amended Complaint that petitioner had personal property
within the Philippines in the form of shares of stock in PEIP did not make Civil Case No. MC99-605
fall under any of the four instances mentioned in Section 15, Rule 14 of the Rules of Court, as to
convert the action in personam to an action in rem or quasi in rem and, subsequently, make the
extraterritorial service of summons upon the petitioner valid.

It is incorrect for the RTC to have ruled that the allegations made by the respondent in its Amended
Complaint, which is primarily for collection of a sum of money and damages, that the petitioner owns
shares of stock within the Philippines to which the petitioner claims interest, or an actual or
contingent lien, would make the case fall under one of the aforesaid instances wherein
extraterritorial service of summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil
Procedure, would be valid. The RTC in arriving at such conclusions relied on the second instance,
mentioned under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the
action relates to, or the subject of which is property, within the Philippines, in which the defendant
claims a lien or interest, actual or contingent), where extraterritorial service of summons can be
properly made. However, the aforesaid second instance has no application in the case before this
Court. Primarily, the Amended Complaint filed by the respondent against the petitioner was for the
collection of sum of money and damages. The said case was neither related nor connected to any
property of the petitioner to which it claims a lien or interest. The action for collection of a sum of
money and damages was purely based on the personal liability of the petitioner towards the
respondent. The petitioner is correct in saying that "mere allegations of personal property within the
Philippines does not necessarily make the action as one that relates to or the subject of which is,
property within the Philippines as to warrant the extraterritorial service of summons. For the action to
be considered one that relates to, or the subject of which, is the property within the Philippines, the
main subject matter of the action must be the property itself of the petitioner in the Philippines." By
analogy, an action involving title to or possession of real or personal property -- such as the
foreclosure of real estate or chattel mortgage where the mortgagor does not reside or is not found in
the Philippines -- can be considered as an action which relates to, or the subject of which is, property
within the Philippines, in which the defendant claims a lien or interest, actual or contingent; and in
such instance, judgment will be limited to the res.33

Moreover, the allegations made by the respondent that the petitioner has property within the
Philippines were in support of its application for the issuance of a writ of attachment, which was
denied by the RTC. Hence, it is clear from the foregoing that the Complaint filed by the respondent
against the petitioner does not really relate to, or the subject of which is, property within the
Philippines of the petitioner.

This Court also finds error in the Decision of the Court of Appeals. It is provided for in the said
Decision, thus:
However, let it be emphasized that in the [C]omplaint filed before the trial court, [respondent] prayed
that "Upon the filing of the Complaint, issue an Order fixing the amount of the bond and issue a writ
of attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are
not exempt from execution, and as much as may be sufficient to satisfy [respondents] demands.

In other words, although the [C]omplaint before the trial court does not involve the personal status of
the [respondent], nevertheless, the case involves property within the Philippines in which the
[petitioner] has or claim an interest, or which the [respondent] has attached, which is one of the
instances where extraterritorial service of summons is proper.

xxxx

Hence, it is submitted that one of the instances when exterritorial service of summons under Section
15, Rule 14 of the Rules of Court is proper may be considered to have been met. This is because
the [C]omplaint for collection of sum of money which is an action in personam was converted into an
action quasi in rem by the attachment of [petitioners] interest in [Perkin-Elmer
Philippines].34 (Emphasis supplied.)

Respondents allegation in its Amended Complaint that petitioner had personal property within the
Philippines in the form of shares of stock in PEIP does not convert Civil Case No. MC99-605 from an
action in personam to one quasi in rem, so as to qualify said case under the fourth instance
mentioned in Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the non-
resident defendants property has been attached within the Philippines), wherein extraterritorial
service of summons upon the petitioner would have been valid. It is worthy to note that what is
required under the aforesaid provision of the Revised Rules of Civil Procedure is not a mere
allegation of the existence of personal property belonging to the non-resident defendant within the
Philippines but, more precisely, that the non-resident defendants personal property located within
the Philippines must have been actually attached. This Court in the case of Venturanza v. Court of
Appeals35 ruled that when the attachment was void from the beginning, the action in personam which
required personal service of summons was never converted into an action in rem where service by
publication would have been valid. Hence, the appellate court erred in declaring that the present
case, which is an action in personam, was converted to an action quasi in rem because of
respondents allegations in its Amended Complaint that petitioner had personal property within the
Philippines.

