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TITLE OF THE CASE: PCIB V.

ALEJANDRO

DATE OF PROMULGATION: September 21, 2007

SUBJECT AREA: Civil Procedure

KEY DOCTRINES/CONCEPTS: Conclusiveness of Judgment; Attachment; Mode of Service for Resident


Temporarily Out of the Philippines; Damages

FACTS:

Complaint for a sum of money with prayer for the issuance of a writ of preliminary attachment (FIRST CASE)

Petitioner PCIB filed against respondent Alejandro a complaint for a sum of money with prayer for the issuance of a
writ of preliminary attachment. Said complaint alleged that on September 10, 1997, Alejandro, a resident of Hong
Kong, executed in favor of PCIB a promissory note obligating himself to pay P249,828,588.90 plus interest. In view
of the fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits of Alejandro as
security for the loan, PCIB requested the latter to put up additional security. Alejandro sought a reconsideration of
said request pointing out petitioner’s alleged mishandling of his account due to its failure to carry out his instruction to
close his account as early as April 1997, when the prevailing rate of exchange of the US Dollar to Japanese yen was
US$1.00:JPY127.50. The amount of P249,828,588.90 was the consolidated amount of a series of yen loans granted
by PCIB to Alejandro during the months of February and April 1997.

In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs (e) and (f) of Rule 57 of the
Rules of Court, petitioner alleged that (1) respondent fraudulently withdrew his unassigned deposits notwithstanding
his verbal promise to PCIB not to withdraw the same prior to their assignment as security for the loan; and (2) that
respondent is not a resident of the Philippines.

The trial court granted the application and issued the writ ex parte after PCIB posted a Php 18.7M bond, issued by
Prudential Guarantee & Assurance Inc. Also, the bank deposits of Alejandro with RCBC were garnished. Alejandro,
through counsel, voluntarily submitted to the jurisdiction of the court.

Subsequently, Alejandro filed a motion to quash the writ contending that the withdrawal of his unassigned deposits
was not fraudulent as it was approved by PCIB. He also alleged that petitioner knew that he maintains a permanent
residence at Calle Victoria, Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati City at the
Law Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, where he is a partner. In both addresses,
petitioner regularly communicated with him through its representatives. Respondent added that he is the managing
partner of the Hong Kong branch of said Law Firm; that his stay in Hong Kong is only temporary; and that he
frequently travels back to the Philippines.

The trial court issued an order quashing the writ and holding that the withdrawal of respondent’s unassigned deposits
was not intended to defraud petitioner. It also found that the representatives of petitioner personally transacted with
respondent through his home address in Quezon City and/or his office in Makati City. It thus concluded that petitioner
misrepresented and suppressed the facts regarding respondent’s residence considering that it has personal and
official knowledge that for purposes of service of summons, respondent’s residence and office addresses are located
in the Philippines.

With the denial of PCIB’s motion for reconsideration, it elevated the case to the CA via a petition for certiorari. The
petition was dismissed for failure to prove that the trial court abused its discretion in issuing the aforesaid order. PCIB
filed a motion for reconsideration but was denied. On petition with the SC, the case was dismissed for late filing.
PCIB filed a motion for reconsideration but was likewise denied with finality on March 6, 2000.

Complaint for damages (SECOND CASE AND CASE BEFORE THE COURT)

Meanwhile, on May 20, 1998, Alejandro filed for damages in the amount of P25 Million on the attachment bond
posted by Prudential Guarantee & Assurance, Inc. on account of the wrongful garnishment of his deposits. He
presented evidence showing that his P150,000.00 RCBC check payable to his counsel as attorney’s fees, was
dishonored by reason of the garnishment of his deposits. He also testified that he is a graduate of the Ateneo de
Manila University in 1982 with a double degree of Economics and Management Engineering and of the University of
the Philippines in 1987 with the degree of Bachelor of Laws. Respondent likewise presented witnesses to prove that
he is a well known lawyer in the business community both in the Philippines and in Hong Kong.
The trial court awarded damages to Alejandro in the amount of P25 Million without specifying the basis thereof. It
also denied petitioner’s motion for reconsideration.

PCIB elevated the case to the CA which affirmed the findings of the trial court. It held that in claiming that respondent
was not a resident of the Philippines, petitioner cannot be said to have been in good faith considering that its
knowledge of respondent’s Philippine residence and office address goes into the very issue of the trial court’s
jurisdiction which would have been defective had respondent not voluntarily appeared before it. The CA, however,
reduced the amount of damages awarded to petitioner and specified their basis: P2M as nominal damages; P5M as
moral damages; and P1M as attorney’s fees, to be satisfied against the attachment bond under Prudential Guarantee
& Assurance, Inc.

