G.R. No.

93262 December 29, 1991

4. On May 12, 1989, the summons and a copy of the complaint, as well as the
writ of attachment and a copy of the attachment bond, were served on defendants

DAVAO

LIGHT

&

POWER

CO.,

INC., petitioner,

vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND
TOURIST INN, and TEODORICO ADARNA, respondents.
Breva & Breva Law Offices for petitioner.
Goc-Ong & Associates for private respondents.

Queensland and Adarna; and pursuant to the writ, the sheriff seized properties
belonging to the latter.
5. On September 6, 1989, defendants Queensland and Adarna filed a motion to
discharge the attachment for lack of jurisdiction to issue the same because at the
time the order of attachment was promulgated (May 3, 1989) and the attachment
writ issued (May 11, 1989), the Trial Court had not yet acquired jurisdiction over
the cause and over the persons of the defendants.
6. On September 14, 1989, Davao Light filed an opposition to the motion to
discharge attachment.

NARVASA, J.:p
Subject of the appellate proceedings at bar is the decision of the Court of Appeals
in CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna
v. Davao Light & Power Co., Inc.," promulgated on May 4, 1990.1 That decision
nullified and set aside the writ of preliminary attachment issued by the Regional
Trial Court of Davao City 2 in Civil Case No. 19513-89 on application of the
plaintiff (Davao Light & Power Co.), before the service of summons on the

7. On September 19, 1989, the Trial Court issued an Order denying the motion to
discharge.
This Order of September 19, 1989 was successfully challenged by Queensland
and Adarna in a special civil action of certiorari instituted by them in the Court of
Appeals. The Order was, as aforestated, annulled by the Court of Appeals in its
Decision of May 4, 1990. The Appellate Court's decision closed with the following
disposition:

defendants (herein respondents Queensland Co., Inc. and Adarna).

. . . the Orders dated May 3, 1989 granting the issuance of a
Following is the chronology of the undisputed material facts culled from the

writ of preliminary attachment, dated September 19, 1989

Appellate Tribunal's judgment of May 4, 1990.

denying the motion to discharge attachment; dated November 7,

1989 denying petitioner's motion for reconsideration; as well as

1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light)

all other orders emanating therefrom, specially the Writ of

filed a verified complaint for recovery of a sum of money and damages against

Attachment dated May 11, 1989 and Notice of Levy on

Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case No. 19513-

Preliminary Attachment dated May 11, 1989, are hereby

89). The complaint contained an ex parte application for a writ of preliminary

declared null and void and the attachment hereby ordered

attachment.

DISCHARGED.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by

The Appellate Tribunal declared that

raffle, issued an Order granting theex parte application and fixing the attachment
bond at P4,600,513.37.

. . . While it is true that a prayer for the issuance of a writ of

preliminary attachment may be included m the complaint, as is

3. On May 11, 1989 the attachment bond having been submitted by Davao Light,

usually done, it is likewise true that the Court does not acquire

the writ of attachment issued.

jurisdiction over the person of the defendant until he is duly

summoned or voluntarily appears, and adding the phrase that it

signifies his submission to the court's power and authority that jurisdiction is

be issued "ex parte" does not confer said jurisdiction before

acquired by the court over his person. 7 On the other hand, jurisdiction over the

actual summons had been made, nor retroact jurisdiction upon

person of the defendant is obtained, as above stated, by the service of summons

summons being made. . . .

or other coercive process upon him or by his voluntary submission to the

authority of the court. 8

It went on to say, citing Sievert v. Court of Appeals, 3 that "in a

proceedings in attachment," the "critical time which must be identified

The events that follow the filing of the complaint as a matter of routine are well

is . . . when the trial court acquires authority under law to act coercively

known. After the complaint is filed, summons issues to the defendant, the

against the defendant or his property . . .;" and that "the critical time is

summons is then transmitted to the sheriff, and finally, service of the summons

the of the vesting of jurisdiction in the court over the person of the

is effected on the defendant in any of the ways authorized by the Rules of Court.

defendant in the main case."

There is thus ordinarily some appreciable interval of time between the day of the
filing of the complaint and the day of service of summons of the defendant.

Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao

During this period, different acts may be done by the plaintiff or by the Court,

Light seeks in the present appellate proceedings.

which are unquestionable validity and propriety. Among these, for example, are
the appointment of a guardian ad litem, 9 the grant of authority to the plaintiff to

The question is whether or not a writ of preliminary attachment may issue ex

parte against a defendant before acquisition of jurisdiction of the latter's person
by service of summons or his voluntary submission to the Court's authority.
The Court rules that the question must be answered in the affirmative and that
consequently, the petition for review will have to be granted.
It is incorrect to theorize that after an action or proceeding has been commenced
and jurisdiction over the person of the plaintiff has been vested in the court, but
before the acquisition of jurisdiction over the person of the defendant (either by
service of summons or his voluntary submission to the court's authority), nothing
can be validly done by the plaintiff or the court. It is wrong to assume that the
validity of acts done during this period should be defendant on, or held in
suspension until, the actual obtention of jurisdiction over the defendant's person.
The obtention by the court of jurisdiction over the person of the defendant is one
thing; quite another is the acquisition of jurisdiction over the person of the
plaintiff or over the subject-matter or nature of the action, or the res or object
hereof.
An action or proceeding is commenced by the filing of the complaint or other
initiatory pleading. 4 By that act, the jurisdiction of the court over the subject
matter or nature of the action or proceeding is invoked or called into
activity; 5 and it is thus that the court acquires jurisdiction over said subject
matter or nature of the action. 6 And it is by that self-same act of the plaintiff (or
petitioner) of filing the complaint (or other appropriate pleading) by which he

prosecute the suit as a pauper litigant, 10 the amendment of the complaint by

the plaintiff as a matter of right without leave of court, 11 authorization by the
Court of service of summons by publication, 12 the dismissal of the action by the
plaintiff on mere notice. 13
This, too, is true with regard to the provisional remedies of preliminary
attachment, preliminary injunction, receivership or replevin. 14 They may be
validly and properly applied for and granted even before the defendant is
summoned or is heard from.
A preliminary attachment may be defined, paraphrasing the Rules of Court, as
the provisional remedy in virtue of which a plaintiff or other party may, at the
commencement of the action or at any time thereafter, have the property of the
adverse party taken into the custody of the court as security for the satisfaction of
any judgment that may be recovered. 15 It is a remedy which is purely statutory
in respect of which the law requires a strict construction of the provisions
granting it. 16 Withal no principle, statutory or jurisprudential, prohibits its
issuance by any court before acquisition of jurisdiction over the person of the
defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the
action or at any time thereafter." 17The phase, "at the commencement of the
action," obviously refers to the date of the filing of the complaint which, as
above pointed out, is the date that marks "the commencement of the
action;" 18 and the reference plainly is to a time before summons is served on the

defendant, or even before summons issues. What the rule is saying quite clearly is

against them and the probable seizure of their properties, and thus give them the

that after an action is properly commenced by the filing of the complaint and

advantage of time to hide their assets, leaving the creditor-plaintiff holding the

the payment of all requisite docket and other fees the plaintiff may apply for

proverbial empty bag; it would place the creditor-applicant in danger of losing any

and obtain a writ of preliminary attachment upon fulfillment of the pertinent

security for a favorable judgment and thus give him only an illusory victory.

requisites laid down by law, and that he may do so at any time, either before or
after service of summons on the defendant. And this indeed, has been the

Withal, ample modes of recourse against a preliminary attachment are secured by

immemorial practice sanctioned by the courts: for the plaintiff or other proper

law to the defendant. The relative ease with which a preliminary attachment may

party to incorporate the application for attachment in the complaint or other

be obtained is matched and paralleled by the relative facility with which the

appropriate pleading (counter-claim, cross-claim, third-party claim) and for the

attachment may legitimately be prevented or frustrated. These modes of recourse

Trial Court to issue the writ ex-parte at the commencement of the action if it finds

against preliminary attachments granted by Rule 57 were discussed at some

the application otherwise sufficient in form and substance.

length

by

the

separate

opinion

in Mindanao

Savings

&

Loans

Asso. Inc. v. CA., supra.

In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application
for preliminary attachment is not generally necessary unless otherwise directed

That separate opinion stressed that there are two (2) ways of discharging an

by the Trial Court in its discretion. 20 And in Filinvest Credit Corporation

attachment: first, by the posting of a counterbond; and second, by a showing of its

v. Relova, 21 the Court declared that "(n)othing in the Rules of Court makes

improper or irregular issuance.

notice and hearing indispensable and mandatory requisites for the issuance of a
writ of attachment." The only pre-requisite is that the Court be satisfied, upon

1.0. The submission of a counterbond is an efficacious mode of lifting an

consideration of "the affidavit of the applicant or of some other person who

attachment

personally knows the facts, that a sufficient cause of action exists, that the case

enforcement altogether.

already

enforced

against

property,

or

even

of preventing

its

is one of those mentioned in Section 1 . . . (Rule 57), that there is no other

sufficient security for the claim sought to be enforced by the action, and that the

1.1. When property has already been seized under attachment, the attachment

amount due to the applicant, or the value of the property the possession of which

may be discharged upon counterbond in accordance with Section 12 of Rule 57.

he is entitled to recover, is as much as the sum for which the order (of
attachment) is granted above all legal counterclaims." 22 If the court be so

Sec. 12. Discharge of attachment upon giving counterbond. At

satisfied, the "order of attachment shall be granted," 23 and the writ shall issue

any time after an order of attachment has been granted, the

upon the applicant's posting of "a bond executed to the adverse party in an

party whose property has been attached or the person appearing

amount to be fixed by the judge, not exceeding the plaintiffs claim, conditioned

in his behalf, may, upon reasonable notice to the applicant,

that the latter will pay all the costs which may be adjudged to the adverse party

apply to the judge who granted the order, or to the judge of the

and all damages which he may sustain by reason of the attachment, if the court

court in which the action is pending, for an order discharging

shall finally adjudge that the applicant was not entitled thereto." 24

the attachment wholly or in part on the security given . . . in an

In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April

determined by the judge to secure the payment of any judgment

18, 1989, 25 this Court had occasion to emphasize the postulate that no hearing
is required on an application for preliminary attachment, with notice to the
defendant, for the reason that this "would defeat the objective of the remedy . . .
(since the) time which such a hearing would take, could be enough to enable the
defendant to abscond or dispose of his property before a writ of attachment
issues." As observed by a former member of this Court, 26 such a procedure
would warn absconding debtors-defendants of the commencement of the suit

amount equal to the value of the property attached as

that the attaching creditor may recover in the action. . . .
1.2. But even before actual levy on property, seizure under attachment may be
prevented also upon counterbond. The defendant need not wait until his property
is seized before seeking the discharge of the attachment by a counterbond. This is
made possible by Section 5 of Rule 57.