Glaringly, respondents prayer in its Amended Complaint for the issuance of a writ of attachment
over petitioners purported shares of stock in PEIP located within the Philippines was denied by the
court a quo in its Order dated 26 March 1999. Respondents Motion for Reconsideration of the said
Order was likewise denied by the RTC in its subsequent Order, dated 11 January 2000. Evidently,
petitioners alleged personal property within the Philippines, in the form of shares of stock in PEIP,
had not been attached; hence, Civil Case No. MC99-605, for collection of sum of money and
damages, remains an action in personam. As a result, the extraterritorial service of summons was
not validly effected by the RTC against the petitioner, and the RTC thus failed to acquire jurisdiction
over the person of the petitioner. The RTC is therefore bereft of any authority to act upon the
Complaint filed before it by the respondent insofar as the petitioner is concerned.

If there was no valid summons served upon petitioner, could RTC have acquired jurisdiction over the
person of the petitioner by the latters voluntary appearance? As a rule, even if the service of
summons upon the defendant or respondent in a civil case is defective, the court can still acquire
jurisdiction over his person when he voluntary appears in court or submits himself to its authority.
Nonetheless, voluntary appearance, as a mode of acquiring jurisdiction over the person of the
defendant, is likewise inapplicable in this case.

It is settled that a party who makes a special appearance in court for the purpose of challenging the
jurisdiction of said court, based on the invalidity of the service of summons, cannot be considered to
have voluntarily submitted himself to the jurisdiction of the court.36 In the present case, petitioner has
been consistent in all its pleadings in assailing the service of summons upon it and the jurisdiction of
the RTC over its person. Thus, the petitioner cannot be declared in estoppel when it filed an Answer
ad cautelam with compulsory counterclaim before the RTC while the instant Petition was still
pending before this Court. The petitioner was in a situation wherein it had no other choice but to file
an Answer; otherwise, the RTC would have already declared that petitioner had waived its right to
file responsive pleadings.37 Neither can the compulsory counterclaim contained in petitioners
Answer ad cautelam be considered as voluntary appearance of petitioner before the RTC. Petitioner
seeks to recover damages and attorneys fees as a consequence of the unfounded suit filed by
respondent against it. Thus, petitioners compulsory counterclaim is only consistent with its position
that the respondent wrongfully filed a case against it and the RTC erroneously exercised jurisdiction
over its person.

Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC over
respondents complaint and over petitioners counterclaim -- while it may have no jurisdiction over
the former, it may exercise jurisdiction over the latter. The compulsory counterclaim attached to
petitioners Answer ad cautelam can be treated as a separate action, wherein petitioner is the
plaintiff while respondent is the defendant.38 Petitioner could have instituted a separate action for the
very same claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to
demand the same in Civil Case No. MC99-605.39 Jurisdiction of the RTC over the subject matter and
the parties in the counterclaim must thus be determined separately and independently from the
jurisdiction of the same court in the same case over the subject matter and the parties in
respondents complaint.

Moreover, even though the petitioner raised other grounds in its Motion to Dismiss aside from lack of
jurisdiction over its person, the same is not tantamount to its voluntary appearance or submission to
the authority of the court a quo. While in De Midgely v. Ferandos,40 it was held that, in a Motion to
Dismiss, the allegation of grounds other than lack of jurisdiction over the person of the defendant,
including a prayer "for such other reliefs as" may be deemed "appropriate and proper" amounted to
voluntary appearance, such ruling must be deemed superseded by the declaration of this Court in La
Naval Drug Corporation v. Court of Appeals41 that estoppel by jurisdiction must be unequivocal and
intentional. It would be absurd to hold that petitioner unequivocally and intentionally submitted itself
to the jurisdiction of the court by seeking other reliefs to which it might be entitled when the only relief
that it could properly ask from the trial court is the dismissal of the complaint against it.42 Thus, the
allegation of grounds other than lack of jurisdiction with a prayer "for such other reliefs" as may be
deemed "appropriate and proper" cannot be considered as unequivocal and intentional estoppel.
Most telling is Section 20, Rule 14 of the Rules of Court, which expressly provides:

