G.R. No.

L-48080 August 31, 1942

JOSE DE BORJA, petitioner,

vs.
SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.

Vicente J. Francisco for petitioner.

E. V. Filamor for respondents.
No appearance for respondent judge

BOCOBO, J.:

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

On August 12, 1936, petitioner brought a civil action in the Court of First Instance of Rizal against
Hermogena Romero, Francisco de Borja, Josefa Tangco and Crisanto de Borja to annul a second
sale by Francisco de Borja to Hermogena Romero, of a large estate known as the Hacienda
Jalajala, and to recover damages in the amount of P25,000. On August 29, 1936, Francisco de Borja
and his wife Josefa Tangco filed an answer with three counterclaims, and on September 29, 1936,
they presented two more counterclaims. Trial began September 30, 1936. Under date of August 4,
1937, defendants Francisco de Borja, Josefa Tangco and Crisanto de Borja submitted their
amended answer, consisting of a general denial, special defenses, and five counterclaims and
cross-complaints. In these causes for counter-claim and cross-complaint, it was alleged that plaintiff,
being a son of defendants Francisco de Borja and Josefa Tangco, had been entrusted with the
administration of the extensive interests of his parents, but had been unfaithful to his trust. Said
defendants, therefore, prayed, inter alia, that the spouses Borja and Tangco be declared owners of
the Hacienda Jalajala in question; that plaintiff be required to render an accounting of the products of
said hacienda that he had received and to pay said spouses at least P100,000 illegally retained by
him; that plaintiff be ordered to account for the proceed of rice and bran and to pay at least P700,000
unlawfully retained by him; that plaintiff be made to deliver P20,000 which he had collected from a
debtor of said spouses; that plaintiff be likewise ordered to pay another sum of P9,034 collected by
him from the same debtor; and that plaintiff be required to turn over to defendants Francisco de
Borja and Josefa Tangco the amount of P40,000 collected by him as indemnity of an insurance
policy on property belonging to said spouses.

On July 27, 1940, Francisco de Borja and his wife filed their petition for preliminary attachment to
cover their third, fourth, and fifth, grounds for cross-complaint, involving a total of P69,035. In said
motion, the defendants Borja and wife stated that they did not include the first and second causes for
cross-complaint because the visible property of plaintiff that could then be attached was only worth
about P2,000. On August 21, 1940, plaintiff presented an amended answer setting up a
counterclaim against defendants Borja and wife in the sum of P99,175.46.

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

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

As to be the second objection of petitioner, his counsel strenuously advances the theory that the
affidavit attached to the petition for a writ of preliminary attachment was fatally defective because it
failed to allege that "the amount due to the plaintiff is as much as the sum for which the order is
granted above all legal counterclaims" as required in section 426, Code of Civil Procedure and
section 3, Rule 59, Rules of Court. Petitioner contends that his counterclaim against that of
Francisco de Borja and wife being P99,175.46 whereas the latter's counterclaim totalled only
P69,035, the omission of the allegation referred to is a serious defect. The trial court found, however,
that the counterclaim of Francisco de Borja and wife exceed those of the petitioner Jose de Borja. It
should be borne in mind that the aggregate counterclaims of Francisco de Borja and wife amounted
to P869,000, which exceeds petitioner's counterclaim by P769,000 in round figures. Moreover, as
the trial court had before it the evidence adduce by both sides, the petition for a writ of preliminary
attachment having been filed four years after the trial had begun, we presume that the lower court,
having in mind such evidence, ordered the attachment accordingly.

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

In 1999, TESDA, an instrumentality of the government established under R.A. No. 7796 (the
TESDA Act of 1994) and attached to the DOLE to develop and establish a national system of
skills standardization, testing, and certification in the country.

To fulfill this mandate, it sought to issue security-printed certification and/or identification

polyvinyl (PVC) cards to trainees who have passed the certification process.

Professional Video Inc. (PROVI) signed and executed the “Contract Agreement Project PVC ID
Card issuance” for the provision of goods and services in the printing and encoding of the PVC
cards. PROVI was to provide TESDA with the system and equipment compliant with the
specifications defined in the proposal. In return, TESDA would pay PROVI a specified sum of
money after TESDA’s acceptance of the contracted goods and services. PPOVI alleged that
TESDA has still an outstanding balance and still remains unpaid.

TESDA claims that it entered the Contract Agreement and Addendum in the performance of its
governmental function to develop and establish a national system of skills standardization,
testing, and certification; in the performance of this governmental function, TESDA is immune
from suit.

ISSUE:

Can TESDA be sued without its consent?

RULING:

TESDA, as an agency of the State, cannot be sued without its consent. The rule that a state may
not be sued without its consent is embodied in Section 3, Article XVI of the 1987 Constitution
and has been an established principle that antedates this Constitution. It is as well a universally
recognized principle of international law that exempts a state and its organs from the jurisdiction
of another state.

The principle is based on the very essence of sovereignty, and on the practical ground that there
can be no legal right as against the authority that makes the law on which the right depends. It
also rests on reasons of public policy. That public service would be hindered, and the public
endangered, if the sovereign authority could be subjected to law suits at the instance of every
citizen and, consequently, controlled in the uses and dispositions of the means required for the
proper administration of the government.

The proscribed suit that the state immunity principle covers takes on various forms, namely: a
suit against the Republic by name; a suit against an unincorporated government agency; a suit
against a government agency covered by a charter with respect to the agencys performance of
governmental functions; and a suit that on its face is against a government officer, but where the
ultimate liability will fall on the government. In the present case, the writ of attachment was
issued against a government agency covered by its own charter.

As discussed above, TESDA performs governmental functions, and the issuance of certifications
is a task within its function of developing and establishing a system of skills standardization,
testing, and certification in the country. From the perspective of this function, the core reason for
the existence of state immunity applies i.e., the public policy reason that the performance of
governmental function cannot be hindered or delayed by suits, nor can these suits control the use
and disposition of the means for the performance of governmental functions.
G.R. No. L-23237 November 14, 1925

WALTER E. OLSEN & CO., plaintiff-appellee,

vs.
WALTER E. OLSEN, defendant-appellant.

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

VILLA-REAL, J.:

This is an appeal taken by the defendant from a judgment of the Court of First Instance of Manila,
sentencing him to pay plaintiff corporation the sum of P66,207.62 with legal interest thereon at the
rate of 6 per cent per annum from February 1, 1923, the date of the filing of the complaint, until full
payment and the costs, and dismissing the cross-complaint and counterclaim set up by him.

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

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

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

The preliminary attachment is an auxiliary remedy the granting of which lies within the sound
discretion of the judge taking cognizance of the principal case upon whose existence it depends.
The order of the judge denying a motion for the annulment of a writ of preliminary attachment, being
of an incidental or interlocutory and auxiliary character, cannot be the subject of an appeal
independently from the principal case, because our procedural law now in force authorizes an
appeal only from a final judgement which gives an end to the litigation. (Section 143, Act No. 190: 3
C. J., 549 par. 389.) This lack of ordinary remedy through an appeal does not mean, however, that
any excess a lower court may commit in the exercise of its jurisdiction is without remedy; because
there are the especial remedies, such as certiorari, for the purpose. (Leung Ben vs. O'Brien, 38 Phil.,
182.)

While it is true that an order denying a motion for the annulment of a preliminary attachment is not
subject to review through an appeal independently from the principal case, it not consisting a final
order, yet when the writ of preliminary attachment becomes final by virtue of a final judgment
rendered in the principal case, said writ is subject to review jointly with the judgment rendered in the
principal case through an ordinary appeal. The appellate court has the power to revoke or confirm
said order, in like manner as a judgment on the merits; because it is a ruling to which an exception
may be taken, and therefore is subject to review in an appeal by bill of exceptions. (Secs. 141-143,
Act No. 190.) The fact that section 441 of the Code of Civil Procedure does not provide any remedy
against the granting or denial of a motion for the annulment of a writ of preliminary attachment,
except in case of excess of jurisdiction, does not confer upon said order a final and irrevocable
character, taking it out from the general provisions as to appeal and review, for a special provision is
necessary for that purpose.

Having arrived at the conclusion that an order denying a motion for the annulment of a preliminary
attachment may be reviewed in an appeal taken from a final judgment rendered in the principal case,
in which said order was entered as an auxiliary remedy, we will now turn to consider the question
whether or not the trial court committed error in denying the motion for the annulment of the
preliminary attachment levied upon the property of the defendant-appellant.

It is admitted by the defendant-appellant that he is indebted to the plaintiff-appellee corporation in

the sum of P66,207.62, but denies that he has contracted said debt fraudulently.

The evidence shows that the defendant-appellant was president-treasurer and general manager of
the plaintiff-appellee corporation and exercised direct and almost exclusive supervision over its
function, funds and books of account until about the month of August, 1921. During that time he has
been taking money of the corporation without being duly authorized to do so either by the board of
directors or by the by-laws, the money taken by him having amounted to the considerable sum of
P66,207.62. Of this sum, P19,000 was invested in the purchase of the house and lot now under
attachment in this case, and P50,000 in the purchase of 500 shares of stock of Prising at the price of
P100 per share for himself and Marker. A few days afterwards he began to sell the ordinary shares
of the corporation for P430 each. The defendant-appellant attempted to justify his conduct, alleging
that the withdrawal of the funds of the corporation for his personal use was made in his current
account with said corporation, in whose treasury he deposited his own money and the certificates of
title of his shares, as well as of his estate, and that at the first meeting of the stockholders, which
took place on February 1, 1919, a statement of his account with a debit balance was submitted and
approved.

Having, as he had, absolute and almost exclusive control over the function of the corporation and its
funds by virtue of his triple capacity as president, treasurer and general manager, the defendant-
appellant should have been more scrupulous in the application of the funds of said corporation to his
own use. As a trustee of said corporation, it was his duty to see by all legal means possible that the
interests of the stockholders were protected, and should not abuse the extraordinary opportunity
which his triple position offered him to dispose of the funds of the corporation. Ordinary delicacy
required that in the disposition of the funds of the corporation for his personal use, he should be very
careful, so as to do it in such a way as would be compatible with the interest of the stockholders and
his fiduciary character. And let it not also be said that he did every thing openly and with the security
of his shares of stock, because as he could dispose of the funds of the corporation so he could
dispose of his won shares and with greater freedom. And let it not also be said that other officers of
the corporation, such as the vice-president, the secretary and other chiefs and employees, were
doing the same thing, because that does not show but that his bad example had spread among his
subordinates and all believed themselves with the same right as their chief to dispose of the funds of
the corporation for their personal use, although it were merely by way of loan, without any security of
whatever kind of course. The approval of his account at the first meeting of the stockholders cannot
be considered as a justification of his conduct, nor does it remove every suspicion of bad faith,
because the corporation was constituted exclusively by the defendant-appellant himself and his
cospeculator, Marker, and nothing else could be expected from it. As to the debt he owed to the
corporation, Walter E. Olsen was in effect a lender and a borrower at the same time. The conduct of
the defendant-appellant in connection with the funds of the corporation he represented was more
than an irregularity; and while it is not sufficiently serious to constitute a criminal fraud, it is
undoubtedly a fraud of a civil character, because it is an abuse of confidence to the damage of the
corporation and its stockholders, and constitutes one of the grounds enumerated in section 424, in
connection with section 412, of the Code of Civil Procedure for the issuance of a preliminary
attachment, and the order of the Court of First Instance of Manila, denying the motion for the
annulment of the injunction in question, is in accordance with law.
lawph!1.net

As to the counterclaim set up by the defendant-appellant, we have nothing to add to the

considerations of the trial court which we make ours.

For the foregoing, and no error having been found in the judgment appealed from, the same is
hereby affirmed, with the costs against the defendant-appellant. So ordered.
G.R. No. 112573 February 9, 1995

NORTHWEST ORIENT AIRLINES, INC. petitioner,

vs.
COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents.