Sec. 5. Manner of attaching property. The officer executing the

instances . . . would require presentation of evidence in a fullblown trial on the

order shall without delay attach, to await judgment and

merits, and cannot easily be settled in a pending incident of the case." 27

execution in the action, all the properties of the party against

whom the order is issued in the province, not exempt from
execution, or so much thereof as may be sufficient to satisfy the
applicant's demand, unless the former makes a deposit with the

It may not be amiss to here reiterate other related principles dealt with
in Mindanao Savings & Loans Asso. Inc. v.C.A., supra., 28 to wit:

clerk or judge of the court from which the order issued, or gives a

(a) When an attachment may not be dissolved by a showing of its

counter-bond executed to the applicant, in an amount sufficient to

irregular or improper issuance:

satisfy such demand besides costs, or in an amount equal to the

value of the property which is about to be attached, to secure

. . . (W)hen the preliminary attachment is issued upon a ground

payment to the applicant of any judgment which he may recover

which is at the same time the applicant's cause of action; e.g.,

in the action. . . . (Emphasis supplied)

"an action for money or property embezzled or fraudulently

misapplied or converted to his own use by a public officer, or an

2.0. Aside from the filing of a counterbond, a preliminary attachment may also be

officer of a corporation, or an attorney, factor, broker, agent, or

lifted or discharged on the ground that it has been irregularly or improperly

clerk, in the course of his employment as such, or by any other

issued, in accordance with Section 13 of Rule 57. Like the first, this second mode

person in a fiduciary capacity, or for a willful violation of duty."

of lifting an attachment may be resorted to even before any property has been

(Sec. 1 [b], Rule 57), or "an action against a party who has been

levied on. Indeed, it may be availed of after property has been released from a levy

guilty of fraud m contracting the debt or incurring the obligation

on attachment, as is made clear by said Section 13, viz.:

upon which the action is brought" (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a motion to dissolve the

Sec. 13. Discharge of attachment for improper or irregular

attachment under Section 13 of Rule 57 by offering to show the

issuance. The party whose property has been attached may

falsity of the factual averments in the plaintiff's application and

also, at any time either BEFORE or AFTER the release of the

affidavits on which the writ was based and consequently that

attached property, or before any attachment shall have been

the writ based thereon had been improperly or irregularly issued

actually levied, upon reasonable notice to the attaching creditor,

(SEE Benitez v. I.A.C., 154 SCRA 41) the reason being that

apply to the judge who granted the order, or to the judge of the

the hearing on such a motion for dissolution of the writ would

court in which the action is pending, for an order to discharge

be tantamount to a trial of the merits of the action. In other

the attachment on the ground that the same was improperly or

words, the merits of the action would be ventilated at a mere

irregularly issued. If the motion be made on affidavits on the

hearing of a motion, instead of at the regular trial. Therefore,

part of the party whose property has been attached, but not

when the writ of attachment is of this nature, the only way it

otherwise, the attaching creditor may oppose the same by

can be dissolved is by a counterbond (G.B. Inc. v. Sanchez, 98

counter-affidavits or other evidence in addition to that on which

Phil. 886).

the attachment was made. . . . (Emphasis supplied)

This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987),
The attachment debtor cannot be deemed to have waived any defect in the
issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. Moreover, the filing of a
counterbond is a speedier way of discharging the attachment writ maliciously
sought out by the attaching creditor instead of the other way, which, in most

(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment

bond:
. . . The dissolution of the preliminary attachment upon security
given, or a showing of its irregular or improper issuance, does
not of course operate to discharge the sureties on plaintiff's own
attachment bond. The reason is simple. That bond is "executed

to the adverse party, . . . conditioned that the . . . (applicant) will

attachment issued by the Trial Court ex parte were struck down by this Court's

pay all the costs which may be adjudged to the adverse party

Third Division in two (2) cases, namely: Sievert v. Court of Appeals, 31 and BAC

and all damages which he may sustain by reason of the

Manufacturing and Sales Corporation v. Court of Appeals, et al. 32 In contrast to

attachment, if the court shall finally adjudge that the applicant

was not entitled thereto" (SEC. 4, Rule 57). Hence, until that
determination is made, as to the applicant's entitlement to the
attachment, his bond must stand and cannot be with-drawn.

the case at bar where the summons and a copy of the complaint, as well as the
order and writ of attachment and the attachment bond were served on the
defendant in Sievert, levy on attachment was attempted notwithstanding that
only the petition for issuance of the writ of preliminary attachment was served on
the defendant, without any prior or accompanying summons and copy of the

With respect to the other provisional remedies, i.e., preliminary injunction (Rule

complaint; and in BAC Manufacturing and Sales Corporation, neither the

58), receivership (Rule 59), replevin or delivery of personal property (Rule 60), the

summons nor the order granting the preliminary attachment or the writ of

rule is the same: they may also issue ex parte. 29

attachment itself was served on the defendant "before or at the time the levy was
made."

It goes without saying that whatever be the acts done by the Court prior to the
acquisition of jurisdiction over the person of defendant, as above indicated

For the guidance of all concerned, the Court reiterates and reaffirms the

issuance of summons, order of attachment and writ of attachment (and/or

proposition that writs of attachment may properly issue ex parte provided that the

appointments of guardian ad litem, or grant of authority to the plaintiff to

Court is satisfied that the relevant requisites therefor have been fulfilled by the

prosecute the suit as a pauper litigant, or amendment of the complaint by the

applicant, although it may, in its discretion, require prior hearing on the

plaintiff as a matter of right without leave of court 30 and however valid and

application with notice to the defendant; but that levy on property pursuant to

proper they might otherwise be, these do not and cannot bind and affect the

the writ thus issued may not be validly effected unless preceded, or

defendant until and unless jurisdiction over his person is eventually obtained by

contemporaneously accompanied, by service on the defendant of summons, a

the court, either by service on him of summons or other coercive process or his

copy of the complaint (and of the appointment of guardian ad litem, if any), the

voluntary submission to the court's authority. Hence, when the sheriff or other

application for attachment (if not incorporated in but submitted separately from

proper officer commences implementation of the writ of attachment, it is essential

the complaint), the order of attachment, and the plaintiff's attachment bond.

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 explicity required by Section

WHEREFORE, the petition is GRANTED; the challenged decision of the Court of

5 of Rule 57, but also the summons addressed to said defendant as well as a copy

Appeals is hereby REVERSED, and the order and writ of attachment issued by

of the complaint and order for appointment of guardian ad litem, if any, as also

Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial Court of

explicity directed by Section 3, Rule 14 of the Rules of Court. Service of all such

Davao City in Civil Case No. 19513-89 against Queensland Hotel or Motel or

documents is indispensable not only for the acquisition of jurisdiction over the

Queensland Tourist Inn and Teodorico Adarna are hereby REINSTATED. Costs

person of the defendant, but also upon considerations of fairness, to apprise the

against private respondents.

defendant of the complaint against him, of the issuance of a writ of preliminary

attachment and the grounds therefor and thus accord him the opportunity to

SO ORDERED.

prevent attachment of his property by the posting of a counterbond in an amount

equal to the plaintiff's claim in the complaint pursuant to Section 5 (or Section
12), Rule 57, or dissolving it by causing dismissal of the complaint itself on any of
the grounds set forth in Rule 16, or demonstrating the insufficiency of the

Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Padilla, Bidin, Grio-Aquino,

Medialdea, Regalado and Romero, JJ., concur.

applicant's affidavit or bond in accordance with Section 13, Rule 57.

Fernan, C.J., is on leave.

It was on account of the failure to comply with this fundamental requirement of

Davide, Jr., J., took no part.

service of summons and the other documents above indicated that writs of

Attorney-General, 20 Phil. 523 (in turn citing Ayers v. Watson,

133 U.S. 594), and Toledano v. Severino, 78 Phil. 783;
Francisco, op cit., p. 125 citing, additionally, 21 C.J.S., 122.

# Footnotes
1 Jorge S. Imperial, J., ponente; Reynato J. Puno and Artemon

8 Feria, op cit., p. 20, citing 21 C.J.S., 123; Pennoyer v. Neff, 95

Luna, JJ., concurring.

U.S. 714, Banco Espaol-Filipino v. Palanca, 37 Phil. 921, and

2 Branch 8, presided over by Hon. Milagros C. Nartatez.

Espaol-Filipino v. Palanca, 37 Phil. 921, Infante v. Toledo, 44

3 G.R. No. 84034, Dec. 22, 1988, 168 SCRA 692 (1988).
4 Sec. 6, Rule 2, Rules of Court.
N.B. The action is not deemed commenced, however, and will not
be deemed to interrupt the running of the period of prescription,
unless and until the docket and other court fees are fully paid.
SEE Manchester Development Corporation v. Court of Appeals,
149 SCRA 562 (1987); Sun Insurance Office, Ltd., et al. v.
Asuncion, et al., G.R. No. 79937-38, Feb. 13, 1989; Tacay v.
Regional Trial Court of Tagum, G.R. No. 88075-77, Dec. 20,
1989; Ayala Corporation, et al. v. Madayag, G.R. No. 88421, Jan.

Perkins v. Dizon, 69 Phil. 186; Moran, op cit., citing Banco

Phil. 834, and Nilo v. Romero, L-15195, March 29, 1961;
Francisco, op cit., p. 126; citing Sharruf v. Bubla, et al., No. L17029, Sept. 30, 1964.
9 Sec. 5, Rule 3.
10 Sec. 22, Rule 3.
11 Sec. 2, Rule 10.
12 Sec. 16 or 17, Rule 14.
13 Sec. 1, Rule 17.

30, 1990; Hodges v. Court of Appeals, G.R. No. 87617, April 6,

1990; SEE also Lacson v. Luis Reyes, etc., G.R. No. 86250, Feb.

14 Rules 57, 58, 59 and 60, respectively; SEE footnote 29, infra.

26, 1990; Sapugay v. Court of Appeals, G.R. No. 86791, March

21, 1990.