SEC. 20. Voluntary appearance. - The defendants voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from
lack of jurisdiction over the person of the defendant shall not be deemed a voluntary
appearance.43 (Emphasis supplied.)

In sum, this Court finds that the petitioner did not submit itself voluntarily to the authority of the court
a quo; and in the absence of valid service of summons, the RTC utterly failed to acquire jurisdiction
over the person of the petitioner.

Anent the existence of a cause of action against petitioner and the proper venue of the case, this
Court upholds the findings of the RTC on these issues.

Dismissal of a Complaint for failure to state a cause of action is provided for by the Rules of
Court.44 When a Motion to Dismiss is grounded on the failure to state a cause of action, a ruling
thereon should be based only on the facts alleged in the complaint. The court must pass upon this
issue based solely on such allegations, assuming them to be true. For it to do otherwise would be a
procedural error and a denial of plaintiffs right to due process.45 While, truly, there are well-
recognized exceptions46 to the rule that the allegations are hypothetically admitted as true and
inquiry is confined to the face of the complaint,47 none of the exceptions apply in this case. Hence,
the general rule applies. The defense of the petitioner that it is not the real party-in-interest is
evidentiary in nature which must be proven in trial. The appellate court, then, cannot be faulted for
not granting petitioners Motion to Dismiss on the ground of failure to state a cause of action.

In the same way, the appellate court did not err in denying petitioners Motion to Dismiss Civil Case
No. MC99-605 on the ground of improper venue. In arriving at such conclusion, this Court quotes
with approval the following ratiocination of the RTC:

As for the contention that venue was improperly laid, x x x, the [trial court] in its ultimate desire that
the ends of justice could be served in its fullest, cannot rule that venue was improperly laid.

xxxx

The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the
residence of the [respondent] under Section 2, Rule 4, Rules of Court, especially where the venue
stipulation was imposed by the [petitioner] for its own benefits.48 (Emphasis supplied.)
Despite the venue stipulation found in the Distribution Agreement stipulating that the exclusive
jurisdiction over disputes arising from the same shall lie in the courts of Singapore or of the Territory
(referring to the Philippines), whichever is elected by PEIA (or petitioner, as PEIAs alleged
successor), the RTC of the Philippines cannot be considered as an improper venue. Truly, the venue
stipulation used the word "exclusive," however, a closer look on the Distribution Agreement would
reveal that the venue stipulation was really in the alternative i.e., courts of Singapore or of the
Territory, meaning, the Philippines; thus, the court a quo is not an improper venue for the present
case.

Nonetheless, it bears to emphasize that despite our findings that based on the allegations in
respondents Complaint in Civil Case No. MC99-605, respondent appears to have a cause of action
against the petitioner and that the RTC is the proper venue for the said case, Civil Case No. MC99-
605 is still dismissible, for the RTC never acquired jurisdiction over the person of the petitioner. The
extraterritorial service of summons upon the petitioner produces no effect because it can only be
done if the action is in rem or quasi in rem. The case for collection of sum of money and damages
filed by the respondent against the petitioner being an action in personam, then personal service of
summons upon the petitioner within the Philippines is essential for the RTC to validly acquire
jurisdiction over the person of the petitioner. Having failed to do so, the RTC can never subject
petitioner to its jurisdiction. The mere allegation made by the respondent that the petitioner had
shares of stock within the Philippines was not enough to convert the action from one in personam to
one that was quasi in rem, for petitioners purported personal property was never attached; thus, the
extraterritorial service of summons upon the petitioner remains invalid. In light of the foregoing
findings, this Court concludes that the RTC has no power to hear and decide the case against the
petitioner, because the extraterritorial service of summons was not validly effected upon the
petitioner and the RTC never acquired jurisdiction over its person.