PADILLA, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals affirming
the dismissal of the petitioner's complaint to enforce the judgment of a Japanese court. The principal
issue here is whether a Japanese court can acquire jurisdiction over a Philippine corporation doing
business in Japan by serving summons through diplomatic channels on the Philippine corporation at
its principal office in Manila after prior attempts to serve summons in Japan had failed.

Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized under
the laws of the State of Minnesota, U.S.A., sought to enforce in Civil Case No. 83-17637 of the
Regional Trial Court (RTC), Branch 54, Manila, a judgment rendered in its favor by a Japanese court
against private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a corporation
incorporated under Philippine laws.

As found by the Court of Appeals in the challenged decision of 10 November 1993, 1 the following
are the factual and procedural antecedents of this controversy:

On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp & Company,
through its Japan branch, entered into an International Passenger Sales Agency
Agreement, whereby the former authorized the latter to sell its air transportation
tickets. Unable to remit the proceeds of the ticket sales made by defendant on behalf
of the plaintiff under the said agreement, plaintiff on March 25, 1980 sued defendant
in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with
claim for damages.

On April 11, 1980, a writ of summons was issued by the 36th Civil Department,
Tokyo District Court of Japan against defendant at its office at the Taiheiyo Building,
3rd floor, 132, Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture. The
attempt to serve the summons was unsuccessful because the bailiff was advised by
a person in the office that Mr. Dinozo, the person believed to be authorized to receive
court processes was in Manila and would be back on April 24, 1980.

On April 24, 1980, bailiff returned to the defendant's office to serve the summons. Mr.
Dinozo refused to accept the same claiming that he was no longer an employee of
the defendant.

After the two attempts of service were unsuccessful, the judge of the Tokyo District
Court decided to have the complaint and the writs of summons served at the head
office of the defendant in Manila. On July 11, 1980, the Director of the Tokyo District
Court requested the Supreme Court of Japan to serve the summons through
diplomatic channels upon the defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the
writ of summons (p. 276, Records). Despite receipt of the same, defendant failed to
appear at the scheduled hearing. Thus, the Tokyo Court proceeded to hear the
plaintiff's complaint and on [January 29, 1981], rendered judgment ordering the
defendant to pay the plaintiff the sum of 83,158,195 Yen and damages for delay at
the rate of 6% per annum from August 28, 1980 up to and until payment is completed
(pp. 12-14, Records).

On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the
judgment. Defendant not having appealed the judgment, the same became final and
executory.

Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit
for enforcement of the judgment was filed by plaintiff before the Regional Trial Court
of Manila Branch 54.2

On July 16, 1983, defendant filed its answer averring that the judgment of the
Japanese Court sought to be enforced is null and void and unenforceable in this
jurisdiction having been rendered without due and proper notice to the defendant
and/or with collusion or fraud and/or upon a clear mistake of law and fact (pp. 41-45,
Rec.).

Unable to settle the case amicably, the case was tried on the merits. After the plaintiff
rested its case, defendant on April 21, 1989, filed a Motion for Judgment on a
Demurrer to Evidence based on two grounds:
(1) the foreign judgment sought to be enforced is null and void for want of jurisdiction
and (2) the said judgment is contrary to Philippine law and public policy and rendered
without due process of law. Plaintiff filed its opposition after which the court a
quo rendered the now assailed decision dated June 21, 1989 granting the demurrer
motion and dismissing the complaint (Decision, pp. 376-378, Records). In granting
the demurrer motion, the trial court held that:

The foreign judgment in the Japanese Court sought in this action is

null and void for want of jurisdiction over the person of the defendant
considering that this is an action in personam; the Japanese Court
did not acquire jurisdiction over the person of the defendant because
jurisprudence requires that the defendant be served with summons in
Japan in order for the Japanese Court to acquire jurisdiction over it,
the process of the Court in Japan sent to the Philippines which is
outside Japanese jurisdiction cannot confer jurisdiction over the
defendant in the case before the Japanese Court of the case at
bar. Boudard versus Tait 67 Phil. 170. The plaintiff contends that the
Japanese Court acquired jurisdiction because the defendant is a
resident of Japan, having four (4) branches doing business therein
and in fact had a permit from the Japanese government to conduct
business in Japan (citing the exhibits presented by the plaintiff); if this
is so then service of summons should have been made upon the
defendant in Japan in any of these alleged four branches; as
admitted by the plaintiff the service of the summons issued by the
Japanese Court was made in the Philippines thru a Philippine Sheriff.
This Court agrees that if the defendant in a foreign court is a resident
in the court of that foreign court such court could acquire jurisdiction
 over the person of the defendant but it must be served upon the
defendant in the territorial jurisdiction of the foreign court. Such is not
the case here because the defendant was served with summons in
the Philippines and not in Japan.

Unable to accept the said decision, plaintiff on July 11, 1989 moved for
reconsideration of the decision, filing at the same time a conditional Notice of Appeal,
asking the court to treat the said notice of appeal "as in effect after and upon
issuance of the court's denial of the motion for reconsideration."

Defendant opposed the motion for reconsideration to which a Reply dated August 28,
1989 was filed by the plaintiff.

On October 16, 1989, the lower court disregarded the Motion for Reconsideration
and gave due course to the plaintiff's Notice of Appeal. 3

In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance
upon Boudard vs.Tait 4 wherein it was held that "the process of the court has no extraterritorial effect
and no jurisdiction is acquired over the person of the defendant by serving him beyond the
boundaries of the state." To support its position, the Court of Appeals further stated:

In an action strictly in personam, such as the instant case, personal service of

summons within the forum is required for the court to acquire jurisdiction over the
defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction
on the court, personal or substituted service of summons on the defendant not
extraterritorial service is necessary (Dial Corp vs. Soriano, 161 SCRA 739).

But while plaintiff-appellant concedes that the collection suit filed is an action in
personam, it is its theory that a distinction must be made between an action in
personam against a resident defendant and an action in personam against a non-
resident defendant. Jurisdiction is acquired over a non-resident defendant only if he
is served personally within the jurisdiction of the court and over a resident defendant
if by personal, substituted or constructive service conformably to statutory
authorization. Plaintiff-appellant argues that since the defendant-appellee maintains
branches in Japan it is considered a resident defendant. Corollarily, personal,
substituted or constructive service of summons when made in compliance with the
procedural rules is sufficient to give the court jurisdiction to render judgment in
personam.

Such an argument does not persuade.

It is a general rule that processes of the court cannot lawfully be served outside the
territorial limits of the jurisdiction of the court from which it issues (Carter vs. Carter;
41 S.E. 2d 532, 201) and this is regardless of the residence or citizenship of the party
thus served (Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292, Am.
Case 1912 D680). There must be actual service within the proper territorial limits on
defendant or someone authorized to accept service for him. Thus, a defendant,
whether a resident or not in the forum where the action is filed, must be served with
summons within that forum.

But even assuming a distinction between a resident defendant and non-resident

defendant were to be adopted, such distinction applies only to natural persons and
 not in the corporations. This finds support in the concept that "a corporation has no
home or residence in the sense in which those terms are applied to natural persons"
(Claude Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited by the
defendant-appellee in its brief:

Residence is said to be an attribute of a natural person, and can be predicated on an

artificial being only by more or less imperfect analogy. Strictly speaking, therefore, a
corporation can have no local residence or habitation. It has been said that a
corporation is a mere ideal existence, subsisting only in contemplation of law — an
invisible being which can have, in fact, no locality and can occupy no space, and
therefore cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing Kimmerle v.
Topeka, 88 370, 128 p. 367; Wood v. Hartfold F. Ins. Co., 13 Conn 202)

Jurisprudence so holds that the foreign or domestic character of a corporation is to

be determined by the place of its origin where its charter was granted and not by the
location of its business activities (Jennings v. Idaho Rail Light & P. Co., 26 Idaho
703, 146 p. 101), A corporation is a "resident" and an inhabitant of the state in which
it is incorporated and no other (36 Am. Jur. 2d, p. 49).

Defendant-appellee is a Philippine Corporation duly organized under the Philippine

laws. Clearly, its residence is the Philippines, the place of its incorporation, and not
Japan. While defendant-appellee maintains branches in Japan, this will not make it a
resident of Japan. A corporation does not become a resident of another by engaging
in business there even though licensed by that state and in terms given all the rights
and privileges of a domestic corporation (Galveston H. & S.A.R. Co. vs. Gonzales,
151 US 496, 38 L ed. 248, 4 S Ct. 401).

On this premise, defendant appellee is a non-resident corporation. As such, court

processes must be served upon it at a place within the state in which the action is
brought and not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1 S. Ct.
354).5

It then concluded that the service of summons effected in Manila or beyond the territorial boundaries
of Japan was null and did not confer jurisdiction upon the Tokyo District Court over the person of
SHARP; hence, its decision was void.

Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court
contending that the respondent court erred in holding that SHARP was not a resident of Japan and
that summons on SHARP could only be validly served within that country.

A foreign judgment is presumed to be valid and binding in the country from which it comes, until the
contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of
due notice therein.6

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of
a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as
between the parties and their successors-in-interest by a subsequent title. The judgment may,
however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines
or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has
regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption
of its validity.7Being the party challenging the judgment rendered by the Japanese court, SHARP had
the duty to demonstrate the invalidity of such judgment. In an attempt to discharge that burden, it
contends that the extraterritorial service of summons effected at its home office in the Philippines
was not only ineffectual but also void, and the Japanese Court did not, therefore acquire jurisdiction
over it.

It is settled that matters of remedy and procedure such as those relating to the service of process
upon a defendant are governed by the lex fori or the internal law of the forum.8 In this case, it is the
procedural law of Japan where the judgment was rendered that determines the validity of the
extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It
may not be taken judicial notice of and must be pleaded and proved like any other fact.9 Sections 24
and 25, Rule 132 of the Rules of Court provide that it may be evidenced by an official publication or
by a duly attested or authenticated copy thereof. It was then incumbent upon SHARP to present
evidence as to what that Japanese procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of
the service of summons and the decision thereafter rendered by the Japanese court must stand.

Alternatively in the light of the absence of proof regarding Japanese

law, the presumption of identity or similarity or the so-called processual presumption 10 may be
invoked. Applying it, the Japanese law on the matter is presumed to be similar with the Philippine
law on service of summons on a private foreign corporation doing business in the Philippines.
Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing
business in the Philippines, service may be made: (1) on its resident agent designated in
accordance with law for that purpose, or, (2) if there is no such resident agent, on the government
official designated by law to that effect; or (3) on any of its officers or agents within the Philippines.

If the foreign corporation has designated an agent to receive summons, the designation is exclusive,
and service of summons is without force and gives the court no jurisdiction unless made upon him. 11

Where the corporation has no such agent, service shall be made on the government official
designated by law, to wit: (a) the Insurance Commissioner in the case of a foreign insurance
company; (b) the Superintendent of Banks, in the case of a foreign banking corporation; and (c) the
Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do
business in the Philippines. Whenever service of process is so made, the government office or
official served shall transmit by mail a copy of the summons or other legal proccess to the
corporation at its home or principal office. The sending of such copy is a necessary part of the
service. 12

SHARP contends that the laws authorizing service of process upon the Securities and Exchange
Commission, the Superintendent of Banks, and the Insurance Commissioner, as the case may be,
presuppose a situation wherein the foreign corporation doing business in the country no longer has
any branches or offices within the Philippines. Such contention is belied by the pertinent provisions
of the said laws. Thus, Section 128 of the Corporation Code 13 and Section 190 of the Insurance
Code 14 clearly contemplate two situations: (1) if the corporation had left the Philippines or had
ceased to transact business therein, and (2) if the corporation has no designated agent. Section 17
of the General Banking Act 15 does not even speak a corporation which had ceased to transact
business in the Philippines.