15 Sec. 1, Rule 57, Rules of Court. Another definition, given in 4

Words and Phrases 727 (1940),citing cases, is that it is "a

5 Moran, Comments on the Rules, 1979 ed. Vol. 1, p.

provisional remedy, auxiliary or incidental to the main action,

54, citing Caluag v. Pecson, 82 Phil. 8; Francisco, The Revised

whereby the debtor's property capable of being taken under levy

Rules of Court, 1973 ed., Vol. 1, p. 120; Feria, Civil Procedure,

and execution is placed under custody of the law pending the

1969 ed., pp. 17-18.

determination of the cause, to secure the payment of any

judgment that may be recovered therein."

6 Defined as the power to hear and determine cases of the

general class to which the proceedings in question belong **,

16 SEE Salas v. Adil, 90 SCRA 125, cited in Sievert v. C.A., 168

conferred by the sovereign authority which organizes the court

SCRA 698.

and defines its powers. Francisco, The Revised Rules of Court,

1973 ed., Vol. I, p. 117, citing Reyes v. Diaz, 73 Phil. 484, 486.

17 Sec. 1.

7 Feria, op cit., p. 19, citing Manila Railroad Co. v. Attorney

18 SEE footnote 6, supra.

General, 20 Phil. 523, King Mau Wu v. Sycip, 94 Phil. 784, and

21 C.J.S., 122; Moran, op cit., p. 55, citing M.R.R. Co. v.

19 168 SCRA 513 (Dec. 19, 1988). In this case, this Court ultimately ruled that

executed to the party against whom the application is presented

the application for preliminary attachment ex parte should have been denied

in an amount to be fixed by the court to the effect that the

because the fundamental requisites under Rule 57, Section 1 did not exist, and

applicant will pay such party all damages he may sustain by

not because ex parte applications are per se illegal.

reason of the appointment of such receiver in case the applicant

shall have procured such appointment without sufficient cause .

20 La Granja, Inc. v. Samson, 58 Phil. 378, 380.

..

21 117 SCRA 420, 428-429, cited in Francisco, op cit., 1985 ed.,

(3) And Rule 60 provides that "Whenever the complaint in an

"Provisional Remedies," pp. 31-32.

action prays for the recovery of possession of personal property,

the plaintiff may, at the commencement of action or at any time

22 Sec. 3, Rule 57.

before answer, apply for an order for the delivery of such

23 Id., SEE Central Capiz v. Salas, 43 Phil. 930, 931.

plaintiff with the prescribed requisites (affidavit and bond [Sec.

24 Sec. 4, Rule 57.

alleged to be wrongfully detained, and requiring the sheriff or

property to him . . ." (Sec. 1); and upon compliance by the

2]), the judge . . . shall issue an order describing the property
other proper officer . . . forthwith to take such property into his
custody" (Sec. 3).

25 172 SCRA 480, 484 (April 18, 1989), per Grio-Aquino,

J., citing Belisle Investment & Finance Co., Inc. v. State

30 SEE footnotes 9 to 13, supra.

Investment House, Inc. 72927, June 30, 1987; Filinvest Credit

Corp. v. Relova, 117 SCRA 420).

31 168 SCRA 692 (1988).

26 Hon. Abraham F. Sarmiento, who retired on October 9, 1991.

32 G.R. No. 96784, Aug. 2, 1991.

27 172 SCRA 480, 488.

28 At pp. 488-489.
29 (1) Sec. 5, Rule 58 declares that while, generally, "No
preliminary injunction shall appear be granted without notice to

G.R. No. 107303 February 23, 1995

EMMANUEL C. OATE and ECON HOLDINGS CORPORATION, petitioners,

the defendant," nevertheless, "If it shall appear from the facts

vs.

shown by affidavits or by the verified complaint that great or

HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional

irreparable injury would result to the applicant before the

Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA,

matter can be heard on notice, the judge to whom the

respondents.

application for preliminary injunction was made, may issue a

restaining order to be effective only for a period of twenty days
from date of its issuance. . . .
(2) Sec. 3, Rule 59 provides that, "if a receiver be appointed upon
an ex parte application, the court, before making the order, may
require the person applying for such appointment to file a bond

BRUNNER

DEVELOPMENT

CORPORATION,

petitioner,

vs.
HON. ZEUS C. ABROGAR, as Presiding Judge of Branch 150 of the Regional
Trial Court of Makati, and SUN LIFE ASSURANCE COMPANY OF CANADA,
respondents.

RESOLUTION

I
At the outset, it should be stated that the Court does not in the least doubt
the validity of the writ of attachment issued in these cases. The fact that a

MENDOZA, J.:

criminal complaint for estafa which Sun Life had filed against petitioner
Oate and Noel L. Dio, president of Brunner, was dismissed by the Office of

These are motions separately filed by petitioners, seeking reconsideration of

the Provincial Prosecutor is immaterial to the resolution of the motions for

the decision of the Second Division holding that although the levy on

reconsideration. In the first place, the dismissal, although later affirmed by

attachment of petitioners' properties had been made before the trial court

the Department of Justice, is pending reconsideration. In the second place,

acquired jurisdiction over them, the subsequent service of summons on

since the issue in the case below is precisely whether petitioners were guilty

them cured the invalidity of the attachment.

of fraud in contracting their obligation, resolution of the question must

await the trial of the main case.

The motions were referred to the Court en banc in view of the fact that in
another decision rendered by the Third Division on the same question, it

However, we find petitioners' contention respecting the validity of the

was held that the subsequent acquisition of jurisdiction over the person of a

attachment of their properties to be well taken. We hold that the

defendant

his

attachment of petitioners' properties prior to the acquisition of jurisdiction

property. The Court en banc accepted the referral and now issues this

by the respondent court is void and that the subsequent service of summons

resolution.

on petitioners did not cure the invalidity of such attachment. The records

does

not

render

valid

the

previous

attachment

of

show that before the summons and the complaint were served on petitioners
Petitioners maintain that, in accordance with prior decisions of this Court,

Oate and Econ Holdings Corporation (Econ) on January 9, 1992, Deputy

the attachment of their properties was void because the trial court had not

Sheriff Arturo C. Flores had already served on January 3, 1992 notices of

at that time acquired jurisdiction over them and that the subsequent

garnishment on the PNB Head office 2 and on all its Metro Manila branches

service of summons on them did not cure the invalidity of the levy. They

and an A.B capital. 3 In addition he made other levies before the service of

further contend that the examination of the books and ledgers of the Bank

summons on petitioners, to wit:

of the Philippine Islands (BPI), the Philippine National Bank (PNB) and the
Urban Bank was a "fishing expedition" which the trial court should not have

On January 6, 1992, he served notices of garnishment on the Urban Bank

authorized because petitioner Emmanuel C. Oate, whose accounts were

Head Office and all its Metro Manila branches, 4 and on the BPI. 5

examined, was not a signatory to any of the documents evidencing the

transaction between Sun Life Assurance of Canada (Sun Life) and Brunner

On the same day, he levied on attachment Oate's condominium unit at

Development Corporation (Brunner).

the Amorsolo Apartments Condominium Project, covered by Condominium

Certificate of Title No. S-1758.

On the other hand private respondent Sun Life stresses the fact that the
trial court eventuallyacquired jurisdiction over petitioners and contends

On January 7, 1992, he served notice of garnishment on the Union Bank

that this cured the invalidity of the attachment of petitioners' properties.

of the Philippines. 7

With respect to the second contention of petitioners, private respondent

argues that the examination of petitioner Oate's bank account was justified

On January 8, 1992, he attached Oate's lot, consisting of 1,256 square

because it was he who signed checks transferring huge amounts from

meters, at the Ayala-Alabang Subdivision, Alabang, Muntinlupa, covered by

Brunner's account in the Urban Bank to the PNB and the BPI.

TCT No. 112673. 8

First. The Deputy Sheriff claims that he had tried to serve the summons

Rule 57, but also the summons addressed to said defendant

with a copy of the complaint on petitioners on January 3, 1992 but that

as

there was no one in the offices of petitioners on whom he could make a

appointment of guardian ad litem, if any, as also explicitly

service. This is denied by petitioners who claim that their office was always

directed

open and that Adeliza M. Jaranilla, Econ's Chief Accountant who eventually

Court.

well

as

by

copy

Section

of
3,

the

complaint

Rule

14

of

and
the

order
Rules

for
of

10

received summons on behalf of Oate and Econ, was present that day.
Whatever the truth is, the fact is that no other attempt was made by the

It is clear from the above excerpt, however, that while the petition for a writ

sheriff to serve the summons except on January 9, 1992, in the case of

of preliminary attachment may be granted and the writ itself issued before

Oate and Econ, and on January 16, 1992, in the case of Dio. Meantime,

the

he made several levies, which indicates a predisposition to serve the writ of

be implemented until jurisdiction over the person of the defendant is

attachment in anticipation of the eventual acquisition by the court of

obtained. As this Court explained, "levy on property pursuant to the writ

jurisdiction over petitioners.

thus

defendant

issued

is

may

summoned,

not

be

the

validly

or contemporaneously accompanied,

by

writ

of

effected
service

on

attachment

unless
the

cannot

preceded,

defendant

of

Second. Private respondent invokes the ruling in Davao Light & Power

summons, a copy of the complaint (and of the appointment of guardian ad

Co. v. Court of Appeals 9 in support of its contention that the subsequent

litem, if any), the application for attachment (if not incorporated in but

acquisition of jurisdiction by the court cured the defect in the proceedings

submitted separately from the complaint), the order of attachment, and the

for attachment. It cites the following portion of the decision in Davao Light

plaintiff's attachment bond."