Finally, as regards the petitioners counterclaim, which is purely for damages and attorneys fees by
reason of the unfounded suit filed by the respondent against it, it has long been settled that the same
truly falls under the classification of compulsory counterclaim and it must be pleaded in the same
action, otherwise, it is barred.49 In the case at bar, this Court orders the dismissal of the Complaint
filed by the respondent against the petitioner because the court a quo failed to acquire jurisdiction
over the person of the latter. Since the Complaint of the respondent was dismissed, what will happen
then to the counterclaim of the petitioner? Does the dismissal of the complaint carry with it the
dismissal of the counterclaim?

In the cases of Metal Engineering Resources Corp. v. Court of Appeals,50 International Container
Terminal Services, Inc. v. Court of Appeals,51 and BA Finance Corporation v. Co.,52 the Court ruled
that if the court does not have jurisdiction to entertain the main action of the case and dismisses the
same, then the compulsory counterclaim, being ancillary to the principal controversy, must likewise
be dismissed since no jurisdiction remained for any grant of relief under the counterclaim.53 If we
follow the aforesaid pronouncement of the Court in the cases mentioned above, the counterclaim of
the herein petitioner being compulsory in nature must also be dismissed together with the Complaint.
However, in the case of Pinga vs. Heirs of German Santiago,54 the Court explicitly expressed that:

Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for
the dismissal of the complaint and to prosecute his counterclaim, as stated in the separate opinion
[of Justice Regalado in BA Finance]. Retired Court of Appeals Justice Hererra pronounces that the
amendment to Section 3, Rule 17 [of the 1997 Revised Rules of Civil Procedure] settles that
"nagging question "whether the dismissal of the complaint carries with it the dismissal of the
counterclaim, and opines that by reason of the amendments, the rulings in Metals Engineering,
International Container, and BA Finance "may be deemed abandoned." x x x.

x x x, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule
17, those previous jural doctrines that were inconsistent with the new rules incorporated in the 1997
Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the effectivity of
the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may
be necessarily dismissed along with the complaint, clearly conflicts with the 1997 Rules of Civil
Procedure. The abandonment of BA Finance as doctrine extends as far back as 1997, when the
Court adopted the new Rules of Civil Procedure. If, since then, abandonment has not been affirmed
in jurisprudence, it is only because no proper case has arisen that would warrant express
confirmation of the new rule. That opportunity is here and now, and we thus rule that the dismissal of
a complaint due to fault of the plaintiff is without prejudice to the right of the defendant to
prosecute any pending counterclaims of whatever naturein the same or separate action. We confirm
that BA Finance and all previous rulings of the Court that are inconsistent with this present holding
are now abandoned.55 [Emphasis supplied].

It is true that the aforesaid declaration of the Court refers to instances covered by Section 3, Rule 17
of the 1997 Revised Rules of Civil Procedure56 on dismissal of the complaint due to the fault of the
plaintiff. Nonetheless, it does not also preclude the application of the same to the instant case just
because the dismissal of respondents Complaint was upon the instance of the petitioner who
correctly argued lack of jurisdiction over its person.

Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the situation wherein the
very filing of the complaint by the plaintiff against the defendant caused the violation of the latters
rights. As to whether the dismissal of such a complaint should also include the dismissal of the
counterclaim, the Court acknowledged that said matter is still debatable, viz:

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint;
namely a cause (or causes) of action constituting an act or omission by which a party violates the
right of another. The main difference lies in that the cause of action in the counterclaim is maintained
by the defendant against the plaintiff, while the converse holds true with the complaint. Yet, as with a
complaint, a counterclaim without a cause of action cannot survive.