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive
court processes in Japan. This silence could only mean, or least create an impression, that it had
none. Hence, service on the designated government official or on any of SHARP's officers or agents
in Japan could be availed of. The respondent, however, insists that only service of any of its officers
or employees in its branches in Japan could be resorted to. We do not agree. As found by the
respondent court, two attempts at service were made at SHARP's Yokohama branch. Both were
unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be the person authorized to
accept court process, was in Manila. On the second, Mr. Dinozo was present, but to accept the
summons because, according to him, he was no longer an employee of SHARP. While it may be
true that service could have been made upon any of the officers or agents of SHARP at its three
other branches in Japan, the availability of such a recourse would not preclude service upon the
proper government official, as stated above.

As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for
SHARP be served at its head office in the Philippine's after the two attempts of service had
failed. 16 The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of the
summons and other legal documents to the Philippines. Acting on that request, the Supreme Court
of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs
of Japan which, in turn, forwarded the same to the Japanese Embassy in Manila . Thereafter, the
court processes were delivered to the Ministry (now Department) of Foreign Affairs of the
Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of
Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its
principal office in Manila. This service is equivalent to service on the proper government official
under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code.
Hence, SHARP's contention that such manner of service is not valid under Philippine laws holds no
water.17

In deciding against the petitioner, the respondent court sustained the trial court's reliance
on Boudard vs. Tait 18where this Court held:

The fundamental rule is that jurisdiction in personam over nonresidents, so as to

sustain a money judgment, must be based upon personal service within the state
which renders the judgment.

xxx xxx xxx

The process of a court, has no extraterritorial effect, and no jurisdiction is acquired

over the person of the defendant by serving him beyond the boundaries of the state.
Nor has a judgment of a court of a foreign country against a resident of this country
having no property in such foreign country based on process served here, any effect
here against either the defendant personally or his property situated here.

Process issuing from the courts of one state or country cannot run into another, and
although a nonresident defendant may have been personally served with such
process in the state or country of his domicile, it will not give such jurisdiction as to
authorize a personal judgment against him.

It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as
well as the principle laid down by the Iowa Supreme Court in the 1911 case of Raher vs. Raher. 21

The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of
the civil division of the Court of First Instance of Hanoi, French Indo-China. The trial court dismissed
the case because the Hanoi court never acquired jurisdiction over the person of the defendant
considering that "[t]he, evidence adduced at the trial conclusively proves that neither the appellee
[the defendant] nor his agent or employees were ever in Hanoi, French Indo-China; and that the
deceased Marie Theodore Jerome Boudard had never, at any time, been his employee."
In Magdalena Estate, what was declared invalid resulting in the failure of the court to acquire
jurisdiction over the person of the defendants in an action in personam was the service of summons
through publication against non-appearing resident defendants. It was claimed that the latter
concealed themselves to avoid personal service of summons upon them. In Dial, the defendants
were foreign corporations which were not, domiciled and licensed to engage in business in the
Philippines and which did not have officers or agents, places of business, or properties here. On the
other hand, in the instant case, SHARP was doing business in Japan and was maintaining four
branches therein.

Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a divided
Supreme Court of Iowa declared that the principle that there can be no jurisdiction in a court of a
territory to render a personal judgment against anyone upon service made outside its limits was
applicable alike to cases of residents and non-residents. The principle was put at rest by the United
States Supreme Court when it ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in the
state is alone sufficient to bring an absent defendant within the reach of the state's jurisdiction for
purposes of a personal judgment by means of appropriate substituted service or personal service
without the state. This principle is embodied in section 18, Rule 14 of the Rules of Court which
allows service of summons on residents temporarily out of the Philippines to be made out of the
country. The rationale for this rule was explained in Milliken as follows:

[T]he authority of a state over one of its citizens is not terminated by the mere fact of
his absence from the state. The state which accords him privileges and affords
protection to him and his property by virtue of his domicile may also exact reciprocal
duties. "Enjoyment of the privileges of residence within the state, and the attendant
right to invoke the protection of its laws, are inseparable" from the various incidences
of state citizenship. The responsibilities of that citizenship arise out of the relationship
to the state which domicile creates. That relationship is not dissolved by mere
absence from the state. The attendant duties, like the rights and privileges incident to
domicile, are not dependent on continuous presence in the state. One such incident
of domicile is amenability to suit within the state even during sojourns without the
state, where the state has provided and employed a reasonable method for apprising
such an absent party of the proceedings against him. 23

The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict technical
sense, such domicile as a corporation may have is single in its essence and a corporation can have
only one domicile which is the state of its creation. 25

Nonetheless, a corporation formed in one-state may, for certain purposes, be regarded a resident in
another state in which it has offices and transacts business. This is the rule in our jurisdiction
and apropos thereto, it may be necessery to quote what we stated in State Investment House,
Inc, vs. Citibank, N.A., 26 to wit:

The issue is whether these Philippine branches or units may be considered

"residents of the Philippine Islands" as that term is used in Section 20 of the
Insolvency Law . . . or residents of the state under the laws of which they were
respectively incorporated. The answer cannot be found in the Insolvency Law itself,
which contains no definition of the term, resident, or any clear indication of its
meaning. There are however other statutes, albeit of subsequent enactment and
effectivity, from which enlightening notions of the term may be derived.
The National Internal Revenue Code declares that the term "'resident foreign
corporation' applies to a foreign corporation engaged in trade or business within the
Philippines," as distinguished from a "'non-resident foreign corporation' . . . (which is
one) not engaged in trade or bussiness within the Philippines." [Sec. 20, pars. (h)
and (i)].

The Offshore Banking Law, Presidential Decree No. 1034, states "that branches,
subsidiaries, affiliation, extension offices or any other units of corporation or juridical
person organized under the laws of any foreign country operating in the Philippines
shall be considered residents of the Philippines. [Sec. 1(e)].

The General Banking Act, Republic Act No. 337, places "branches and agencies in
the Philippines of foreign banks . . . (which are) called Philippine branches," in the
same category as "commercial banks, savings associations, mortgage banks,
development banks, rural banks, stock savings and loan associations" (which have
been formed and organized under Philippine laws), making no distinction between
the former and the latter in so far as the terms "banking institutions" and "bank" are
used in the Act [Sec. 2], declaring on the contrary that in "all matters not specifically
covered by special provisions applicable only to foreign banks, or their branches and
agencies in the Philippines, said foreign banks or their branches and agencies
lawfully doing business in the Philippines "shall be bound by all laws, rules, and
regulations applicable to domestic banking corporations of the same class, except
such laws, rules and regulations as provided for the creation, formation, organization,
or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties
of members, stockholders or officers of corporation. [Sec. 18].

This court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs.
Philippine Advertising Corp., 57 Phil. 607] that a foreign corporation licitly doing
business in the Philippines, which is a defendant in a civil suit, may not be
considered a non-resident within the scope of the legal provision authorizing
attachment against a defendant not residing in the Philippine Islands; [Sec. 424, in
relation to Sec. 412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of
the Rules of 1940, Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary
attachment may not be applied for and granted solely on the asserted fact that the
defendant is a foreign corporation authorized to do business in the Philippines — and
is consequently and necessarily, "a party who resides out of the Philippines."
Parenthetically, if it may not be considered as a party not residing in the Philippines,
or as a party who resides out of the country, then, logically, it must be considered a
party who does reside in the Philippines, who is a resident of the country. Be this as
it may, this Court pointed out that:

. . . Our laws and jurisprudence indicate a purpose to assimilate

foreign corporations, duly licensed to do business here, to the status
of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall
Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs.
Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line
with this policy should we make a discrimination against a foreign
corporation, like the petitioner, and subject its property to the harsh
writ of seizure by attachment when it has complied not only with
every requirement of law made specially of foreign corporations, but
in addition with every requirement of law made of domestic
corporations. . . .
 Obviously, the assimilation of foreign corporations authorized to do business in the
Philippines "to the status of domestic corporations, subsumes their being found and
operating as corporations, hence, residing, in the country.

The same principle is recognized in American law: that the residence of a

corporation, if it can be said to have a residence, is necessarily where it exercises
corporate functions . . .;" that it is considered as dwelling "in the place where its
business is done . . .," as being "located where its franchises are exercised . . .," and
as being "present where it is engaged in the prosecution of the corporate enterprise;"
that a "foreign corporation licensed to do business in a state is a resident of any
country where it maintains an office or agent for transaction of its usual and
customary business for venue purposes;" and that the "necessary element in its
signification is locality of existence." [Words and Phrases, Permanent Ed., vol. 37,
pp. 394, 412, 493].

In as much as SHARP was admittedly doing business in Japan through its four duly registered
branches at the time the collection suit against it was filed, then in the light of the processual
presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the
jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful
methods of serving process. 27

Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only
under the processual presumption but also because of the presumption of regularity of performance
of official duty.

We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be
without merit. We find no evidence that would justify an award for attorney's fees and litigation
expenses under Article 2208 of the Civil Code of the Philippines. Nor is an award for exemplary
damages warranted. Under Article 2234 of the Civil Code, before the court may consider the
question of whether or not exemplary damages should be awarded, the plaintiff must show that he is
entitled to moral, temperate, or compensatory damaged. There being no such proof presented by
NORTHWEST, no exemplary damages may be adjudged in its favor.

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED
insofar as it denied NORTHWEST's claims for attorneys fees, litigation expenses, and exemplary
damages but REVERSED insofar as in sustained the trial court's dismissal of NORTHWEST's
complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and
another in its stead is hereby rendered ORDERING private respondent C.F. SHARP L COMPANY,
INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case,
with interest thereon at the legal rate from the filing of the complaint therein until the said foreign
judgment is fully satisfied.

Costs against the private respondent.

SO ORDERED.
G.R. No. 171741 November 27, 2009

METRO, INC. and SPOUSES FREDERICK JUAN and LIZA JUAN, Petitioners,
vs.
LARA'S GIFTS AND DECORS, INC., LUIS VILLAFUERTE, JR. and LARA MARIA R.
VILLAFUERTE,Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 29 September 2004 Decision2 and 2 March 2006 Resolution3 of
the Court of Appeals in CA-G.R. SP No. 79475. In its 29 September 2004 Decision, the Court of
Appeals granted the petition for certiorari of respondents Lara’s Gifts and Decors, Inc., Luis
Villafuerte, Jr., and Lara Maria R. Villafuerte (respondents). In its 2 March 2006 Resolution, the
Court of Appeals denied the motion for reconsideration of petitioners Metro, Inc., Frederick Juan and
Liza Juan (petitioners).

The Facts

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

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

In May 2003, respondents filed with the Regional Trial Court, Branch 197, Las Piñas City (trial court)
a complaint against petitioners for sum of money and damages with a prayer for the issuance of a
writ of preliminary attachment. Subsequently, respondents filed an amended complaint5 and alleged
that, as of July 2002, petitioners defrauded them in the amount of $521,841.62. Respondents also
prayed for ₱1,000,000 as moral damages, ₱1,000,000 as exemplary damages and 10% of the
judgment award as attorney’s fees. Respondents also prayed for the issuance of a writ of preliminary
attachment.

In its 23 June 2003 Order,6 the trial court granted respondents’ prayer and issued the writ of
attachment against the properties and assets of petitioners. The 23 June 2003 Order provides:

WHEREFORE, let a Writ of Preliminary Attachment issue against the properties and assets of
Defendant METRO, INC. and against the properties and assets of Defendant SPOUSES
FREDERICK AND LIZA JUAN not exempt from execution, as may be sufficient to satisfy the
applicants’ demand of US$521,841.62 US Dollars or its equivalent in Pesos upon actual attachment,
which is about ₱27 Million, unless such Defendants make a deposit or give a bond in an amount
equal to ₱27 Million to satisfy the applicants’ demand exclusive of costs, upon posting by the
Plaintiffs of a Bond for Preliminary Attachment in the amount of twenty five million pesos
(₱25,000,000.00), subject to the approval of this Court.