Both parties moved for reconsideration. The CA denied PCIB’s motion for reconsideration but granted that of
Alejandro’s by ordering PCIB to pay additional P5M as exemplary damages.

ISSUE 1: WON THE COURT CAN PASS UPON THE ISSUES OF PROPRIETY OF THE ISSUANCE OF A WRIT
OF ATTACHMENT, MISREPRESENTATION BY PCIB AND RESIDENCE OF ALEJANDRO

DECISION: No.

RATIO:

The ruling of the trial court that PCIB is not entitled to a writ of attachment because Alejandro is a resident of the
Philippines, that his act of withdrawing his deposits with petitioner was without intent to defraud, and that PCIB
misrepresented that Alejandro was residing out of the Philippines, is now beyond the power of this Court to review,
having been the subject of a final and executory order. The rule on conclusiveness of judgment precludes the
relitigation of a particular fact or issue in another action between the same parties even if based on a different claim
or cause of action. The judgment in the prior action operates as estoppel as to those matters in issue or points
controverted, upon the determination of which the finding or judgment was rendered. Hence, the issues of
misrepresentation by petitioner and the residence of respondent for purposes of service of summons can no longer
be questioned by petitioner in this case.

ISSUE 2: WON PCIB IS LIABLE FOR DAMAGES FOR THE IMPROPER ISSUANCE OF THE WRIT OF
ATTACHMENT AGAINST ALEJANDRO

DECISION: Yes.

RATIO:

PCIB is barred by the principle of conclusiveness of judgment from invoking good faith in the application for
a writ of attachment in order to avoid liability for damages

The trial court settled in its final order the two grounds invoked by PCIB for the issuance of a writ for preliminary
attachment. Contrary to the assertions of PCIB, Alejandro is a resident of the Philippines, and he did not withdraw his
deposits from PCIB with intent to defraud creditors. Firstly, in the hearings of the motion, and oral arguments of
counsels before the SC, it appeared that PCIB personally transacted with Alejandro mainly through the latter’s Metro
Manila residence, either in Alejandro’s home address in Quezon City or his main business address at the ROMULO
MABANTA BUENAVENTURA SAYOC & DELOS ANGELES in Makati. Thus PCIB could not deny personal and
official knowledge that Alejandro’s residence for purposes of service of summons is in the Philippines. Secondly, the
amount withdrawn by Alejandro from PCIB was not part of his peso deposits assigned with the bank to secure the
loan. Proof that the withdrawal was not intended to defraud PCIB as creditor is that plaintiff approved and allowed
said withdrawals. Moreover, the tenor of the final order of the trial court which quashed the writ evidently considers
PCIB to have acted in bad faith by resorting to a deliberate strategy to mislead the court. Thus, PCIB cannot again
invoke good faith in the present case since such issue was already aired and squarely ruled upon in the first case.
Similarly, in the case of Hanil Development Co., Ltd. v. Court of Appeals, the Court debunked the claim of good faith
by a party who maliciously sought the issuance of a writ of attachment, the bad faith of said party having been
previously determined in a final decision which voided the assailed writ.

Discussion on when attachment is proper as a means for the court to acquire jurisdiction (over the res, not
over the non-resident defendant)
The circumstances under which a writ of preliminary attachment may be issued are set forth in Section 1, Rule 57 of
the Rules of Court, to wit:

SEC. 1. Grounds upon which attachment may issue. — At the commencement of the
action or at any time before entry of judgment, a plaintiff or any proper party may have the property
of the adverse party attached as security for the satisfaction of any judgment that may be
recovered in the following cases:

f) In an action against a party who resides out of the Philippines, or on whom


summons may be served by publication.

The purposes of preliminary attachment are: (1) to seize the property of the debtor in advance of final judgment and
to hold it for purposes of satisfying said judgment, as in the grounds stated in paragraphs (a) to (e) of Section 1, Rule
57 of the Rules of Court; or (2) to acquire jurisdiction over the action by actual or constructive seizure of the property
in those instances where personal or substituted service of summons on the defendant cannot be effected, as in
paragraph (f) of the same provision.

Corollarily, in actions in personam, such as the case for collection of sum of money, summons must be served by
personal or substituted service, otherwise the court will not acquire jurisdiction over the defendant. In case the
defendant does not reside and is not found in the Philippines (and hence personal and substituted service
cannot be effected), the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is
to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant.
The service of summons in this case (which may be by publication coupled with the sending by registered
mail of the copy of the summons and the court order to the last known address of the defendant), is no
longer for the purpose of acquiring jurisdiction but for compliance with the requirements of due process.