x x x if the dismissal of the complaint somehow eliminates the cause(s) of the counterclaim, then the
counterclaim cannot survive. Yet that hardly is the case, especially as a general rule. More often
than not, the allegations that form the counterclaim are rooted in an act or omission of the plaintiff
other than the plaintiffs very act of filing the complaint. Moreover, such acts or omissions imputed to
the plaintiff are often claimed to have occurred prior to the filing of the complaint itself. The only
apparent exception to this circumstance is if it is alleged in the counterclaim that the very act of the
plaintiff in filing the complaint precisely causes the violation of the defendants rights. Yet even in
such an instance, it remains debatable whether the dismissal or withdrawal of the complaint is
sufficient to obviate the pending cause of action maintained by the defendant against the plaintiff.57 1awphi 1

Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow eliminates
the cause of the counterclaim, then the counterclaim cannot survive. Conversely, if the counterclaim
itself states sufficient cause of action then it should stand independently of and survive the dismissal
of the complaint. Now, having been directly confronted with the problem of whether the compulsory
counterclaim by reason of the unfounded suit may prosper even if the main complaint had been
dismissed, we rule in the affirmative.

It bears to emphasize that petitioners counterclaim against respondent is for damages and
attorneys fees arising from the unfounded suit. While respondents Complaint against petitioner is
already dismissed, petitioner may have very well already incurred damages and litigation expenses
such as attorneys fees since it was forced to engage legal representation in the Philippines to
protect its rights and to assert lack of jurisdiction of the courts over its person by virtue of the
improper service of summons upon it. Hence, the cause of action of petitioners counterclaim is not
eliminated by the mere dismissal of respondents complaint.

It may also do well to remember that it is this Court which mandated that claims for damages and
attorneys fees based on unfounded suit constitute compulsory counterclaim which must be pleaded
in the same action or, otherwise, it shall be barred. It will then be iniquitous and the height of
injustice to require the petitioner to make the counterclaim in the present action, under threat of
losing his right to claim the same ever again in any other court, yet make his right totally dependent
on the fate of the respondents complaint.

If indeed the Court dismisses petitioners counterclaim solely on the basis of the dismissal of
respondents Complaint, then what remedy is left for the petitioner? It can be said that he can still file
a separate action to recover the damages and attorneys fees based on the unfounded suit for he
cannot be barred from doing so since he did file the compulsory counterclaim in the present action,
only that it was dismissed when respondents Complaint was dismissed. However, this reasoning is
highly flawed and irrational considering that petitioner, already burdened by the damages and
attorneys fees it may have incurred in the present case, must again incur more damages and
attorneys fees in pursuing a separate action, when, in the first place, it should not have been
involved in any case at all.
Since petitioners counterclaim is compulsory in nature and its cause of action survives that of the
dismissal of respondents complaint, then it should be resolved based on its own merits and
evidentiary support.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision of the
Court of Appeals, dated 4 April 2006, in CA-G.R. SP No. 78981, affirming the Orders, dated 4
November 2002 and 20 June 2003, of the Regional Trial Court of Mandaluyong City, Branch 212, in
Civil Case No. MC99-605, is hereby REVERSED AND SET ASIDE. Respondents Amended
Complaint in Civil Case No. MC99-605 as against the petitioner is hereby ordered DISMISSED, and
all the proceedings against petitioner in the court a quo by virtue thereof are hereby DECLARED
NULL AND VOID. The Regional Trial Court of Mandaluyong City, Branch 212, is DIRECTED to
proceed without further delay with the resolution of respondents Complaint in Civil Case No. MC99-
605 as to defendant PEIP, as well as petitioners counterclaim. No costs.