SO ORDERED.7

On 26 June 2003, petitioners filed a motion to discharge the writ of attachment. Petitioners argued
that the writ of attachment should be discharged on the following grounds: (1) that the 2001
agreement was not a valid contract because it did not show that there was a meeting of the minds
between the parties; (2) assuming that the 2001 agreement was a valid contract, the same was
inadmissible because respondents failed to authenticate it in accordance with the Rules on
Electronic Evidence; (3) that respondents failed to substantiate their allegations of fraud with specific
acts or deeds showing how petitioners defrauded them; and (4) that respondents failed to establish
that the unpaid commissions were already due and demandable.

After considering the arguments of the parties, the trial court granted petitioners’ motion and lifted
the writ of attachment. The 12 August 2003 Order8 of the trial court provides:

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

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

SO ORDERED.9

Respondents filed a motion for reconsideration. In its 10 September 2003 Order, the trial court
denied the motion.

Respondents filed a petition for certiorari before the Court of Appeals. Respondents alleged that the
trial court gravely abused its discretion when it ordered the discharge of the writ of attachment
without requiring petitioners to post a counter-bond.

In its 29 September 2004 Decision, the Court of Appeals granted respondents’ petition. The 29
September 2004 Decision provides:

WHEREFORE, finding merit in the petition, We GRANT the same. The assailed Orders are hereby
ANNULLED and SET ASIDE. However, the issued Writ of Preliminary Attachment may be ordered
discharged upon the filing by the private respondents of the proper counter-bond pursuant to Section
12, Rule 57 of the Rules of Civil Procedure.

SO ORDERED.10

Petitioners filed a motion for reconsideration. In its 2 March 2006 Resolution, the Court of Appeals
denied the motion.

Hence, this petition.

The 12 August 2003 Order of the Trial Court

According to the trial court, respondents failed to sufficiently show that petitioners were guilty of
fraud either in incurring the obligation upon which the action was brought, or in the performance
thereof. The trial court found no proof that petitioners were motivated by malice in entering into the
2001 agreement. The trial court also declared that petitioners’ failure to fully comply with their
obligation, absent other facts or circumstances to indicate evil intent, does not automatically amount
to fraud. Consequently, the trial court ordered the discharge of the writ of attachment for lack of
evidence of fraud.

The 29 September 2004 Decision of the Court of Appeals

According to the Court Appeals, the trial court gravely abused its discretion when it ordered the
discharge of the writ of attachment without requiring petitioners to post a counter-bond. The Court of
Appeals said that when the writ of attachment is issued upon a ground which is at the same time
also the applicant’s cause of action, courts are precluded from hearing the motion for dissolution of
the writ when such hearing would necessarily force a trial on the merits of a case on a mere
motion.11 The Court of Appeals pointed out that, in this case, fraud was not only alleged as the
ground for the issuance of the writ of attachment, but was actually the core of respondents’
complaint. The Court of Appeals declared that the only way that the writ of attachment can be
discharged is by posting a counter-bond in accordance with Section 12,12 Rule 57 of the Rules of
Court.

The Issue

Petitioners raise the question of whether the writ of attachment issued by the trial court was
improperly issued such that it may be discharged without the filing of a counter-bond.

The Ruling of the Court

The petition has no merit.

Petitioners contend that the writ of attachment was improperly issued because respondents’
amended complaint failed to allege specific acts or circumstances constitutive of fraud. Petitioners
insist that the improperly issued writ of attachment may be discharged without the necessity of filing
a counter-bond. Petitioners also argue that respondents failed to show that the writ of attachment
was issued upon a ground which is at the same time also respondents’ cause of action. Petitioners
maintain that respondents’ amended complaint was not an action based on fraud but was a simple
case for collection of sum of money plus damages.

On the other hand, respondents argue that the Court of Appeals did not err in ruling that the writ of
attachment can only be discharged by filing a counter-bond. According to respondents, petitioners
cannot avail of Section 13,13 Rule 57 of the Rules of Court to have the attachment set aside because
the ground for the issuance of the writ of attachment is also the basis of respondents’ amended
complaint. Respondents assert that the amended complaint is a complaint for damages for the
breach of obligation and acts of fraud committed by petitioners. 1 a vv p h i 1

In this case, the basis of respondents’ application for the issuance of a writ of preliminary attachment
is Section 1(d), Rule 57 of the Rules of Court which provides:

SEC. 1. Grounds upon which attachment may issue. — At the commencement of the action or at
any time before entry of judgment, a plaintiff or any proper party may have the property of the
adverse party attached as security for the satisfaction of any judgment that maybe recovered in the
following cases: x x x
(d) In an action against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, or in the performance thereof; x x x

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

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

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

In their amended complaint, respondents alleged the following in support of their prayer for a writ of
preliminary attachment:

5. Sometime in early 2001, defendant Frederick Juan approached plaintiff spouses and asked them
to help defendants’ export business. Defendants enticed plaintiffs to enter into a business deal. He
proposed to plaintiff spouses the following:

a. That plaintiffs transfer and endorse to defendant Metro some of the Purchase Orders
(PO’s) they will receive from their US buyers;

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

xxx

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

xxx

20. Defendants are guilty of fraud committed both at the inception of the agreement and in the
performance of the obligation. Through machinations and schemes, defendants successfully enticed
plaintiffs to enter into the 2001 Agreement. In order to secure plaintiffs’ full trust in them and lure
plaintiffs to endorse more POs and increase the volume of the orders, defendants during the early
part, remitted to plaintiffs shares under the Agreement.

21. However, soon thereafter, just when the orders increased and the amount involved likewise
increased, defendants suddenly, without any justifiable reasons and in pure bad faith and fraud,
abandoned their contractual obligations to remit to plaintiffs their shares. And worse, defendants
transacted directly with plaintiffs’ foreign buyer to the latter’s exclusion and damage. Clearly,
defendants planned everything from the beginning, employed ploy and machinations to defraud
plaintiffs, and consequently take from them a valuable client.
22. Defendants are likewise guilty of fraud by violating the trust and confidence reposed upon them
by plaintiffs. Defendants received the proceeds of plaintiffs’ LCs with the clear obligation of remitting
15% thereof to the plaintiffs. Their refusal and failure to remit the said amount despite demand
constitutes a breach of trust amounting to malice and fraud.17 (Emphasis and underscoring in the
original) (Boldfacing and italicization supplied)

We rule that respondents’ allegation that petitioners undertook to sell exclusively and only through
JRP/LGD for Target Stores Corporation but that petitioners transacted directly with respondents’
foreign buyer is sufficient allegation of fraud to support their application for a writ of preliminary
attachment. Since the writ of preliminary attachment was properly issued, the only way it can be
dissolved is by filing a counter-bond in accordance with Section 12, Rule 57 of the Rules of Court.

Moreover, the reliance of the Court of Appeals in the cases of Chuidian v. Sandiganbayan,18 FCY
Construction Group, Inc. v. Court of Appeals,19 and Liberty Insurance Corporation v. Court of
Appeals20 is proper. The rule that "when the writ of attachment is issued upon a ground which is at
the same time the applicant’s cause of action, the only other way the writ can be lifted or dissolved is
by a counter-bond"21 is applicable in this case. It is clear that in respondents’ amended complaint of
fraud is not only alleged as a ground for the issuance of the writ of preliminary attachment, but it is
also the core of respondents’ complaint. The fear of the Court of Appeals that petitioners could force
a trial on the merits of the case on the strength of a mere motion to dissolve the attachment has a
basis.

WHEREFORE, we DENY the petition. We AFFIRM the 29 September 2004 Decision and 2 March
2006 Resolution of the Court of Appeals in CA-G.R. SP No. 79475.

SO ORDERED.
G.R. No. L-35990 June 17, 1981

ABOITIZ & COMPANY, INC., HONORABLE VICENTE N. CUSI JR., Judge of the Court of First
Instance of Davao, and the PROVINCIAL SHERIFF OF DAVAO DEL SUR, petitioners,
vs.
COTABATO BUS COMPANY, INC., respondent.

DE CASTRO, J.:

The instant petition stemmed from Civil Case No. 7329 of the Court of First Instance of Davao
(Branch 1) in which a writ of preliminary attachment was issued ex-parte by the Court on the
strength of an affidavit of merit attached to the verified complaint filed by petitioner herein, Aboitiz &
Co., Inc., on November 2, 1971, as plaintiff in said case, for the collection of money in the sum of P
155,739.41, which defendant therein, the respondent in the instant case, Cotabato Bus Co., owed
the said petitioner.

By virtue of the writ of preliminary attachment, the provincial sheriff attached personal properties of
the defendant bus company consisting of some buses, machinery and equipment. The ground for
the issuance of the writ is, as alleged in the complaint and the affidavit of merit executed by the
Assistant Manager of petitioner, that the defendant "has removed or disposed of its properties or
assets, or is about to do so, with intent to defraud its creditors."

Respondent company filed in the lower court an "Urgent Motion to Dissolve or Quash Writ of
Attachment" to which was attached an affidavit executed by its Assistant Manager, Baldovino
Lagbao, alleging among other things that "the Cotabato Bus Company has not been selling or
disposing of its properties, neither does it intend to do so, much less to defraud its creditors; that
also the Cotabato Bus Company, Inc. has been acquiring and buying more assets". An opposition
and a supplemental opposition were filed to the urgent motion. The lower court denied the motion
stating in its Order that "the testimony of Baldovino Lagbao, witness for the defendant, corroborates
the facts in the plaintiff's affidavit instead of disproving or showing them to be untrue."

A motion for reconsideration was filed by the defendant bus company but the lower court denied it.
Hence, the defendant went to the Court of Appeals on a petition for certiorari alleging grave abuse of
discretion on the part of herein respondent Judge, Hon. Vicente R. Cusi Jr. On giving due course to
the petition, the Court of Appeals issued a restraining order restraining the trial court from enforcing
further the writ of attachment and from proceeding with the hearing of Civil Case No. 7329. In its
decision promulgated on October 3, 1971, the Court of Appeals declared "null and void the order/writ
of attachment dated November 3, 1971 and the orders of December 2, 1971, as well as that of
December 11, 1971, ordered the release of the attached properties, and made the restraining order
originally issued permanent.

The present recourse is an appeal by certiorari from the decision of the Court of Appeals reversing
the assailed orders of the Court of First Instance of Davao, (Branch I), petitioner assigning against
the lower court the following errors:

ERROR I
 THE COURT OF APPEALS ERRED IN HASTILY AND PERFUNCTORILY
RENDERING, ON OCTOBER 3, 1971, A DECISION WITHOUT CONSIDERING
MOST OF THE EVIDENCE SUCH THAT —

l) EVEN AN IMPORTANT FACT, ESTABLISHED BY DOCUMENTARY EVIDENCE

AND NOT DENIED BY RESPONDENT, IS MENTIONED ONLY AS A "CLAIM" OF
PETITIONER COMPANY;

2) THE DECISION CONTAINS NO DISCUSSION AND APPRECIATION OF THE

FACTS AS PROVED, ASSEMBLED AND PRESENTED BY PETITIONER
COMPANY SHOWING IN — THEIR TOTALITY — THAT RESPONDENT HAS
REMOVED, DIVERTED OR DISPOSED OF ITS BANK DEPOSITS, INCOME AND
OTHER LIQUID ASSETS WITH INTENT TO DEFRAUD ITS CREDITORS,
ESPECIALLY ITS UNSECURED SUPPLIERS;

3) THE DECISION IGNORES THE SIGNIFICANCE OF THE REFUSAL OF

RESPONDENT TO PERMIT, UNDER REP. ACT NO. 1405, THE METROPOLITAN
BANK & TRUST CO. TO BRING, IN COMPLIANCE WITH A subpoena DUCES
TECUM TO THE TRIAL COURT ALL THE RECORDS OF RESPONDENT'S
DEPOSITS AND WITHDRAWALS UNDER ITS CURRENT AND SAVINGS
ACCOUNTS (NOW NIL) FOR EXAMINATION BY PETITIONER COMPANY FOR
THE PURPOSE OF SHOWING DIRECTLY THE REMOVAL, DIVERSION OR
DISPOSAL OF RESPONDENT'S DEPOSITS AND INCOME WITH INTENT TO
DEFRAUD ITS CREDITORS.