11

and Power, written by Justice, now Chief Justice, Narvasa:

Further clarification on this point was made in Cuartero v. Court of
It goes without saying that whatever be the acts done by the

Appeals,

12

in which it was held:

Court prior to the acquisition of jurisdiction over the person

issuance of

It must be emphasized that the grant of the provisional

summons, order of attachment and writ of attachment

remedy of attachment practically involves three stages;

(and/or appointment of guardian ad litem, or grant of

first, the court issues the order granting the application;

authority to the plaintiff to prosecute the suit as a pauper

second, the writ of attachment issues pursuant to the order

litigant, or amendment of the complaint by the plaintiff as a

granting the writ; and third, the writ is implemented. For

matter of right without leave of court and however valid

the initial two stages, it is not necessary that jurisdiction

and proper they might otherwise be, these do not and

over the person of the defendant should first be obtained.

cannot bind and affect the defendant until and unless

However,

jurisdiction over his person is eventually obtained by the

required that the court must have acquired jurisdiction over

court, either by service on him of summons or other

the defendant for without such jurisdiction, the court has

coercive process or his voluntary submission to the court's

no power and authority to act in any manner against the

authority. Hence, when the sheriff or other proper officer

defendant. Any order issuing from the Court will not bind

commences implementation of the writ of attachment, it is

the defendant.

of

the

defendant,

as

above

indicated

once

the

implementation

commences,

it

is

essential that he serve on the defendant not only a copy of

the applicant's affidavit and attachment bond, and of the

Private respondent argues that the case of Cuartero itself provides for an

order of attachment, as explicitly required by Section 5 of

exception as shown in the statement that "the court [in issuing the writ of

preliminary attachment] cannot bind and affect the defendant until

57,

jurisdiction

13 provides:

is eventually obtained"

and

that

since

petitioners

were

subsequently served with summons, no question can be raised against the

Sec. 13. Discharge of attachment for improper or irregular

validity of the attachment of petitioners' properties before such service.

issuance. The party whose property has been attached

The statement in question has been taken out of context. The full statement

may also, at any time either before or after the release of

reads:

the attached property, or before any attachment shall have

been

actually

levied,

upon

reasonable

notice

to

the

It is clear from our pronouncements that a writ of

attaching creditor, apply to the judge who granted the order,

preliminary attachment may issue even before summons is

or to the judge of the court in which the action is pending,

served upon the defendant. However, we have likewise ruled

for an order to discharge the attachment on the ground that

that the writ cannot bind and affect the defendant until

the same was improperly or irregularly issued. . . .

jurisdiction

(Emphasis added).

over

his

person

is

eventually

obtained. Therefore, it is required that when proper officer

commences implementation of the writ of attachment
service of summons should be simultaneously made.

13

As this Court pointed out in Davao Light and Power,

15

the lifting of an

attachment "may be resorted to even before any property has been levied
on."

Indeed, as this Court through its First Division has ruled on facts similar to
those in these cases, the attachment of properties before the service of

It is indeed true that proceedings for the issuance of a writ of attachment

summons on the defendant is invalid, even though the court later acquires

are generally ex parte. InMindanao Savings and Loans Ass'n v. Court of

jurisdiction over the defendant.

Appeals

14

At the very least, then, the writ of

16

it was held that no hearing is required for the issuance of a writ

attachment must be served simultaneously with the service of summons

of attachment because this "would defeat the objective of the remedy

before the writ may be enforced. As the properties of the petitioners were

[because] the time which such hearing would take could be enough to enable

attached by the sheriff before he had served the summons on them, the

the defendant to abscond or dispose of his property before a writ of

levies made must be considered void.

attachment issues." It is not, however, notice to defendant that is sought to

be avoided but the "time which such hearing would take" because of the

Third. Nor can the attachment of petitioners' properties before the service

possibility that defendant may delay the hearing to be able to dispose of his

of summons on them was made be justified an the ground that unless the

properties. On the contrary there may in fact be a need for a hearing before

writ was then enforced, petitioners would be alerted and might dispose of

the writ is issued as where the issue of fraudulent disposal of property is

their properties before summons could be served on them.

raised.

17

It is not true that there should be no hearing lest a defendant

learns of the application for attachment and he remove's his properties

The Rules of Court do not require that issuance of the writ be kept a secret

before the writ can be enforced.

until it can be enforced. Otherwise in no case may the service of summons

on the defendant precede the levy on attachment. To the contrary, Rule 57,

On the other hand, to authorize the attachment of property even before

13 allows the defendant to move to discharge the attachment even before

jurisdiction over the person of the defendant is acquired through the service

any attachment is actually levied upon, thus negating any inference that

of summons or his voluntary appearance could lead to abuse. It is entirely

before its enforcement, the issuance of the writ must be kept secret. Rule

possible that the defendant may not know of the filing of a case against him

note, dated November 27, 1991, in which it was made to appear that the

and consequently may not be able to take steps to protect his interests.

transaction was a money placement instead of sale of treasury bills.

Nor may sheriff's failure to abide by the law be excused on the pretext that

Thus the issue is whether the money paid to Brunner was the consideration

after all the court later acquired jurisdiction over petitioners. More

for the sale of treasury bills, as Sun Life claims, or whether it was money

important than the need for insuring success in the enforcement of the writ

intended for placement, as petitioners allege. Petitioners do not deny

is the need for affirming a principle by insisting on that "most fundamental

receipt of P39,526,500.82 from Sun Life. Hence, whether the transaction is

of all requisites the jurisdiction of the court issuing attachment over the

considered a sale or money placement does not make the money the

person of the defendant."

It may be that the same result would follow from

"subject matter of litigation" within the meaning of 2 of Republic Act No.

requiring that a new writ be served all over again. The symbolic significance

1405 which prohibits the disclosure or inquiry into bank deposits except "in

of such an act, however, is that it would affirm our commitment to the rule

cases where the money deposited or invested is the subject matter of

of law.

litigation." Nor will it matter whether the money was "swindled" as Sun Life

18

19

contends.
II
Second. The examination of bank books and records cannot be justified
We likewise find petitioners' second contention to be meritorious. The

under Rule 57, 10. This provision states:

records show that, on January 21, 1992, respondent judge ordered the
examination of the books of accounts and ledgers of Brunner at the Urban

Sec. 10. Examination of party whose property is attached

Bank, Legaspi Village branch, and on January 30, 199 the records of account

and

of petitioner Oate at the BPI, even as he ordered the PNB to produce the

property; delivery of property to officer. Any person

records regarding certain checks deposited in it.

owing debts to the party whose property is attached or

persons

indebted

to

him

or

controlling

his

having in his possession or under his control any credit or

First. Sun Life defends these court orders on the ground that the money

other personal property belonging to such party, may be

paid by it to Brunner was subsequently withdrawn from the Urban Bank after

required to attend before the court in which the action is

it had been deposited by Brunner and then transferred to BPI and to the

pending, or before a commissioner appointed by the court,

unnamed account in the petitioner Oate's account in the BPI and to the

and be examined on oath respecting the same. The party

unnamed account in the PNB.

whose property is attached may also be required to attend

for

the

purpose

of

giving

information

respecting

his

The issue before the trial court, however, concerns the nature of the

property, and may be examined on oath. The court may,

transaction between petitioner Brunner and Sun Life. In its complaint, Sun

after such examination, order personal property capable of

Life alleges that Oate, in his personal capacity and as president of Econ,

manual delivery belonging to him, in the possession of the

offered to sell to Sun Life P46,990,000.00 worth of treasury bills owned by

person so required to attend before the court, to be

Econ and Brunner at the discounted price of P39,526,500.82; that on

delivered to the clerk of the court, sheriff, or other proper

November 27, 1991, Sun Life paid the price by means of a check payable to

officer on such terms as may be just, having reference to

Brunner; that Brunner, through its president Noel L. Dio, issued to it a

any lien thereon or claims against the same, to await the

receipt with undertaking to deliver the treasury bills to Sun Life; and that

judgment in the action.

on December 4, 1991, Brunner and Dio delivered instead a promissory

Since, as already stated, the attachment of petitioners' properties was

2 Per Sheriff's Report but see Petition, Annex G, Rollo in

invalid, the examination ordered in connection with such attachment must

G.R. No. 107303, p. 51 and Petition, Annex O, Rollo in G.R.

likewise be considered invalid. Under Rule 57, 10, as quoted above, such

No. 107491, p. 90 which show that the notice of levy of

examination is only proper where the property of the person examined has

attachment was received by PNB on January 2, 1992.

been validly attached.

3 Petition, Annex H, Rollo in G.R. No. 107303, p. 52 and
WHEREFORE, the decision dated February 21, 1994 is RECONSIDERED and
SET

ASIDE

and

another

one

is

rendered

GRANTING

the

Petition, Annex P, Rollo in G. R. No. 107491, p. 91.

petitions

for certiorari and SETTING ASIDE the orders dated February 26, 1992 and

4 Petition, Annex I, Rollo in G.R. No. 107303, p. 53 and

September 9, 1992, insofar as they authorize the attachment of petitioners'

Petition, Annex U, Rollo in G.R. No. 107491, p. 99.

properties and the examination of bank books and records pertaining to

their accounts, and ORDERING respondent Judge Zeus C. Abrogar

5 Petition, Annex J, Rollo, in G.R. No. 1073031 p. 54 and

Petition, Annex Q, Rollo in G.R. No. 107491, p. 92.

(1) forthwith to issue an alias writ of attachment upon the same bond
furnished by respondent Sun Life Assurance Company of Canada;

6 Petition, Annex K, Rollo in G.R. No. 107303, p. 55 and

Petition, Annex V, Rollo in G.R. No. 107491, p. 100.

(2) direct the sheriff to lift the levy under the original writ of attachment
and simultaneously levy on the same properties pursuant to the alias writ so

7 Petition, Annex L, Rollo in G.R. No. 107303, p. 57 and

issued; and

Petition, Annex W, Rollo in G.R. No. 107941, p. 102.

(3) take such steps as may be necessary to insure that there will be no

8 Petition, Annex M, Rollo in G.R. No. 107303, p. 58 and

intervening period between the lifting of the original attachment and the

Petition, Annex X, Rollo in G.R. No. 107491, p. 103.

subsequent levy under the alias writ.

Petitioners may file the necessary counterbond to prevent subsequent levy

9 204 SCRA 343 (1991).

or to dissolve the attachment after such levy.

10 Id. at 355-6 (Emphasis added).

SO ORDERED.

11 Id. at 357.

Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero,

12 212 SCRA 260, 266 (1992).

Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Francisco, JJ., concur.

13 Id. (Emphasis added).

14 H.B. Zachry Co, Inc. v. Court of Appeals, supra note 1.

Footnotes
1 H.B. Zachry Co. v. Court of Appeals, 232 SCRA 329 (1994).

15 Supra note 9 (Emphasis added).

16 172 SCRA 480, 484 (1989).