Discussion on the propriety of issuing a writ of attachment / proper mode of service in the case of a resident
temporarily out of the Philippines

PCIB seeks to nuance its argument by saying that it considers Alejandro a resident temporarily out of the Philippines
such that attachment is still a proper and available remedy.

However, the SC held that where the defendant is a resident who is temporarily out of the Philippines, attachment of
his/her property in an action in personam, is not always necessary in order for the court to acquire jurisdiction to hear
the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced
against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it,
service may, by leave of court, be also effected out of the Philippines, as under the preceding
section.

The preceding section referred to in the above provision is Section 15 which provides for extraterritorial service –
(a) personal service out of the Philippines, (b) publication coupled with the sending by registered mail of the copy of
the summons and the court order to the last known address of the defendant; or (c) in any other manner which the
court may deem sufficient.

In Montalban v. Maximo, the Court held that substituted service of summons (under the present Section 7, Rule 14
of the Rules of Court) is the normal mode of service of summons that will confer jurisdiction on the court over the
person of residents temporarily out of the Philippines. Meaning, service of summons may be effected by (a) leaving
copies of the summons at the defendant’s residence with some person of suitable discretion residing therein, or (b)
by leaving copies at the defendant’s office or regular place of business with some competent person in charge
thereof. Hence, the court may acquire jurisdiction over an action in personam by mere substituted service without
need of attaching the property of the defendant.

The rules on the application of a writ of attachment must be strictly construed in favor of the defendant. For
attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which exposes the debtor to
humiliation and annoyance. It should be resorted to only when necessary and as a last remedy.
In the instant case, it must be stressed that the writ was issued by the trial court mainly on the representation of
petitioner that respondent is not a resident of the Philippines. Obviously, the trial court’s issuance of the writ was for
the sole purpose of acquiring jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed
that respondent has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of
acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching
the property of the defendant. The misrepresentation of petitioner that respondent does not reside in the Philippines
and its omission of his local addresses was thus a deliberate move to ensure that the application for the writ will be
granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court that petitioner is liable for
damages for the wrongful issuance of a writ of attachment against respondent.

Discussion on damages

Anent the actual damages, the Court of Appeals is correct in not awarding the same inasmuch as the respondent
failed to establish the amount garnished by petitioner. It is a well settled rule that one who has been injured by a
wrongful attachment can recover damages for the actual loss resulting therefrom. But for such losses to be
recoverable, they must constitute actual damages duly established by competent proofs, which are, however, wanting
in the present case.

Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its
award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right. In this
case, nominal damages is proper considering that the right of respondent to use his money has been violated by its
garnishment. The amount of nominal damages must, however, be reduced from P2 million to P50,000.00
considering the short period of 2 months during which the writ was in effect as well as the lack of evidence as to the
amount garnished.

The award of attorney’s fees is proper when a party is compelled to incur expenses to lift a wrongfully issued writ of
attachment. The basis of the award thereof is also the amount of money garnished, and the length of time
respondents have been deprived of the use of their money by reason of the wrongful attachment. It may also be
based upon (1) the amount and the character of the services rendered; (2) the labor, time and trouble involved; (3)
the nature and importance of the litigation and business in which the services were rendered; (4) the responsibility
imposed; (5) the amount of money and the value of the property affected by the controversy or involved in the
employment; (6) the skill and the experience called for in the performance of the services; (7) the professional
character and the social standing of the attorney; (8) the results secured, it being a recognized rule that an attorney
may properly charge a much larger fee when it is contingent than when it is not. All the aforementioned weighed, and
considering the short period of time it took to have the writ lifted, the favorable decisions of the courts below, the
absence of evidence as to the professional character and the social standing of the attorney handling the case and
the amount garnished, the award of attorney’s fees should be fixed not at P1 Million, but only at P200,000.00.

The courts below correctly awarded moral damages on account of petitioner’s misrepresentation and bad faith;
however, we find the award in the amount of P5 Million excessive. Moral damages are to be fixed upon the discretion
of the court taking into consideration the educational, social and financial standing of the parties. Moral damages are
not intended to enrich a complainant at the expense of a defendant. They are awarded only to enable the injured
party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by
reason of petitioner’s culpable action. Moral damages must be commensurate with the loss or injury suffered.
Hence, the award of moral damages is reduced to P500,000.00.

Considering petitioner’s bad faith in securing the writ of attachment, we sustain the award of exemplary damages by
way of example or correction for public good. While as a general rule, the liability on the attachment bond is limited to
actual (or in some cases, temperate or nominal) damages, exemplary damages may be recovered where the
attachment was established to be maliciously sued out. Nevertheless, the award of exemplary damages in this case
should be reduced from P5M to P500,000.00.