ERROR II

THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE FACTS THAT

RESPONDENT'S BANK DEPOSITS ARE NIL AS PROOF WHICH - TOGETHER
WITH RESPONDENT'S ADMISSION OF AN INCOME OF FROM P10,000.00 to P
14,000.00 A DAY AND THE EVIDENCE THAT IT CANNOT PRODUCE P 634.00
WITHOUT USING A PERSONAL CHECK OF ITS PRESIDENT AND MAJORITY
STOCKHOLDER, AND OTHER EVIDENCE — SHOWS THE REMOVAL OR
CHANNELING OF ITS INCOME TO THE LATTER.

ERROR III

THE COURT OF APPEALS ERRED IN NOT APPRECIATING THE RESCUE AND

REMOVAL BY RESPONDENT OF FIVE ATTACHED BUSES, DURING THE
DEPENDENCY OF ITS MOTION TO DISSOLVE THE ATTACHMENT IN THE,
TRIAL COURT, AS A FURTHER ACT OF REMOVAL OF PROPERTIES BY
RESPONDENT WITH INTENT TO DEFRAUD PETITIONER COMPANY, FOR
WHOSE BENEFIT SAID BUSES HAD BEEN ATTACHED.

The questions raised are mainly, if not solely, factual revolving on whether respondent bus company
has in fact removed its properties, or is about to do so, in fraud of its creditors. This being so, the
findings of the Court of Appeals on said issues of facts are generally considered conclusive and
final, and should no longer be disturbed. However, We gave due course to the petition because it
raises also a legal question of whether the writ of attachment was properly issued upon a showing
that defendant is on the verge of insolvency and may no longer satisfy its just debts without issuing
the writ. This may be inferred from the emphasis laid by petitioner on the fact that even for the
measly amount of P 634.00 payment thereof was made with a personal check of the respondent
company's president and majority stockholder, and its debts to several creditors, including secured
ones like the DBP, have remained unpaid, despite its supposed daily income of an average of P
12,000.00, as declared by its assistant manager, Baldovino Lagbao. 1

Going forthwith to this question of whether insolvency, which petitioners in effect claims to have
been proven by the evidence, particularly by company's bank account which has been reduced to
nil, may be a ground for the issuance of a writ of attachment, the respondent Court of Appeals
correctly took its position in the negative on the strength of the explicit ruling of this Court in Max
Chamorro & Co. vs. Philippine Ready Mix Concrete Company, Inc. and Hon. Manuel P. Barcelona. 2

Petitioner, however, disclaims any intention of advancing the theory that insolvency is a ground for
the issuance of a writ of attachment , 3 and insists that its evidence -is intended to prove his assertion
that respondent company has disposed, or is about to dispose, of its properties, in fraud of its
creditors. Aside from the reference petitioner had made to respondent company's "nil" bank account,
as if to show removal of company's funds, petitioner also cited the alleged non-payment of its other
creditors, including secured creditors like the DBP to which all its buses have been mortgaged,
despite its daily income averaging P12,000.00, and the rescue and removal of five attached buses.

It is an undisputed fact that, as averred by petitioner itself, the several buses attached are nearly
junks. However, upon permission by the sheriff, five of them were repaired, but they were substituted
with five buses which were also in the same condition as the five repaired ones before the repair.
This cannot be the removal intended as ground for the issuance of a writ of attachment under
section 1 (e), Rule 57, of the Rules of Court. The repair of the five buses was evidently motivated by
a desire to serve the interest of the riding public, clearly not to defraud its creditors, as there is no
showing that they were not put on the run after their repairs, as was the obvious purpose of their
substitution to be placed in running condition.

Moreover, as the buses were mortgaged to the DBP, their removal or disposal as alleged by
petitioner to provide the basis for its prayer for the issuance of a writ of attachment should be very
remote, if not nil. If removal of the buses had in fact been committed, which seems to exist only in
petitioner's apprehensive imagination, the DBP should not have failed to take proper court action,
both civil and criminal, which apparently has not been done.

The dwindling of respondent's bank account despite its daily income of from P10,000.00 to
P14,000.00 is easily explained by its having to meet heavy operating expenses, which include
salaries and wages of employees and workers. If, indeed the income of the company were
sufficiently profitable, it should not allow its buses to fall into disuse by lack of repairs. It should also
maintain a good credit standing with its suppliers of equipment, and other needs of the company to
keep its business a going concern. Petitioner is only one of the suppliers.

It is, indeed, extremely hard to remove the buses, machinery and other equipments which
respondent company have to own and keep to be able to engage and continue in the operation of its
transportation business. The sale or other form of disposition of any of this kind of property is not
difficult of detection or discovery, and strangely, petitioner, has adduced no proof of any sale or
transfer of any of them, which should have been easily obtainable.

In the main, therefore, We find that the respondent Court of Appeals has not committed any
reversible error, much less grave abuse of discretion, except that the restraining order issued by it
should not have included restraining the trial court from hearing the case, altogether. Accordingly,
the instant petition is hereby denied, but the trial court is hereby ordered to immediately proceed with
the hearing of Civil Case No. 7329 and decide it in accordance with the law and the evidence. No
special pronouncement as to 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.

Guillermo E. Aragones for petitioner.

Ruben V. Lopez for respondent Antonio D. Pinzon.

CONCEPCION, JR., J.:

Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the
respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal, entitled: Antonio
D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O. Glass, defendants, and
for the release of the amount of P37,190.00, which had been deposited with the Clerk of Court, to
the petitioner.

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 the defendant is a foreigner; that he has sufficient cause of action against the said
defendant; and that there is no sufficient security for his claim against the defendant in the event a
judgment is rendered in his favor. 1

Finding the petition to be sufficient in form and substance, the respondent Judge ordered the
issuance of a writ of attachment against the properties of the defendant upon the plaintiff's filing of a
bond in the amount of P37,190.00. 2

Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the writ of
attachment on the grounds that 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; 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 that the
money being garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant
Kenneth O. Glass. 3

By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co., Inc. as co-
defendant of Kenneth O. Glass. 4

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: (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; (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 (3) the affidavit did not specify any of the grounds enumerated in Sec. 1 of Rule
57, 5 but, the respondent 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. 6

On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and asked the court
for the release of the same amount deposited with the Clerk of Court, 7 but, the respondent Judge did not
order the release of the money deposited. 8

Hence, the present recourse. As prayed for, the Court issued a temporary restraining order,
restraining the respondent Judge from further proceeding with the trial of the case. 9

We find merit in the petition. 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 for the following reasons:

First, there was no ground for the issuance of the writ of preliminary attachment. Section 1, Rule 57
of the Revised Rules of Court, which enumerates the grounds for the issuance of a writ of
preliminary attachment, reads, as follows:

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:

(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;

(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;

(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;

(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;

(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;

(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication.
In ordering the issuance of the controversial writ of preliminary attachment, the respondent Judge
said and We quote:

The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary
Attachment dated September 14, 1977, alleging that the defendant who is a foreigner
may, at any time, depart from the Philippines with intent to defraud his creditors
including the plaintiff herein; that there is no sufficient security for the claim sought to
be enforced by this action; that the amount due the plaintiff is as much as the sum for
which an order of attachment is sought to be granted; and that defendant has
sufficient leviable assets in the Philippines consisting of collectibles and payables
due from Philippine Geothermal, Inc., which may be disposed of at any time, by
defendant if no Writ of Preliminary Attachment may be issued. Finding said motion
and petition to be sufficient in form and substance. 10

Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who) may, at any
time, depart from the Philippines with intent to defraud his creditors including the plaintiff." He merely
stated that the defendant Kenneth O. Glass is a foreigner. The pertinent portion of the complaint reads,
as follows:

15. Plaintiff hereby avers under oath that defendant is a foreigner and that said
defendant has a valid and just obligation to plaintiff in the total sum of P32,290.00
arising out from his failure to pay (i) service charges for the hauling of construction
materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of
the missing/destroyed spare parts of said leased unit; hence, a sufficient cause of
action exists against said defendant. Plaintiff also avers under oath that there is no
sufficient security for his claim against the defendant in the event a judgment be
rendered in favor of the plaintiff. however, defendant has sufficient assets in the
Philippines in the form of collectible and payables due from the Philippine
Geothermal, Inc. with office address at Citibank Center, Paseo de Roxas, Makati,
Metro Manila, but which properties, if not timely attached, may be disposed of
by defendants and would render ineffectual the reliefs prayed for by plaintiff in this
Complaint. 11

In his Amended Complaint, Pinzon alleged the following:

15. Plaintiff hereby avers under oath that defendant GLASS is an American citizen
who controls most, if not all, the affairs of defendant CORPORATION. Defendants
CORPORATION and GLASS have a valid and just obligation to plaintiff in the total
sum of P32,290.00 arising out for their failure to pay (i) service charges for hauling of
construction materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii)
total cost of the missing/destroyed spare parts of said leased unit: hence, a sufficient
cause of action exist against said defendants. Plaintiff also avers under oath that
there is no sufficient security for his claim against the defendants in the event a
judgment be rendered in favor of the plaintiff. however, defendant CORPORATION
has sufficient assets in the Philippines in the form of collectibles and payables due
from the Philippine Geothermal., Inc. with office address at Citibank Center, Paseo
de Roxas, Makati, Metro Manila, but which properties, if not timely attached, may be
disposed of by defendants and would render ineffectual the reliefs prayed for by
plaintiff in this Complaint. 12
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.

Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules, an
affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case is one of
those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security 'or the claim
sought to be enforced by the action, and (d) the amount due to the applicant for attachment 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. Section 3, Rule 57 of the Revised Rules of
Court reads. as follows:

Section 3. Affidavit and bond required.—An order of attachment shall be granted only
when it is made to appear by the affidavit of the applicant, or of some 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 clerk or judge of the court before the order issues.

In his affidavit, Pinzon stated the following:

I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal
address at 1422 A. Mabini Street, Ermita, Manila, subscribing under oath, depose
and states that.

1. On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City
Branch, a case against Kenneth O. Glass entitled 'ANTONIO D. PINZON vs.
KENNETH O. GLASS', docketed as Civil Case No. 5902-P;

2. My Complaint against Kenneth O. Glass is based on several causes of action,

namely:

(i) On February 15, 1977, we mutually agreed that I undertake to haul his
construction materials from Manila to his construction project in Bulalo, Bay, Laguna
and vice-versa, for a consideration of P50.00 per hour;

(ii) Also, on June 18, 1977, we entered into a separate agreement whereby my Isuzu
cargo truck will be leased to him for a consideration of P4,000.00 a month payable
on the 15th day of each month;

(iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the
same without paying the monthly rentals for the leased Isuzu truck and the peso
equivalent of the spare parts that were either destroyed or misappropriated by him;

3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of
P32,290.00 representing his obligation arising from the hauling of his construction
materials, monthly rentals for the lease Isuzu truck and the peso equivalent of the
spare parts that were either destroyed or misappropriated by him;
 4. I am executing this Affidavit to attest to the truthfulness of the foregoing and in
compliance with the provisions of Rule 57 of the Revised Rules of Court. 13

While Pinzon may have stated in his affidavit that a sufficient cause of action exists against the defendant
Kenneth O. Glass, he did not state therein 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 is as much as the sum for which the order granted above all legal counter-
claims." It has been held that the failure to allege in the affidavit the requisites prescribed for the issuance
of a writ of preliminary attachment, 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. 14

Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to answer
for any judgment that may be rendered against the defendant. Upon receipt of the counter-bond the
respondent Judge should have discharged the attachment pursuant to Section 12, Rule 57 of the
Revised Rules of Court which reads, as follows:

Section 12. Discharge of attachment upon giving counterbond.—At any time after an
order of attachment has been granted, the party whose property has been attached,
or the person appearing on his behalf, may upon reasonable notice to the applicant,
apply to the judge who granted the order, or to the judge of the court in which the
action is pending, for an order discharging the attachment wholly or in part on the
security given. The judge shall, after hearing, order the discharge of the attachment if
a cash deposit is made or a counterbond executed to the attaching creditor is filed,
on behalf of the adverse party, with the clerk or judge of the court where the
application is made, in an amount equal to the value of the property attached as
determined by the judge, to secure the payment of any judgment that the attaching
creditor may recover in the action. Upon the filing of such counter-bond, copy thereof
shall forthwith be served on the attaching creditor or his lawyer. Upon the discharge
of an attachment in accordance with the provisions of this section the property
attached, or the proceeds of any sale thereof, shall be delivered to the party making
the deposit or giving the counter-bond, or the person appearing on his behalf, the
deposit or counter-bond aforesaid standing in the place of the property so released.
Should such counter-bond for any reason be found to be, or become, insufficient,
and the party furnishing the same fail to file an additional counter-bond the attaching
creditor may apply for a new order of attachment.