17 See Carpio v. Macadaeg, 9 SCRA 552 (1963).

64940, T-64939, and T-86369 (subject TCTs), registered in the names of Sps.
Lazaro, were levied upon.9

18 Sievert v. Court of Appeals, 168 SCRA 692, 698 (1989).

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

19 Compare Go v. Court of Appeals, 206 SCRA 138, 162

(1992): "It may be that to require the State to accord
petitioner his rights to a preliminary investigation and to
bail at this point,could turn out ultimately to be largely a
ceremonial exercise. But the Court is not compelled to
speculate. And, in any case, it would not be idle ceremony;
rather it would be a celebration by the State of the rights
and liberties of its own people and a re-affirmation of its
obligation and determination to respect those rights and
liberties.

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 certiorari 1 are the July 10, 2008
Decision2 and December 18, 2008 Resolution 3 of the Court of Appeals (CA) in CAG.R. SP No. 100270, affirming the March 29, 2007 Order 4 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 complaint 5 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 P2,160,000.00, which represented the amounts stated in
several dishonored checks issued by the latter to the former, as well as interests,
attorneys fees, and costs. The RTC granted the writ of preliminary attachment
application6 and upon the posting of the required P2,160,000.00 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-

Nonetheless, on September 22, 2006, the parties entered into a Compromise

Agreement13 whereby Sps. Lazaro agreed to pay Lim, Jr. the amount
of P2,351,064.80 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. Lazaros 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
writs annotation on the subject TCTs.
Lim, Jr. filed a motion for reconsideration 19 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 RTCs 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 reconsideration 24 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 Courts 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 P2,351,064.80.
Hence, given that the foregoing debt remains unpaid, the attachment of Sps.
Lazaros 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 latters 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 CEICs 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. Lazaros 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.
Carpio, (Chairperson), Brion, Del Castillo, Perez, and Perlas-Bernabe, JJ.,
concur.

Footnotes
1

"The purposes of preliminary attachment are: (1) to seize the property

of the debtor in advance of final judgment and to hold it for purposes of
satisfying said judgment, as in the grounds stated in paragraphs (a) to (e)
of Section 1, Rule 57 of the Rules of Court; or (2) to acquire jurisdiction
over the action by actual or constructive seizure of the property in those
instances where personal or substituted service of summons on the
defendant cannot be effected, as in paragraph (f) of the same provision."
(Philippine Commercial International Bank v. Alejandro, G.R. No.
175587, September 21, 2007, 533 SCRA 738, 751-752).
27

Rollo, pp. 8-20.

Id. at 23-33. Penned by Associate Justice Ricardo R. Rosario, with

Associate Justices Rebecca De Guia-Salvador and Vicente S. E. Veloso,
concurring.
2

Id. at 35-36.

Id. at 79. Penned by Presiding Judge Ramon A. Cruz.

Id. at 39-43. Docketed as Civil Case No. Q-05-56123.

Id. at 44. See September 15, 2005 RTC Order.

Id. at 45. See September 29, 2005 RTC Order.

Id. at 46-47. Issued by Atty. Joseph Ronald T. Abesa, Clerk of Court V.

Chemphil Export & Import Corporation v. CA, G.R. Nos. 112438-39

and 113394, December 12, 1995, 251 SCRA 257, 288, citing BF Homes,
Incorporated v. CA, G.R. Nos. 76879 and 77143, October 3, 1990, 190
SCRA 262, 271-272. (Emphasis supplied)
28

29

"The lien or security obtained by an attachment even before judgment,

is a fixed and positive security, a specific lien, and, although whether it
will ever be made available to the creditor depends on contingencies, its
existence is in no way contingent, conditioned or inchoate. It is a vested
interest, an actual and substantial security, affording specific security for
satisfaction of the debt put in suit, which constitutes a cloud on the legal
title, and is as specific as if created by virtue of a voluntary act of the
debtor and stands upon as high equitable grounds as a mortgage." (BF
Homes, Incorporated v. CA, supra note 28, at 272; citations omitted).

Id. at 49-50. See October 27, 2005 Sheriffs return.

10

Id. at 51-55.

11

Id. at 52.

12

Id. at 53-54.

13

Id. at 59-62.

Id. at 61. As stated in the September 22, 2006 Compromise Agreement,

the payment of Sps. Lazaros mortgage obligation annotated in the
memorandum of encumbrances of TCT Nos. T-64940, T-64939, and T86369 shall be proof of the improvement of their financial condition.

Id. at 287-290.

30

14

G.R. No. 195374

15

Id. at 63-67.

16

Id. at 69-73.

PEDRO

17

Id. at 74-75.

vs.

18

Id. at 79.

PAGBILAO

19

Id. at 80-82.

20

Id. at 87. See July 26, 2007 RTC Order.

21

Id. at 88-98.

22

Id. at 23-33.

23

Id. at 32-33.

24

Id. at 100-110.

25

Id. at 35-36.

Republic v. Estate of Alfonso Lim, Sr., G.R. No. 164800, July 22, 2009,
593 SCRA 404, 416.
26

March 10, 2014

LUKANG, Petitioner,

DEVELOPMENT

CORPORATION

and

EDUARDO

T.

RODRIGUEZ, Respondents.
DECISION
MENDOZA, J.:
This petition for review under Rule 45 of the Rules of Court assails the October
21, 2010 Decision1 and the January 19, 2011 Resolution 2 of the Court of Appeals
(CA) in CA-G.R. SP No. 108809, which nullified and set aside the May 13, 2008
Order3 of the Regional Trial Court (RTCJ. Branch 53, Lucena City, granting the
petitioner's application for a writ of preliminary injunction.

The Facts:

that they were the only heirs of Arsenio and partitioned the half portion of the
four (4) parcels of land covered by TCT Nos. T-44547, T-44548, T-44549, and T-

The patriarch of the family, Arsenio Lukang (Arsenio), and Mercedes Dee

44550 among themselves, with Mercedes waiving her supposed share in favor of

(Mercedes) lived as husband and wife in Calamba, Laguna, from 1922 to 1934

her three (3) children.

and begot three (3) children, namely, Domingo, Rosalina and Olympia.
In 1988, Simeon, alleging that the certificates of title of the properties covered by
In 1935, he started cohabiting with Leoncia Martinez (Leoncia), with whom he

TCT Nos. T-103094, T-101425, T-125349, and T-125348 were lost, filed a petition

had ten (10) children, namely, Elpidio, Socorro, Manuel, Pedro, Teresita, Simeon,

for the issuance of the owners duplicate copy before the RTC, Branch 57, Lucena

Eugenio, Hilaria, Concepcion, and Carlos. During their cohabitation in Lucena,

City. As a result, new owners duplicate copies of the allegedly lost titles were

Quezon, they acquired several real properties located in Pagbilao, Quezon, to wit:

issued in his favor. Thereafter, Simeon, in a deed of donation, transferred the said
properties in favor of his children, Benedict, Heile and Madeleine. Consequently,

(a) Transfer Certificate of Title (TCT) Nos. T-445474 with an area of

TCT Nos. T-103094, T-125348 and T-125349 were cancelled, and TCT No. T-

257,967 square meters;

241034 was issued in the name of Benedict; TCT No. 241035 in the name of

(b) TCT No. T-445485 with an area of 40,000 square meters;

purportedly executed the Bilihang Lampasan and Pagbibilihang Lubusan, where

(c) TCT No. T-44549 with an area of 5.0078 hectares; and

Leoncia, and Elpidio.

(d) TCT No. T-445507 consisting of 5.0803 hectares.

In the meantime, on February 15, 1989, Mercedes, through Rosalinda, filed the

The said properties were then registered in the name of "ARSENIO LUKANG,
married to Mercedes Dee, 1/2 share and Leoncia Martinez, single, 1/2 share."
Arsenio and Leoncia later acquired four (4) more parcels of land covered by TCT
No. T-103094, TCT No. T- 101425, TCT No. T-125349, and TCT No. T-125348. It
was allegedly agreed that the said properties should be registered in the name of
Simeon, one of their children, in trust for the other heirs and should be owned in
common by their family.
When Arsenio died in 1976, his 13 children and Mercedes, executed the
Extrajudicial Settlement of Estate,8 in which they agreed to adjudicate and
transfer among themselves the rights, interest and ownership of the four (4)
parcels of land covered by TCT Nos. T-44547, T-44548, T-44549, and T-44550.
There was, however, no agreement to partition the properties as they remained
common to all the heirs.
Years later, after the execution of the Extrajudicial Settlement of Estate, Mercedes,
together with her three (3) children, Rosalina, Domingo, and Olympia, executed
another document, denominated as Pagbabahaging Labas sa Hukuman Na May
Pagtalikod sa Karapatan,9 dated December 19, 1987, wherein the parties declared

Heile; and TCT No. 241036 in the name of Madeleine.10 Furthermore, Simeon
he sold the land covered by TCT No. 101425 in favor of Mercedes, Rosalina,

Petition for the Issuance of the Owners Duplicate of TCT Nos. T-44547, T-44548,
T-44549 and T-4455011 before the RTC, Branch 58, Lucena City. The RTC, in its
Order,12 dated March 27, 1989, granted the petition and new titles were issued in
favor of Mercedes. Unknown to Leoncia, Rosalina caused the segregation of the
one-half portion of the said properties in her (Leoncias) favor and the division of
the remaining half among her and her siblings, Domingo and Olympia. Hence,
TCT Nos. T-44547, T-44548, T-44549, and T-44550 were cancelled and new titles
were issued: TCT Nos. T-247219, 13 T-247221,14 T-247223,15 and T-24722516 in the
names of Rosalina, Domingo and Olympia, while TCT Nos. T-247220, 17 T247222,18 T-247224,19 and T-24722620 were registered in the name of Leoncia.
On September 26, 1990, Leoncia and her children, claiming that the titles of TCT
Nos. T-44547, T-44548, T-44549, and T-44550 were not lost but in her (Leoncias)
possession, filed a complaint21 for annulment of extrajudicial partition, affidavit of
segregation and annulment of the new certificates of title, which was docketed as
Civil Case No. 90-124. The said case was consolidated with Civil Case No. 89-79,
a case for recovery of four (4) owners duplicate copy of TCTs filed by Simeon
against his brother Pedro. The cases were raffled to RTC, Branch 53, Lucena City.
Subsequently, Leoncia, through Pedro, registered her adverse claim on February
3, 1989 on TCT Nos. T-241034, T-242429, TCT No. T-241036, T-241035, and T242427 as Entry No. 530545. He further caused the annotation of a notice of lis

pendens on TCT No. T-247221 as Entry No. 556192 on October 1, 1990, and on

the RTC; that it was not a present right but a contingent or future right which

TCT Nos. T-241034, T-242429, TCT No. T-241036, T-241035, and T-242427 as

was not covered by injunction; and that there was no paramount necessity

Entry No. 538916 on November 6, 1989.

because there would be no great and irreparable injury. Moreover, PDC, as the
registered owner of the said properties, had the right to enjoy the same as

In 1993, while Civil Case No. 89-79 and Civil Case No. 90-124 were still pending,

provided under Articles 428 and 429 of the Civil Code.

respondent Pagbilao Development Corporation (PDC) purchased from Simeon,

Mercedes and Rosalina the six (6) properties which were the subject of the two

Pedro filed a motion for reconsideration but it was denied in the CA Resolution,

cases. Thus, TCT Nos. T-241034, T-242429, T-241036, T-241035, T-247221, and

dated January 19, 2011. Hence, this petition, anchored on the following

T-242427 were cancelled and new titles, TCT Nos. T-282100, 22 T-282101,23 T282102,24 T-282103,25 T-282104,26and T-28210527 were issued in favor of PDC.