SO ORDERED.
G.R. No. L-48756 September 11, 1982 K.O. GLASS CONSTRUCTION CO., INC., Petitioner, vs.
THE HONORABLE MANUEL VALENZUELA, Judge of the Court of First Instance of Rizal, and
ANTONIO D. PINZON, Respondents. FACTS OF THE CASE: On October 6, 1977, an action was
instituted in the Court of First Instance of Rizal by Antonio D. Pinzon to recover from Kenneth O.
Glass the sum of P37,190.00, alleged to be the agreed rentals of his truck, as well as the value of
spare parts which have not been returned to him upon termination of the lease. In his verified
complaint, the plaintiff asked for an attachment against the property of the defendant consisting of
collectibles and payables with the Philippine Geothermal, Inc., on the grounds that : y the defendant
is a foreigner; y that he has sufficient cause of action against the said defendant; y and that there is
no sufficient security for his claim against the defendant in the event a judgment is rendered in his
favor. Defendant Kenneth O. Glass moved to quash the writ of attachment on the grounds that: y
there is no cause of action against him since the transactions or claims of the plaintiff were entered
into by and between the plaintiff and the K.O. Glass Construction Co., Inc., a corporation duly
organized and existing under Philippine laws; y that there is no ground for the issuance of the writ of
preliminary attachment as defendant Kenneth O. Glass never intended to leave the Philippines, and
even if he does, plaintiff can not be prejudiced thereby because his claims are against a corporation
which has sufficient funds and property to satisfy his claim; and y that the money being garnished
belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O. Glass. Judge
denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the Clerk
of Court the amount of P37,190.00 immediately upon receipt of the order which amount shall remain
so deposited to await the judgment to be rendered in the case. On January 26, 1978, the defendants
therein filed a supplementary motion to discharge and/or dissolve the writ of preliminary attachment
upon the ground that the affidavit filed in support of the motion for preliminary attachment was not
sufficient or wanting in law for the reason that: y (1) the affidavit did not state that the amount of
plaintiff's claim was above all legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the
Revised Rules of Court; y (2) the affidavit did not state that there is no other sufficient security for the
claim sought to be recovered by the action as also required by said Sec. 3; and y (3) the affidavit did
not specify any of the grounds enumerated in Sec. 1 of Rule 57, ISSUE: HELD: NO The
respondent Judge gravely abused his discretion in issuing the writ of preliminary attachment and in
not ordering the release of the money which had been deposited with the Clerk of Court There being
no showing, much less an allegation, that the defendants are about to depart from the Philippines
with intent to defraud their creditor, or that they are non-resident aliens, the attachment of their
properties is not justified. Affidavit of plaintiff failed to allege the requisites prescribed for the
issuance of a writ of preliminary attachment, which renders the writ of preliminary attachment issued
against the property of the defendant fatally defective, and the judge issuing it is deemed to have
acted in excess of his jurisdiction WON the issuance of the writ of preliminary attachment proper
Sec. 1. Grounds upon which attachment may issue. -A plaintiff or any proper party may, at the
commencement of the action or at any time thereafter, have the property of the adverse party
attached as security for the satisfaction of any judgment that may be recovered in the following
cases: chanrobles (a) In an action for the recovery of money or damages on a cause of action
arising from contract, express or implied, against a party who is about to depart from the Philippines
with intent to defraud his creditor; chanrobles virtual law library (b) In an action for money or property
embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of
a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such,
or by any other person in a fiduciary capacity, or for a willful violation of duty; chanrobles virtual law
library (c) In an action to recover the possession of personal property unjustly detained, when the
property, or any part thereof, has been concealed, removed, or disposed of to prevent its being
found or taken by the applicant or an officer; chanrobles virtual law library (d) In an action against the
party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the
action is brought, or in concealing or disposing of the property for the taking, detention or conversion
of which the action is brought; chanrobles virtual law library (e) In an action against a party who has
removed or disposed of his property, or is about to do so, with intent to defraud his creditors;
chanrobles virtual law library (f) In an action against a party who resides out of the Philippines, or on
whom summons may be served by publication. Requirements for issuance of writ of preliminary
attachment: 1. Affidavit of the applicant, or some other person who personally knows the facts,
showing that: a. sufficient casue of action exists b. the case is one of those mentioned in Section 1,
Rule 57 c. there is no other sufficient security for the claim sought to be enforced by the action, and
that the amount due the applicant, or the value of the property the possession of which he is entitled
to recover, is as much as the sum for which the order is garanted above all legal counterclaims. 2.
Bond