The filing of the counter-bond will serve the purpose of preserving the defendant's property and at
the same time give the plaintiff security for any judgment that may be obtained against the
defendant. 15

WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders issued by the
respondent Judge on October 11, 19719, January 26, 1978, and February 3, 1978 in Civil Case No.
5902-P of the Court of First Instance of Rizal, insofar as they relate to the issuance of the writ of
preliminary attachment, should be as they are hereby ANNULLED and SET ASIDE and the
respondents are hereby ordered to forthwith release the garnished amount of P37,190.00 to the
petitioner. The temporary restraining order, heretofore issued, is hereby lifted and set aside. Costs
against the private respondent Antonio D. Pinzon.

SO ORDERED.
G.R. No. L-67715 July 11, 1986

WILLIAM ALAIN MIAILHE and THE HON. FELIX V. BARBERS, in his capacity as Presiding
Judge, RTC of Manila, Branch XXXIII, petitioners-appellants,
vs.
ELAINE M. DE LENCQUESAING and HERVE DE LENCQUESAING, respondents-appellees.

PARAS, J.:

This petition is an appeal by certiorari from the Decision of the Intermediate Appellate Court in AC-
G.R. SP. No. 01914 which declared null-and void, the Order of the Hon. Judge Felix V. Barbers,
issued in Civil Case No. 83-16829, dated April 14, 1983, granting petitioner's application for the
issuance of a writ of preliminary attachment and the Order dated September 13, 1983 denying
respondent's motion to lift said attachment.

The pertinent facts that gave rise to the instant petition are as follows: Petitioner William Alain
Miailhe, his sisters Monique Miailhe Sichere, Elaine Miailhe de Lencquesaing and their mother,
Madame Victoria D. Miailhe are co-owners of several registered real properties located in Metro
Manila. By common consent of the said co-owners, petitioner William Alain has been administering
said properties since 1960. As Madame Victoria D. Miailhe, her daughter Monique and son William
Alain (herein petitioner) failed to secure an out-of court partition thereof due to the unwillingness or
opposition of respondent Elaine, they filed in the Court of First Instance of Manila (now Regional
Trial Court) an action for Partition, which was docketed as Civil Case No. 105774 and assigned to
Branch . . . thereof, presided over by Judge Pedro Ramirez. Among the issues presented in the
partition case was the matter of petitioner's account as administrator of the properties sought to be
partitioned. But while the said administrator's account was still being examined, respondent Elaine
filed a motion praying that the sum of P203,167.36 which allegedly appeared as a cash balance in
her favor as of December 31, 1982, be ordered delivered to her by petitioner William Alain. Against
the opposition of petitioner and the other co-owners, Judge Pedro Ramirez granted the motion in his
Order dated December 19, 1983 which order is now the subject of a certiorari proceeding in the
Intermediate Appellate Court under AC-G.R. No. SP-03070.

Meanwhile however, and more specifically on February 28, 1983, respondent Elaine filed a criminal
complaint for estafa against petitioner William Alain, with the office of the City Fiscal of Manila,
alleging in her supporting affidavit that on the face of the very account submitted by him as
Administrator, he had misappropriated considerable amounts, which should have been turned over
to her as her share in the net rentals of the common properties. Two days after filing the complaint,
respondent flew back to Paris, the City of her residence. Likewise, a few days after the filing of the
criminal complaint, an extensive news item about it appeared prominently in the Bulletin Today,
March 4, 1983 issue, stating substantially that Alain Miailhe, a consul of the Philippines in the
Republic of France, had been charged with Estafa of several million pesos by his own sister with the
office of the City Fiscal of Manila.

On April 12, 1983, petitioner Alain filed a verified complaint against respondent Elaine, for Damages
in the amount of P2,000,000.00 and attorney's fees of P250,000.00 allegedly sustained by him by
reason of the filing by respondent (then defendant) of a criminal complaint for estafa, solely for the
purpose of embarrassing petitioner (then plaintiff) and besmirching his honor and reputation as a
private person and as an Honorary Consul of the Republic of the Philippine's in the City of Bordeaux,
France. Petitioner further charged respondent with having caused the publication in the March 4,
1983 issue of the Bulletin Today, of a libelous news item. In his verified complaint, petitioner prayed
for the issuance of a writ of preliminary attachment of the properties of respondent consisting of 1/6
undivided interests in certain real properties in the City of Manila on the ground that "respondent-
defendant is a non-resident of the Philippines", pursuant to paragraph (f), Section 1, Rule 57, in
relation to Section 17, Rule 14 of the Revised Rules of Court.

This case for Damages was docketed as Civil Case No. 83-16829 of the Regional Trial Court of
Manila, Branch XXXIII presided over by the Honorable Felix V. Barbers.

On April 14, 1983, Judge Barbers granted petitioner's application for preliminary attachment upon a
bond to be filed by petitioner in the amount of P2,000,000.00. Petitioner filed said bond and upon its
approval, the Writ of Preliminary Attachment was issued on April 18, 1983 which was served on the
Deputy Clerk of Court of Branch XXX before whom the action for Partition was pending.

On May 17, 1983, respondent thru counsel filed a motion to lift or dissolve the writ of attachment on
the ground that the complaint did not comply with the provisions of Sec. 3 of Rule 57, Rules of Court
and that petitioner's claim was for unliquidated damages. The motion to lift attachment having been
denied, respondent filed with the Intermediate Appellate Court a special action for certiorari under
AC-G.R. SP No. 01914 alleging that Judge Barbers had acted with grave abuse of discretion in the
premises. On April 4, 1984, the IAC issued its now assailed Decision declaring null and void the
aforesaid Writ of preliminary attachment. Petitioner filed a motion for the reconsideration of the
Decision but it was denied hence, this present petition which was given due course in the Resolution
of this Court dated February 6, 1985.

We find the petition meritless. The most important issue raised by petitioner is whether or not the
Intermediate Appellate Court erred in construing Section 1 par. (f) Rule 57 of the Rules of Court to
be applicable only in case the claim of the plaintiff is for liquidated damages (and therefore not
where he seeks to recover unliquidated damages arising from a crime or tort).

In its now assailed decision, the IAC stated —

We find, therefore, and so hold that respondent court had exceeded its jurisdiction in
issuing the writ of attachment on a claim based on an action for damages arising
from delict and quasi delict the amount of which is uncertain and had not been
reduced to judgment just because the defendant is not a resident of the Philippines.
Because of the uncertainty of the amount of plaintiff's claim it cannot be said that said
claim is over and above all legal counterclaims that defendant may have against
plaintiff, one of the indispensable requirements for the issuance of a writ of
attachment which should be stated in the affidavit of applicant as required in Sec. 3
of Rule 57 or alleged in the verified complaint of plaintiff. The attachment issued in
the case was therefore null and void.

We agree.

Section 1 of Rule 57 of the Rules of Court provides —

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:

(a) In an action for the recovery of money or damages on a cause of action arising
fromcontract, express or implied, against a party who is about to depart from the
Philippines with intent to defraud his creditors;
 (b) In an action for money or property embezzled or fraudulently misapplied or
converted to his 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;

(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;

(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;

(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;

(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication. (emphasis supplied)

While it is true that from the aforequoted provision attachment may issue "in an action against a
party who resides out of the Philippines, " irrespective of the nature of the action or suit, and while it
is also true that in the case of Cu Unjieng, et al vs. Albert, 58 Phil. 495, it was held that "each of the
six grounds treated ante is independent of the others," still it is imperative that the amount sought be
liquidated.

In view of the foregoing, the Decision appealed from is hereby AFFIRMED.

SO ORDERED.
G.R. No. 75466 December 19, 1988

ANTONIO TOLEDO, petitioner,

vs.
HON. JOSE P. BURGOS, Presiding Judge of Branch XXV of the Regional Trial Court of Cebu,
Region VII, and PERCY CASTRO, respondents.

PARAS, J.:

This is a petition for certiorari and mandamus with a prayer for the issuance of a writ of preliminary prohibitory injunction, questioning the
respondent judge's denial of petitioner's "Application for Issuance of a Writ of Preliminary Attachment" and the latter's subsequent "Motion for
Reconsideration", in his orders dated 6 June 1986 and 23 June 1986, respectively.

As can be gleaned from the parties' memoranda, the following material facts have been established:

A complaint for Delivery of Personal Property was commenced by petitioner on 14 June 1985
against respondent Castro but was subsequently denied. In connection therewith, a writ of Replevin
was applied for. Petitioner's subsequent reconsideration having been likewise denied, he went to the
then Intermediate Appellate Court on certiorari. The latter Court denied the same on 30 April 1986. *

Subsequently, on 14 May 1986, petitioner applied for the issuance of a writ of preliminary attachment with the Court below, and which was
requested by the former's counsel for it to be considered in the morning of 6 June 1986 "With or without the attendance of counsel and
without oral arguments" (p. 28, Rollo). In said application, it was alleged that respondent Castro, among others, "has removed and has
deposed (sic) or is about to depose (sic) of her property with intent to defraud the herein plaintiff" (p. 24, Rollo). To support such allegation,
an affidavit of one Rudolfo Inot (p. 29, Rollo) was attached to the application to prove that respondent Castro and her spouse insistently
offered to sell to him two (2) motor vehicles. Castro submitted her written opposition thereto on 4 June 1986 (p. 57, Rollo). On the hearing of
6 June 1986, neither petitioner nor his counsel appeared. Being present then, Castro assailed the allegations in the affidavit of Mr. Inot. She
likewise argued that petitioner had to prove by overwhelming evidence his allegation that she was about to dispose of her properties in fraud
of creditors, and that mere affidavits would not suffice. On the same date, respondent judge denied the application.

On 17 June 1986, petitioner moved to reconsider the above denial. Once more, counsel for
petitioner requested that the consideration of said motion be scheduled in the morning session of 23
June 1986 "without need of argument or appearance of counsel" (p. 35, Rollo). But like before,
petitioner and his counsel failed to appear. On said date, respondent Castro manifested that the two
(2) vehicles, alleged to have been offered for sale by her, were needed in her retail merchandising
business, thus, had no intention of disposing of them. The respondent judge then issued another
order dated 23 June 1986 denying petitioner's motion. Hence, this present petition was filed on 12
August 1986.

In a minute resolution dated 25 August 1986 (p. 90, Rollo), this Court denied the instant petition for
being without merit. And after respondent Castro had filed her answer and petitioner his motion for
reconsideration, this Court reconsidered the aforesaid resolution in a subsequent one dated 5
January 1987 (p. 94, Rollo) and ordered the parties to submit their respective memoranda.