ISSUES

Accordingly, the annotations were carried over to PDCs titles.

I
When Pedro and the other heirs learned of the sale of the subject properties to
PDC, they filed a motion to require Simeon and Rosalina to explain why they sold
the properties without permission from the RTC. 28 On April 23, 2008, they also
filed an application for a writ of preliminary injunction with ex-parte prayer for
temporary restraining order (TRO).29 They alleged that they were in actual and
physical possession of the subject properties; and that PDC entered into the said
premises,

destroyed

some

structures

therein

and

started

to

construct

improvements on the properties without their consent.

In its Order, dated April 23, 2008, the RTC 30 granted the issuance of the TRO
effective for a period of twenty (20) days.
On May 13, 2008, after due hearing, the RTC issued the Order 31 granting the
application for writ of preliminary injunction by which it restrained PDC from
wresting possession of the subject properties and ordering the movant, Pedro, to
file a bond.
PDC filed a motion for reconsideration but it was denied in the RTC Order, 32 dated
March 18, 2009.
On May 29, 2009, Pedro posted a bond in the amount of One Million Pesos
(P1,000,000.000).33
PDC filed a petition for certiorari before the CA assailing the issuance of the writ
of preliminary injunction. The CA, in its Decision, dated October 21, 2010,
granted the petition and set aside the May 13, 2008 and March 18, 2009 Orders
of the RTC. The CA explained that Pedros right over the said properties was not
clear as it was contingent on the outcome or result of the cases pending before

THE COURT OF APPEALS ERRED IN CONSISTENTLY TURNING AWAY

FROM THE ISSUE OF RESPONDENT PAGBILAOS STATUS AS A
TRANSFEREE PENDENTE LITE WHEN THAT IS THE MAIN ISSUE IN
THE FIRST PLACE
II
THE COURT OF APPEALS ERRED IN RULING THAT PAGBILAO AS
REGISTERED OWNER OF THE SUBJECT PROPERTIES HAVE THE
RIGHT TO ENJOY AND EXCLUDE OTHER PERSONS FROM THE
ENJOYMENT THEREOF
III
THE COURT OF APPEALS ERRED IN RULING THAT THE TRIAL COURT
PRE-JUDGED THE MAIN CASE AND SHIFTED THE BURDEN OF PROOF
ON THE HEIRS OF SIMEON LUKANG
IV
THE COURT OF APPEALS ERRED IN RULING THAT NON-ISSUANCE OF
THE INJUNCTIVE RELIEF IS NOT OF PARAMOUNT NECESSITY NOR
WILL IT CAUSE GREAT AND IRREPARABLE INJURY TO PEDRO
LUKANG
V

THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL

is sufficient that the complainant shows that he has an ostensible right to the

COURT COMMITTED GRAVE ABUSE OF DISCRETION IN NOT FIXING

final relief prayed for in his complaint.37

THE BOND.
The well-entrenched rule is that the grant or denial of the writ of preliminary
Synthesized, the issues boil down to the question of whether or not the RTC

injunction rests upon the sound discretion of the court. The trial court is given a

committed grave abuse of discretion when it issued the May 13, 2008 Order

wide latitude in this regard. Thus, in the absence of a manifest abuse, such

granting the writ of preliminary injunction.

discretion must not be interfered with. 38 "Grave abuse of discretion in the

issuance of writs of preliminary injunction implies a capricious and whimsical

A writ of preliminary injunction is a provisional remedy which is adjunct to a

exercise of judgment that is equivalent to lack of jurisdiction, or where the power

main suit, as well as a preservative remedy issued to maintain the status quo of

is exercised in an arbitrary or despotic manner by reason of passion, prejudice or

the things subject of the action or the relations between the parties during the

personal aversion amounting to an evasion of positive duty or to a virtual refusal

pendency of the suit.34 The purpose of injunction is to prevent threatened or

to perform the duty enjoined, or to act at all in contemplation of law."39

continuous irremediable injury to the parties before their claims can be

thoroughly studied and educated. Its sole aim is to preserve the status quo until

In the present case, the Court finds the RTC grant of injunction to be in

the merits of the case are fully heard. 35 Under Section 3, Rule 58 of the Rules of

order.1wphi1 The pertinent parts of its order read:

Court, an application for a writ of preliminary injunction may be granted if the

following grounds are established:

It is to be emphasized that the deeds of sale between the vendors of the six
parcels of land and the Pagbilao Development Corporation were executed on June

(a) That the applicant is entitled to the relief demanded, and the whole or

1, 1993. The Affidavit of Adverse Claim of Leoncia Martinez Vda. De Lukang and

part of such relief consists in restraining the commission or continuance

the Notice of Lis Pendens of Pedro Lukang over the six properties were all

of the act or acts complained of, or in requiring the performance of an act

inscribed on February 3, 1989.

or acts, either for a limited period or perpetually;

There is no question, therefore, that when the Pagbilao Development Corporation
(b) That the commission, continuance or non-performance of the act or

bought the properties from the vendors, it had full knowledge that there were

acts complained of during the litigation would probably work injustice to

questions involving ownership of the parcels of land it bought.

the applicant; or
Likewise there is no question that Pagbilao Development Corporation did not take
(c) That a party, court, agency or a person is doing, threatening, or is

any step to have the annotation or encumbrance in each title cancelled.

attempting to do, or is procuring or suffering to be done, some act or acts

[Emphases supplied]

probably in violation of the rights of the applicant respecting the subject

of the action or proceeding, and tending to render the judgment

The annotation of an adverse claim and notice of lis pendens over the subject

ineffectual.

properties is a notice to third persons that there is a controversy over the

ownership of the land and serves to preserve and protect the right of the adverse

Thus, a writ of preliminary injunction may be issued upon the concurrence of the

claimants during the pendency of the controversy. 40 The principle of filing a notice

following essential requisites, to wit: (a) the invasion of right sought to be

of lis pendens is based on public policy and necessity, the purpose of which is to

protected is material and substantial; (b) the right of the complainant is clear and

keep the properties in litigation within the power of the court until the litigation is

unmistakable; and (c) there is an urgent and paramount necessity for the writ to

terminated in order to prevent the defeat of the judgment by subsequent

prevent serious damage.36 While a clear showing of the right is necessary, its

alienation; and in order to bind a purchaser, bona fide or otherwise, to the

existence need not be conclusively established. Hence, to be entitled to the writ, it

judgment that the court would subsequently promulgate. It serves as an

announcement to the whole world that a particular real property is in litigation

and as a warning that those who acquire an interest in the property do so at their

v. Court of Industrial Relations, 45 the Court declared that it was erroneous for the

own risk -- they gamble on the result of the litigation over it.

labor court not to require the party to file a bond. Yet, the Court did not annul the

41

writ of injunction but instead ordered the said court to determine the appropriate
Here, it must be noted that the annotations of adverse claim and lis pendens have

amount of bond to be posted by the party.

been inscribed in the certificates of titles on the following dates February 3, 1989,
November 6, 1989 and October 1, 1990, more than three (3) years before PDC

In fine, it is erroneous for the CA to rule that the RTC committed grave abuse of

bought the subject properties in 1993. It would have been different if the adverse

discretion simply because it failed to fix the amount of the bond. This error

claims and lis pendens were not annotated in the titles. With PDC having been

caused "no substantial prejudice" that would warrant the quashal of the writ of

officially aware of them, there can be no grave abuse of discretion that can be

injunction.46 As a matter of fact, Pedro posted a bond in the amount of One

attributed to the RTC for issuing the writ of preliminary injunction. There is no

Million Pesos (P1,000,000.00), the sufficiency or insufficiency of which was never

question that when PDC purchased the property, the petitioner and other

questioned by PDC before the RTC.

intervenors were in actual possession of the property and their claims adverse to
its predecessors-in-interest were annotated in the very titles of the properties. In

Hence, the Court will not discuss the sufficiency of the bond not only because the

fact, these annotations were carried over to PDCs title. PDC cannot invoke its

issue was not raised before the RTC but also it involves a question of fact.

being the registered owner to dispossess the present possessors for, precisely,
when it brought the properties, it was charged with the knowledge that the
ownership and sale of the subject properties by its predecessors-in-interest have
been questioned by their co-heirs. Inevitably, PDC is deemed to have obtained the
properties subject to the outcome of the litigation among the heirs of Arsenio.

WHEREFORE, the petition is GRANTED. The assailed October 21, 2010 Decision
and the January 19, 2011 Resolution of the Court of Appeals in CA-G.R. SP No.
108809 are hereby REVERSED and SET ASIDE. The May 13, 2008 Order of the
Regional Trial Court, Branch 53, Lucena City, in Civil Case No. 89-79 and Civil
Case No. 90-124 ordering the issuance of a Writ of Preliminary Injunction, is

During the hearing, Pedro and the other heirs were able to convince the RTC that

hereby ordered REINSTATED.

they had a right over the properties which should be protected while being
litigated. Convinced, the RTC made a preliminary determination that their right
should be protected by a writ of preliminary injunction. Their claimed ownership

SO ORDERED.

and actual possession were then being violated by PDC which had started
entering the premises and preparing the property for the construction of a power
plant for liquefied natural gas. Unless legally stopped, such act would indeed
cause irreparable damage to the petitioner and other claimants. As claimed coowners, the petitioner and the other heirs have the right to remain in possession
of the subject properties pendente lite. The legal or practical remedy of PDC, who
gambled its lot in purchasing the properties despite the annotations, is to await
the final outcome of the cases or to amicably settle its problems with all the coowners, co-heirs or claimants.
With regard to the issue of the injunctive bond, the Court has time and again
ruled that the posting of the bond is a condition sine qua non before a writ of
preliminary injunction may issue.42 Its purpose is to secure the person enjoined
against any damage that he may sustain in case the court should finally decide
that the applicant was not entitled thereto. 43 The rule, does not mean, however,
that the injunction maybe disregarded since it becomes effective only after the
bond is actually filed in court. 44 In fact, in the case of Consolidated Workers Union

G.R. No. 176657

DEPARTMENT

September 1, 2010
OF

FOREIGN

AFFAIRS

and

BANGKO

SENTRAL

NG

PILIPINAS, Petitioners,
vs.
HON. FRANCO T. FALCON, IN HIS CAPACITY AS THE PRESIDING JUDGE OF
BRANCH 71 OF THE REGIONAL TRIAL COURT IN PASIG CITY and BCA
INTERNATIONAL CORPORATION, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Certiorari and prohibition under Rule 65 of the

On February 8, 2001, a Build-Operate-Transfer Agreement 7 (BOT Agreement)

Rules of Court with a prayer for the issuance of a temporary restraining order

between the DFA and PPC was signed by DFA Acting Secretary Lauro L. Baja, Jr.

and/or a writ of preliminary injunction filed by petitioners Department of Foreign

and PPC President Bonifacio Sumbilla. Under the BOT Agreement, the MRP/V

Affairs (DFA) and Bangko Sentral ng Pilipinas (BSP). Petitioners pray that the

Project was defined as follows:

Court declare as null and void the Order 1 dated February 14, 2007 of respondent
Judge Franco T. Falcon (Judge Falcon) in Civil Case No. 71079, which granted the
application for preliminary injunction filed by respondent BCA International
Corporation (BCA). Likewise, petitioners seek to prevent respondent Judge Falcon
from implementing the corresponding Writ of Preliminary Injunction dated
February 23, 20072 issued pursuant to the aforesaid Order.

Section 1.02 MRP/V Project refers to all the activities and services undertaken
in the fulfillment of the Machine Readable Passport and Visa Project as defined in
the Request for Proposals (RFP), a copy of which is hereto attached as Annex A,
including but not limited to project financing, systems development, installation
and maintenance in the Philippines and Foreign Service Posts (FSPs), training of
DFA personnel, provision of all project consumables (related to the production of

The facts of this case, as culled from the records, are as follows:

passports and visas, such as printer supplies, etc.), scanning of application and
citizenship documents, creation of data bases, issuance of machine readable

Being a member state of the International Civil Aviation Organization (ICAO), 3 the

passports and visas, and site preparation in the Central Facility and Regional

Philippines has to comply with the commitments and standards set forth in ICAO

Consular Offices (RCOs) nationwide.8

Document No. 9303 which requires the ICAO member states to issue machine
4

readable travel documents (MRTDs)5 by April 2010.

On April 5, 2002, former DFA Secretary Teofisto T. Guingona and Bonifacio

Sumbilla, this time as BCA President, signed an Amended BOT Agreement 9 in

Thus, in line with the DFAs mandate to improve the passport and visa issuance

order to reflect the change in the designation of the parties and to harmonize

system, as well as the storage and retrieval of its related application records, and

Section 11.3 with Section 11.810 of the IRR of the BOT Law. The Amended BOT

pursuant to our governments ICAO commitments, the DFA secured the approval

Agreement was entered into by the DFA and BCA with the conformity of PPC.

of the President of the Philippines, as Chairman of the Board of the National

Economic and Development Authority (NEDA), for the implementation of the

The two BOT Agreements (the original version signed on February 8, 2001 and

Machine Readable Passport and Visa Project (the MRP/V Project) under the

the amended version signed April 5, 2002) contain substantially the same

Build-Operate-and-Transfer (BOT) scheme, provided for by Republic Act No. 6957,

provisions except for seven additional paragraphs in the whereas clauses and two

as amended by Republic Act No. 7718 (the BOT Law), and its Implementing Rules

new provisions Section 9.05 on Performance and Warranty Securities and

and Regulations (IRR). Thus, a Pre-qualification, Bids and Awards Committee

Section 20.15 on Miscellaneous Provisions. The two additional provisions are

(PBAC) published an invitation to pre-qualify and bid for the supply of the needed

quoted below:

machine readable passports and visas, and conducted the public bidding for the
MRP/V Project on January 10, 2000. Several bidders responded and BCA was
among those that pre-qualified and submitted its technical and financial
proposals. On June 29, 2000, the PBAC found BCAs bid to be the sole complying
bid; hence, it permitted the DFA to engage in direct negotiations with BCA. On
even date, the PBAC recommended to the DFA Secretary the award of the MRP/V
Project to BCA on a BOT arrangement.
In compliance with the Notice of Award dated September 29, 2000 and Section
11.3, Rule 11 of the IRR of the BOT Law, 6 BCA incorporated a project company,
the Philippine Passport Corporation (PPC) to undertake and implement the
MRP/V Project.

Section 9.05. The PPC has posted in favor of the DFA the performance security
required for Phase 1 of the MRP/V Project and shall be deemed, for all intents and
purposes, to be full compliance by BCA with the provisions of this Article 9.
xxxx
Section 20.15 It is clearly and expressly understood that BCA may assign, cede
and transfer all of its rights and obligations under this Amended BOT Agreement
to PPC, as fully as if PPC is the original signatory to this Amended BOT
Agreement, provided however that BCA shall nonetheless be jointly and severally

liable with PPC for the performance of all the obligations and liabilities under this

Phase 3. Implementation of the MRP/V Project at the Regional Consular

Amended BOT Agreement.11

Offices This phase represents the replication of the systems as approved from
the Central Facility to the RCOs throughout the country, as identified in the RFP

Also modified in the Amended BOT Agreement was the Project Completion date of

[Request for Proposal]. The approved systems are those implemented, evaluated,

the MRP/V Project which set the completion of the implementation phase of the

and finally approved by DFA as described in Phase 1. The Project Proponent [BCA]

project within 18 to 23 months from the date of effectivity of the Amended BOT

will be permitted to begin site preparation and the scanning and database

Agreement as opposed to the previous period found in the original BOT

building operations in all offices as soon as the plans are agreed upon and

Agreement which set the completion within 18 to 23 months from receipt of the

accepted. This includes site preparation and database building operations in

NTP (Notice to Proceed) in accordance with the Project Master Plan.

these Phase-3 offices.

On April 12, 2002, an Assignment Agreement 12 was executed by BCA and PPC,

Within six (6) months from issuance of CA for Phase 2, the Project Proponent

whereby BCA assigned and ceded its rights, title, interest and benefits arising

[BCA] shall complete site preparation and implementation of the approved

from the Amended BOT Agreement to PPC.

systems in the ten (10) RCOs, including a fully functional network connection
between all equipment at the Central Facility and the RCOs.

As set out in Article 8 of the original and the Amended BOT Agreement, the
MRP/V Project was divided into six phases:

Phase 4. Full Implementation, including all Foreign Service Posts Within

three (3) to eight (8) months from issuance of the CA for Phase-3, the Project

Phase 1. Project Planning Phase The Project Proponent [BCA] shall prepare

Proponent [BCA] shall complete all preparations and fully implement the approved

detailed plans and specifications in accordance with Annex A of this [Amended]

systems in the eighty (80) FSPs, including a fully functional network connection

BOT Agreement within three (3) months from issuance of the NTP (Notice to

between all equipment at the Central Facility and the FSPs. Upon satisfactory

Proceed) [from the date of effectivity of this Amended BOT Agreement]. This phase

completion of Phase 4, a CA shall be issued by the DFA.

shall be considered complete upon the review, acceptance and approval by the
DFA of these plans and the resulting Master Plan, including the Master Schedule,
the business process specifications, the acceptance criteria, among other plans.

Phase 5. In Service Phase Operation and maintenance of the complete MRP/V

Facility to provide machine readable passports and visas in all designated
locations around the world.

xxxx
The DFA must approve all detailed plans as a condition precedent to the issuance
of the CA [Certificate of Acceptance] for Phase 1.

Phase

6.

Transition/Turnover Transition/Turnover to

the DFA

of all

operations and equipment, to include an orderly transfer of ownership of all

hardware, application system software and its source code and/or licenses
(subject to Section 5.02 [H]), peripherals, leasehold improvements, physical and

Phase 2. Implementation of the MRP/V Project at the Central Facility

computer security improvements, Automated Fingerprint Identification Systems,

Within six (6) months from issuance of the CA for Phase 1, the PROJECT

and all other MRP/V facilities shall commence at least six (6) months prior to the

PROPONENT [BCA] shall complete the implementation of the MRP/V Project in

end of the [Amended] BOT Agreement. The transition will include the training of

the DFA Central Facility, and establish the network design between the DFA

DFA personnel who will be taking over the responsibilities of system operation

Central Facility, the ten (10) RCOs [Regional Consular Offices] and the eighty (80)

and maintenance from the Project Proponent [BCA]. The Project Proponent [BCA]

FSPs [Foreign Service Posts].

shall bear all costs related to this transfer. 13 (Words in brackets appear in the
Amended BOT Agreement)

xxxx
To place matters in the proper perspective, it should be pointed out that both the
DFA and BCA impute breach of the Amended BOT Agreement against each other.