The sole issue in this case concerns the propriety of the respondent judge's denial of petitioner's
application for a writ of attachment. In branding the denial as improper, petitioner accuses
respondent judge of having made it "with undue haste and without proper notice of hearing" and with
disregard of the "(strong) evidence in support of the application". (Petition, p. 8, Rollo)

We disagree With the petitioner's accusations. Contrary to his claims, the respondent judge acted
well within his powers and in the highest regard for justice. Respondent judge acted correctly in
denying petitioner's "Application for Issuance of a Writ of Preliminary attachment". There was no
need for him to, as against petitioner's claim, set a hearing on the said application. This is because
the issuance of a writ of preliminary attachment may be made by the Court ex parte. As We held in
the case of Filinvest Credit Corporation vs. Relova, 117 SCRA 420, and reiterated in Belisle
Investment and Finance Co., Inc. vs. State Investment House, Inc., 151 SCRA 630:

Nothing in the Rules of Court makes notice and hearing indispensable and
mandatory requisites for the issuance of a writ of attachment. The statement in the
case Blue Green Waters, Inc. vs. Hon. Sundiam and Tan cited by private
respondent, to the effect that the order of attachment issued without notice to therein
petitioner Blue Green Waters, Inc. and without giving it a chance to prove that it was
not fraudulently disposing of its properties is irregular, gives the wrong implication. As
clarified in the separate opinion of Mr. Justice Claudio Teehankee in the same cited
case, a writ of attachment may be issued ex parte.

And even if said notice is indeed necessary, petitioner can only blame himself for failing to attend the
scheduled hearing of 6 June 1986. This is because it was he, through his counsel, who requested
that the application be set for consideration and approval by the Court on the said date. It was,
therefore, his duty to be present in Court on that date.

Inasmuch as a writ of preliminary attachment may be issued without hearing, the judge before whom
the application is made has full discretion in considering the supporting evidence proffered by the
applicant. And in dealing with the affidavit of Mr. Inot, the respondent judge was empowered to
decide whether or not such should be given credit. As We enunciated in the early case of La Grande
vs. Samson (58 Phil. 578); "the sufficiency or insufficiency of an affidavit depends upon the amount
of credit given to it by the judge, and its acceptance of rejection upon his sound discretion."

It is unfortunate that counsel for petitioner, in his motion for reconsideration dated 13 October 1986,
has made a hasty accusation against the Honorable Judge Jose Burgos, the public respondent, as
having "shown manifest partiality towards private respondents, making statements and actions which
clearly intimate that the private respondents would win the case handsdown This is indeed
unfortunate, improper and an affront to the dignity of the judiciary." (p. 79, Rollo). We do not find any
cogent and valid ground in the records of this case which justify such a grave imputation upon a
member of the Bench. Counsel for petitioner is hereby reminded of his duties to the Court. And the
attorney's duty of prime importance is to observe and maintain the respect due the courts of justice
and judicial officers (Rule 138, Sec. 20(b); Rheem of the Phil. vs. Ferrer, 60 SCRA 234). His
arguments, written or oral, should be gracious to both the court and opposing counsel and be of
such words as may be properly addressed by one gentleman to another (National Surety Co. v.
Jarvis, 278 US 610 (1928).

WHEREFORE, premises considered, this petition is hereby DENIED with costs against petitioner.

SO ORDERED.
G.R. No. 166759 November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES,
INC.,Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI
NORLIN SATSATIN, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated November 23, 2004 of the
Court of Appeals (CA) in CA-G.R. SP No. 83595, and its Resolution2 dated January 18, 2005,
denying petitioners’ motion for reconsideration.

The factual and procedural antecedents are as follows:

The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres (Mario) each own
adjacent 20,000 square meters track of land situated at Barrio Lankaan, Dasmariñas, Cavite,
covered by Transfer Certificate of Title (TCT) Nos. 251267,3 251266,4 and 251265,5 respectively.

Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners’ mother, Agripina Aledia, if she
wanted to sell their lands. After consultation with her daughters, daughter-in-law, and grandchildren,
Agripina agreed to sell the properties. Petitioners, thus, authorized Nicanor, through a Special Power
of Attorney, to negotiate for the sale of the properties.6

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc. (Solar). Solar
allegedly agreed to purchase the three parcels of land, together with the 10,000-square-meter
property owned by a certain Rustica Aledia, for ₱35,000,000.00. Petitioners alleged that Nicanor
was supposed to remit to them the total amount of ₱28,000,000.00 or ₱9,333,333.00 each to Sofia,
Fructosa, and the heirs of Mario.

Petitioners claimed that Solar has already paid the entire purchase price of ₱35,000,000.00 to
Nicanor in Thirty-Two (32) post-dated checks which the latter encashed/deposited on their
respective due dates. Petitioners added that they also learned that during the period from January
2000 to April 2002, Nicanor allegedly acquired a house and lot at Vista Grande BF Resort Village,
Las Piñas City and a car, which he registered in the names of his unemployed children, Nikki Normel
Satsatin and Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment for the
subject property, Nicanor only remitted the total amount of ₱9,000,000.00, leaving an unremitted
balance of ₱19,000,000.00. Despite repeated verbal and written demands, Nicanor failed to remit to
them the balance of ₱19,000,000.00.

Consequently, on October 25, 2002, petitioners filed before the regional trial court (RTC) a
Complaint7 for sum of money and damages, against Nicanor, Ermilinda Satsatin, Nikki Normel
Satsatin, and Nikki Norlin Satsatin. The case was docketed as Civil Case No. 2694-02, and raffled to
RTC, Branch 90, Dasmariñas, Cavite.

On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ of
Attachment,8 alleging among other things: that respondents are about to depart the Philippines; that
they have properties, real and personal in Metro Manila and in the nearby provinces; that the amount
due them is P19,000,000.00 above all other claims; that there is no other sufficient security for the
claim sought to be enforced; and that they are willing to post a bond fixed by the court to answer for
all costs which may be adjudged to the respondents and all damages which respondents may
sustain by reason of the attachment prayed for, if it shall be finally adjudged that petitioners are not
entitled thereto.

On October 30, 2002, the trial court issued an Order9 directing the petitioners to post a bond in the
amount of ₱7,000,000.00 before the court issues the writ of attachment, the dispositive portion of
which reads as follows:

WHEREFORE, premises considered, and finding the present complaint and motion sufficient in form
and substance, this Court hereby directs the herein plaintiffs to post a bond, pursuant to Section 3,
Rule 57 of the 1997 Rules of Civil Procedure, in the amount of Seven Million Pesos (P7,000,000.00),
before the Writ of Attachment issues.10

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,11 informing the court that
they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve
the writ of attachment that would be issued by the court.

In the Order12 dated November 15, 2002, the RTC granted the above motion and deputized the
sheriff, together with police security assistance, to serve the writ of attachment.

Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002, directing the sheriff to
attach the estate, real or personal, of the respondents, the decretal portion of which reads:

WE, THEREFORE, command you to attach the estate, real or personal, not exempt from execution,
of the said defendants, in your province, to the value of said demands, and that you safely keep the
same according to the said Rule, unless the defendants give security to pay such judgment as may
be recovered on the said action, in the manner provided by the said Rule, provided that your legal
fees and all necessary expenses are fully paid.

You shall return this writ with your proceedings indorsed hereon within twenty (20) days from the
date of receipt hereof.

GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002, at Imus for
Dasmariñas, Cavite, Philippines.14

On November 19, 2002, a copy of the writ of attachment was served upon the respondents. On the
same date, the sheriff levied the real and personal properties of the respondent, including household
appliances, cars, and a parcel of land located at Las Piñas, Manila.15

On November 21, 2002, summons, together with a copy of the complaint, was served upon the
respondents.16

On November 29, 2002, respondents filed their Answer.17

On the same day respondents filed their answer, they also filed a Motion to Discharge Writ of
Attachment18anchored on the following grounds: the bond was issued before the issuance of the writ
of attachment; the writ of attachment was issued before the summons was received by the
respondents; the sheriff did not serve copies of the application for attachment, order of attachment,
plaintiffs’ affidavit, and attachment bond, to the respondents; the sheriff did not submit a sheriff’s
return in violation of the Rules; and the grounds cited for the issuance of the writ are baseless and
devoid of merit. In the alternative, respondents offered to post a counter-bond for the lifting of the
writ of attachment.19

On March 11, 2003, after the parties filed their respective pleadings, the RTC issued an
Order20 denying the motion, but at the same time, directing the respondents to file a counter-bond, to
wit:

WHEREFORE, premises considered, after the pertinent pleadings of the parties have been taken
into account, the herein defendants are hereby directed to file a counter-bond executed to the
attaching party, in the amount of Seven Million Pesos (₱7,000,000.00), to secure the payment of any
judgment that the attaching party may recover in the action, with notice on the attaching party,
whereas, the Motion to Discharge Writ of Attachment is DENIED.

SO ORDERED.21

Thereafter, respondents filed a motion for reconsideration and/or motion for clarification of the above
order. On April 3, 2003, the RTC issued another Order22 which reads:

In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of the Order of this
Court dated March 11, 2003, denying their Motion to Discharge Writ of Attachment filed by the
defendants through counsel Atty. Franco L. Loyola, the Motion to Discharge Writ of Attachment is
denied until after the defendants have posted the counter-bond in the amount of Seven Million
Pesos (₱7,000,000.00).

The defendants, once again, is directed to file their counter-bond of Seven Million Pesos
(₱7,000,000.00), if it so desires, in order to discharge the Writ of Attachment.

SO ORDERED.

On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order Dated March
[11], 2003,23 which the RTC denied in an Order24 of even date, the dispositive portion of which reads:

WHEREFORE, premises considered, defendants’ Urgent Motion to Lift/Set Aside Order Dated
March 23, 2003 (With Manifestation to Dissolve Writ of Attachment) is hereby DENIED for lack of
Merit.

SO ORDERED.

Respondents filed an Urgent Motion for Reconsideration,25 but it was denied in the Order26 dated
March 3, 2004.

Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and Prohibition with
Preliminary Injunction and Temporary Restraining Order27 under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 83595, anchored on the following grounds:

(1) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in failing to notice that the lower court has no jurisdiction over the person and
subject matter of the complaint when the subject Writ of Attachment was issued;
 (2) public respondents committed grave abuse of discretion amounting to lack of or in excess
of jurisdiction in granting the issuance of the Writ of Attachment despite non-compliance with
the formal requisites for the issuance of the bond and the Writ of Attachment.28

Respondents argued that the subject writ was improper and irregular having been issued and
enforced without the lower court acquiring jurisdiction over the persons of the respondents. They
maintained that the writ of attachment was implemented without serving upon them the summons
together with the complaint. They also argued that the bond issued in favor of the petitioners was
defective, because the bonding company failed to obtain the proper clearance that it can transact
business with the RTC of Dasmariñas, Cavite. They added that the various clearances which were
issued in favor of the bonding company were applicable only in the courts of the cities of Pasay,
Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.29

On November 23, 2003, the CA rendered the assailed Decision in favor of the respondents, finding
grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the RTC in
issuing the Orders dated December 15, 2003 and March 3, 2004. The decretal portion of the
Decision reads:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed Orders are
hereby nullified and set aside. The levy on the properties of the petitioners pursuant to the Writ of
Attachment issued by the lower court is hereby LIFTED.

SO ORDERED.30

Petitioners filed a Motion for Reconsideration,31 but it was denied in the Resolution32 dated January
18, 2005.

Hence, this petition assigning the following errors:

I.

THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF THE WRIT OF
ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE REVISED RULES OF CIVIL
PROCEDURE.

II.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC RESPONDENT

COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF
JURISDICTION IN GRANTING THE WRIT OF ATTACHMENT DESPITE THE BOND BEING
INSUFFICIENT AND HAVING BEEN IMPROPERLY ISSUED.

III.

THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION BY

REASON OF ESTOPPEL, LACHES AND PRESCRIPTION AND IN HOLDING THAT THE WRIT OF
ATTACHMENT WAS IMPROPERLY AND IRREGULARLY ENFORCED IN VIOLATION OF
SECTION 5, RULE 57 OF THE REVISED RULES OF COURT.

IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRINCIPLE OF
ESTOPPEL WILL NOT LIE AGAINST RESPONDENTS.

Petitioners maintain that in the case at bar, as in the case of FCY Construction Group, Inc. v. Court
of Appeals,33the only way the subject writ of attachment can be dissolved is by a counter-bond. They
claim that the respondents are not allowed to file a motion to dissolve the attachment under Section
13, Rule 57 of the Rules of Court. Otherwise, the hearing on the motion for the dissolution of the writ
would be tantamount to a trial on the merits, considering that the writ of preliminary attachment was
issued upon a ground which is, at the same time, the applicant’s cause of action.

Petitioners insist that the determination of the existence of grounds to discharge a writ of attachment
rests in the sound discretion of the lower court. They argue that the Certification34 issued by the
Office of the Administrator and the Certifications35 issued by the clerks of court of the RTCs of
Dasmariñas and Imus, Cavite, would show that the bonds offered by Western Guaranty Corporation,
the bonding company which issued the bond, may be accepted by the RTCs of Dasmariñas and
Imus, Cavite, and that the said bonding company has no pending liability with the government.

Petitioners contend that respondents are barred by estoppel, laches, and prescription from
questioning the orders of the RTC issuing the writ of attachment. They also maintain that the issue
whether there was impropriety or irregularity in the issuance of the orders is moot and academic,
considering that the attachment bond questioned by the respondent had already expired on
November 14, 2003 and petitioners have renewed the attachment bond covering the period from
November 14, 2003 to November 14, 2004, and further renewed to cover the period of November
14, 2004 to November 14, 2005.

The petition is bereft of merit.

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.36

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.37

Every bond should be accompanied by a clearance from the Supreme Court showing that the
company concerned is qualified to transact business which is valid only for thirty (30) days from the
date of its issuance.38 However, it is apparent that the Certification39 issued by the Office of the Court
Administrator (OCA) at the time the bond was issued would clearly show that the bonds offered by
Western Guaranty Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and
Pasig. Therefore, the surety bond issued by the bonding company should not have been accepted
by the RTC of Dasmariñas, Branch 90, since the certification secured by the bonding company from
the OCA at the time of the issuance of the bond certified that it may only be accepted in the above-
mentioned cities. Thus, the trial court acted with grave abuse of discretion amounting to lack of or in
excess of jurisdiction when it issued the writ of attachment founded on the said bond.

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.

This Court has long put to rest the issue of when jurisdiction over the person of the defendant should
be acquired in cases where a party resorts to provisional remedies. A party to a suit may, at any time
after filing the complaint, avail of the provisional remedies under the Rules of Court. Specifically,
Rule 57 on preliminary attachment speaks of the grant of the remedy "at the commencement of the
action or at any time before entry of judgment."40 This phrase refers to the date of the filing of the
complaint, which is the moment that marks "the commencement of the action." The reference plainly
is to a time before summons is served on the defendant, or even before summons issues.41

In Davao Light & Power Co., Inc. v. Court of Appeals,42 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 x x x issuance of summons, order of attachment and writ
of attachment x x x 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 court’s 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 applicant’s 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 x x x. (Emphasis
supplied.)

In Cuartero v. Court of Appeals,43 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.44

Thus, it is indispensable not only for the acquisition of jurisdiction over the person of the defendant,
but also upon consideration of fairness, to apprise the defendant of the complaint against him and
the issuance of a writ of preliminary attachment and the grounds therefor that prior or
contemporaneously to the serving of the writ of attachment, service of summons, together with a
copy of the complaint, the application for attachment, the applicant’s affidavit and bond, and the
order must be served upon him.

In the instant case, assuming arguendo that the trial court validly issued the writ of attachment on
November 15, 2002, which was implemented on November 19, 2002, it is to be noted that the
summons, together with a copy of the complaint, was served only on November 21, 2002.

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, although there is truth in the petitioners’ contention that an attachment may not be
dissolved by a showing of its irregular or improper issuance if it is upon a ground which is at the
same time the applicant’s cause of action in the main case, since an anomalous situation would
result if the issues of the main case would be ventilated and resolved in a mere hearing of a motion.
However, the same is not applicable in the case bar. It is clear from the respondents’ pleadings that
the grounds on which they base the lifting of the writ of attachment are the irregularities in its
issuance and in the service of the writ; not petitioners’ cause of action.
1avv phi 1

Further, petitioners’ contention that respondents are barred by estoppel, laches, and prescription
from questioning the orders of the RTC issuing the writ of attachment and that the issue has become
moot and academic by the renewal of the attachment bond covering after its expiration, is devoid of
merit. As correctly held by the CA:

There are two ways of discharging the attachment. First, to file a counter-bond in accordance with
Section 12 of Rule 57. Second[,] [t]o quash the attachment on the ground that it was irregularly or
improvidently issued, as provided for in Section 13 of the same rule. Whether the attachment was
discharged by either of the two ways indicated in the law, the attachment debtor cannot be deemed
to have waived any defect in the issuance of the attachment writ by simply availing himself of one
way of discharging the attachment writ, instead of the other. The filing of a counter-bond is merely a
speedier way of discharging the attachment writ instead of the other way.45

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 over her
person because the law does not allow for retroactivity of a belated service.46

WHEREFORE, premises considered, the petition is DENIED. The Decision and Resolution of the
Court of Appeals dated November 23, 2004 and January 18, 2005, respectively, in CA-G.R. SP No.
83595 are AFFIRMED.

SO ORDERED.
G.R. No. 185734 July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.

RESOLUTION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the July 10, 2008 Decision2 and December 18,
2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March 29,
2007 Order4 of the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of
preliminary attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).

The Facts

On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the issuance of a
writ of preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S.
Lazaro and Carmen T. Lazaro (Sps. Lazaro) the sum of ₱2,160,000.00, which represented the
amounts stated in several dishonored checks issued by the latter to the former, as well as interests,
attorney’s fees, and costs. The RTC granted the writ of preliminary attachment application6 and upon
the posting of the required ₱2,160,000.00 bond,7 issued the corresponding writ on October 14,
2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered by Transfer Certificates
of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs), registered in the names of Sps.
Lazaro, were levied upon.9

In their Answer with Counterclaim,10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause
of action against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the
fifteen (15) Metrobank checks; and (b) the PNB and Real Bank checks were not drawn by them, but
by Virgilio Arcinas and Elizabeth Ramos, respectively. While they admit their indebtedness to Colim,
Sps. Lazaro alleged that the same had already been substantially reduced on account of previous
payments which were apparently misapplied. In this regard, they sought for an accounting and
reconciliation of records to determine the actual amount due. They likewise argued that no fraud
should be imputed against them as the aforesaid checks issued to Colim were merely intended as a
form of collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ
of preliminary attachment.12

Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement13 whereby
Sps. Lazaro agreed to pay Lim, Jr. the amount of ₱2,351,064.80 on an installment basis, following a
schedule of payments covering the period from September 2006 until October 2013, under the
following terms, among others: (a) that should the financial condition of Sps. Lazaro improve, the
monthly installments shall be increased in order to hasten the full payment of the entire
obligation;14 and (b) that Sps. Lazaro’s failure to pay any installment due or the dishonor of any of the
postdated checks delivered in payment thereof shall make the whole obligation immediately due and
demandable.

The aforesaid compromise agreement was approved by the RTC in its October 31, 2006
Decision15 and January 5, 2007 Amended Decision.16

Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking to lift the writ of preliminary
attachment annotated on the subject TCTs, which the RTC granted on March 29, 2007.18 It ruled that
a writ of preliminary attachment is a mere provisional or ancillary remedy, resorted to by a litigant to
protect and preserve certain rights and interests pending final judgment. Considering that the case
had already been considered closed and terminated by the rendition of the January 5, 2007
Amended Decision on the basis of the September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed. Consequently, it ordered the Registry of Deeds
of Bulacan to cancel the writ’s annotation on the subject TCTs.

Lim, Jr. filed a motion for reconsideration19 which was, however, denied on July 26,
2007,20 prompting him to file a petition for certiorari21 before the CA.

The CA Ruling

On July 10, 2008, the CA rendered the assailed decision,22 finding no grave abuse of discretion on
the RTC’s part. It observed that a writ of preliminary attachment may only be issued at the
commencement of the action or at any time before entry of judgment. Thus, since the principal
cause of action had already been declared closed and terminated by the RTC, the provisional or
ancillary remedy of preliminary attachment would have no leg to stand on, necessitating its
discharge.23

Aggrieved, Lim, Jr. moved for reconsideration24 which was likewise denied by the CA in its
December 18, 2008 Resolution.25

Hence, the instant petition.

The Issue Before the Court

The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.

The Court’s Ruling

The petition is meritorious.

By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary
remedy applied for not for its own sake but to enable the attaching party to realize upon the relief
sought and expected to be granted in the main or principal action; it is a measure auxiliary or
incidental to the main action. As such, it is available during its pendency which may be resorted to by
a litigant to preserve and protect certain rights and interests during the interim, awaiting the ultimate
effects of a final judgment in the case.26 In addition, attachment is also availed of in order 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.27

In this relation, while the provisions of Rule 57 are silent on the length of time within which an
attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates
that the said lien continues until the debt is paid, or the sale is had under execution issued on the
judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same
manner provided by law.28

Applying these principles, the Court finds that the discharge of the writ of preliminary attachment
against the properties of Sps. Lazaro was improper.
Records indicate that while the parties have entered into a compromise agreement which had
already been approved by the RTC in its January 5, 2007 Amended Decision, the obligations
thereunder have yet to be fully complied with – particularly, the payment of the total compromise
amount of ₱2,351,064.80. Hence, given that the foregoing debt remains unpaid, the attachment of
Sps. Lazaro’s properties should have continued to subsist.

In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of attachment is
not extinguished by the execution of a compromise agreement between the parties, viz:

Did the compromise agreement between Antonio Garcia and the consortium discharge the latter’s
attachment lien over the disputed shares?

CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the
case, dies a natural death. Thus, when the consortium entered into a compromise agreement, which
resulted in the termination of their case, the disputed shares were released from garnishment.

We disagree. To subscribe to CEIC’s contentions would be to totally disregard the concept and
purpose of a preliminary attachment.

xxxx

The case at bench admits of peculiar character in the sense that it involves a compromise
agreement. Nonetheless, x x x. The parties to the compromise agreement should not be deprived of
the protection provided by an attachment lien especially in an instance where one reneges on his
obligations under the agreement, as in the case at bench, where Antonio Garcia failed to hold up his
own end of the deal, so to speak.

xxxx

If we were to rule otherwise, we would in effect create a back door by which a debtor can easily
escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor,
in order to buy time to dispose of his properties, would enter into a compromise agreement he has
no intention of honoring in the first place. The purpose of the provisional remedy of attachment
would thus be lost. It would become, in analogy, a declawed and toothless tiger. (Emphasis and
underscoring supplied; citations omitted)

In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored
and its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the
properties covered by the same as it were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment even before judgment, is in the nature
of a vested interest which affords specific security for the satisfaction of the debt put in suit.30 Verily,
the lifting of the attachment lien would be tantamount to an abdication of Lim, Jr.’s rights over Sps.
Lazaro’s properties which the Court, absent any justifiable ground therefor, cannot allow.

WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008
Resolution of the Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE,
and the March 29, 2007 Order of the Regional Trial Court of Quezon City, Branch 223 is
NULLIFIED. Accordingly, the trial court is directed to RESTORE the attachment lien over Transfer
Certificates of Title Nos. T-64940, T-64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr.

SO ORDERED.