According to the DFA, delays in the completion of the phases permeated the

According to the DFA, BCAs financial warranty is a continuing warranty which

MRP/V Project due to the submission of deficient documents as well as

requires that it shall have the necessary capitalization to finance the MRP/V

intervening issues regarding BCA/PPCs supposed financial incapacity to fully

Project in its entirety and not on a "per phase" basis as BCA contends. Only upon

implement the project.

sufficient proof of its financial capability to complete and implement the whole
project will the DFAs obligation to choose and approve the location of its Central

On the other hand, BCA contends that the DFA failed to perform its reciprocal

Facility arise. The DFA asserted that its approval of a Central Facility site was not

obligation to issue to BCA a Certificate of Acceptance of Phase 1 within 14

ministerial and upon its review, BCAs proposed site for the Central Facility was

working days of operation purportedly required by Section 14.04 of the Amended

purportedly unacceptable in terms of security and facilities. Moreover, the DFA

BOT Agreement. BCA bewailed that it took almost three years for the DFA to issue

allegedly received conflicting official letters and notices 19 from BCA and PPC

the said Certificate allegedly because every appointee to the position of DFA

regarding the true ownership and control of PPC. The DFA implied that the

Secretary wanted to review the award of the project to BCA. BCA further alleged

disputes among the shareholders of PPC and between PPC and BCA appeared to

that it was the DFAs refusal to approve the location of the DFA Central Facility

be part of the reason for the hampered implementation of the MRP/V Project.

which prevented BCA from proceeding with Phase 2 of the MRP/V Project.
BCA, in turn, submitted various letters and documents to prove its financial
Later, the DFA sought the opinion of the Department of Finance (DOF) and the

capability to complete the MRP/V Project. 20 However, the DFA claimed these

Department of Justice (DOJ) regarding the appropriate legal actions in connection

documents were unsatisfactory or of dubious authenticity. Then on August 1,

with BCAs alleged delays in the completion of the MRP/V Project. In a Letter

2005, BCA terminated its Assignment Agreement with PPC and notified the DFA

dated February 21, 2005,

the DOJ opined that the DFA should issue a final

that it would directly implement the MRP/V Project. 21 BCA further claims that the

demand upon BCA to make good on its obligations, specifically on the warranties

termination of the Assignment Agreement was upon the instance, or with the

and responsibilities regarding the necessary capitalization and the required

conformity, of the DFA, a claim which the DFA disputed.

14

financing to carry out the MRP/V Project. The DOJ used as basis for said
recommendation, the Letter dated April 19, 2004 15 of DOF Secretary Juanita

On December 9, 2005, the DFA sent a Notice of Termination22 to BCA and PPC

Amatong to then DFA Secretary Delia Albert stating, among others, that BCA may

due to their alleged failure to submit proof of financial capability to complete the

not be able to infuse more capital into PPC to use for the completion of the

entire MRP/V Project in accordance with the financial warranty under Section

MRP/V Project.

5.02(A) of the Amended BOT Agreement. The Notice states:

Thus, on February 22, 2005, DFA sent a letter16 to BCA, through its project

After a careful evaluation and consideration of the matter, including the reasons

company PPC, invoking BCAs financial warranty under Section 5.02(A) of the

cited in your letters dated March 3, May 3, and June 20, 2005, and upon the

Amended BOT Agreement.17 The DFA required BCA to submit (a) proof of

recommendation of the Office of the Solicitor General (OSG), the Department is of

adequate capitalization (i.e., full or substantial payment of stock subscriptions);

the view that your continuing default in complying with the requisite bank

(b) a bank guarantee indicating the availability of a credit facility of P700 million;

guarantee and/or credit facility, despite repeated notice and demand, is legally

and (c) audited financial statements for the years 2001 to 2004.

unjustified.

In reply to DFAs letter, BCA, through PPC, informed the former of its position that

In light of the foregoing considerations and upon the instruction of the Secretary

its financial capacity was already passed upon during the prequalification process

of Foreign Affairs, the Department hereby formally TERMINATE (sic) the Subject

and that the Amended BOT Agreement did not call for any additional financial

Amended BOT Agreement dated 5 April 2005 (sic) 23effective 09 December 2005.

requirements for the implementation of the MRP/V Project. Nonetheless, BCA

Further, and as a consequence of this termination, the Department formally

submitted its financial statements for the years 2001 and 2002 and requested for

DEMAND (sic) that you pay within ten (10) days from receipt hereof, liquidated

additional time within which to comply with the other financial requirements

damages equivalent to the corresponding performance security bond that you had

which the DFA insisted on.18

posted for the MRP/V Project.

Please be guided accordingly.

1. A judgment nullifying and setting aside the Notice of Termination

dated December 9, 2005 of Respondent [DFA], including its demand to

On December 14, 2005, BCA sent a letter

24

to the DFA demanding that it

immediately reconsider and revoke its previous notice of termination, otherwise,

Claimant

[BCA]

to

pay

liquidated

damages

equivalent

to

the

corresponding performance security bond posted by Claimant [BCA];

BCA would be compelled to declare the DFA in default pursuant to the Amended
BOT Agreement. When the DFA failed to respond to said letter, BCA issued its

2. A judgment (a) confirming the Notice of Default dated December 22,

own Notice of Default dated December 22, 2005

against the DFA, stating that if

2005 issued by Claimant [BCA] to Respondent [DFA]; and (b) ordering

the default is not remedied within 90 days, BCA will be constrained to terminate

Respondent [DFA] to perform its obligation under the Amended BOT

the MRP/V Project and hold the DFA liable for damages.

Agreement dated April 5, 2002 by approving the site of the Central

25

Facility at the Star Mall Complex on Shaw Boulevard, Mandaluyong City,

BCAs request for mutual discussion under Section 19.01 of the Amended BOT

within five days from receipt of the Arbitral Award; and

Agreement26 was purportedly ignored by the DFA and left the dispute unresolved
through amicable means within 90 days. Consequently, BCA filed its Request for

3. A judgment ordering respondent [DFA] to pay damages to Claimant

Arbitration dated April 7, 200627 with the Philippine Dispute Resolution Center,

[BCA],

Inc. (PDRCI), pursuant to Section 19.02 of the Amended BOT Agreement which

representing lost business opportunities; financing fees, costs and

provides:

commissions; travel expenses; legal fees and expenses; and costs of

reasonably

estimated

atP50,000,000.00

as

of

this

date,

arbitration, including the fees of the arbitrator/s. 29

Section 19.02 Failure to Settle Amicably If the Dispute cannot be settled
amicably within ninety (90) days by mutual discussion as contemplated under

PDRCI, through a letter dated April 26, 2006, 30 invited the DFA to submit its

Section 19.01 herein, the Dispute shall be settled with finality by an arbitrage

Answer to the Request for Arbitration within 30 days from receipt of said letter

tribunal operating under International Law, hereinafter referred to as the

and also requested both the DFA and BCA to nominate their chosen arbitrator

"Tribunal", under the UNCITRAL Arbitration Rules contained in Resolution 31/98

within the same period of time.

adopted by the United Nations General Assembly on December 15, 1976, and
entitled "Arbitration Rules on the United Nations Commission on the International

Initially, the DFA, through a letter dated May 22, 2006, 31 requested for an

Trade Law". The DFA and the BCA undertake to abide by and implement the

extension of time to file its answer, "without prejudice to jurisdictional and other

arbitration award. The place of arbitration shall be Pasay City, Philippines, or

defenses and objections available to it under the law." Subsequently, however, in a

such other place as may mutually be agreed upon by both parties. The arbitration

letter dated May 29, 2006,32 the DFA declined the request for arbitration before

proceeding shall be conducted in the English language.

the PDRCI. While it expressed its willingness to resort to arbitration, the DFA

28

pointed out that under Section 19.02 of the Amended BOT Agreement, there is no
As alleged in BCAs Request for Arbitration, PDRCI is a non-stock, non-profit

mention of a specific body or institution that was previously authorized by the

organization composed of independent arbitrators who operate under its own

parties to settle their dispute. The DFA further claimed that the arbitration of the

Administrative Guidelines and Rules of Arbitration as well as under the United

dispute should be had before an ad hocarbitration body, and not before the PDRCI

Nations Commission on the International Trade Law (UNCITRAL) Model Law on

which has as its accredited arbitrators, two of BCAs counsels of record. Likewise,

International Commercial Arbitration and other applicable laws and rules.

the DFA insisted that PPC, allegedly an indispensable party in the instant case,

According to BCA, PDRCI can act as an arbitration center from whose pool of

should also participate in the arbitration.

accredited arbitrators both the DFA and BCA may select their own nominee to
become a member of the arbitral tribunal which will render the arbitration award.

The DFA then sought the opinion of the DOJ on the Notice of Termination dated
December 9, 2005 that it sent to BCA with regard to the MRP/V Project.

BCAs Request for Arbitration filed with the PDRCI sought the following reliefs:

In DOJ Opinion No. 35 (2006) dated May 31, 2006, 33 the DOJ concurred with the

pending the resolution on the merits of BCAs Request for Arbitration;

steps taken by the DFA, stating that there was basis in law and in fact for the

and

termination of the MRP/V Project. Moreover, the DOJ recommended the

immediate implementation of the project (presumably by a different contractor) at

(c) render judgment affirming the interim relief granted to BCA until the

the soonest possible time.

dispute between the parties shall have been resolved with finality.

Thereafter, the DFA and the BSP entered into a Memorandum of Agreement for

BCA also prays for such other relief, just and equitable under the premises. 37

the latter to provide the former passports compliant with international standards.
The

BSP

then

solicited

bids

for

the

supply,

delivery,

installation

and

commissioning of a system for the production of Electronic Passport Booklets or

e-Passports.34

BCA alleged, in support for its application for a Temporary Restraining Order
(TRO), that unless the DFA and the BSP were immediately restrained, they would
proceed to undertake the project together with a third party to defeat the reliefs
BCA sought in its Request for Arbitration, thus causing BCA to suffer grave and

For BCA, the BSPs invitation to bid for the supply and purchase of e-Passports

irreparable injury from the loss of substantial investments in connection with the

(the e-Passport Project) would only further delay the arbitration it requested from

implementation of the MRP/V Project.

the DFA. Moreover, this new e-Passport Project by the BSP and the DFA would
render BCAs remedies moot inasmuch as the e-Passport Project would then be
replacing the MRP/V Project which BCA was carrying out for the DFA.

Thereafter, the DFA filed an Opposition (to the Application for Temporary
Restraining Order and/or Writ of Preliminary Injunction) dated January 18,
2007,38 alleging that BCA has no cause of action against it as the contract

Thus, BCA filed a Petition for Interim Relief

under Section 28 of the Alternative

between them is for machine readable passports and visas which is not the same

Dispute Resolution Act of 2004 (R.A. No. 9285), 36 with the Regional Trial Court

as the contract it has with the BSP for the supply of electronic passports. The

(RTC) of Pasig City, Branch 71, presided over by respondent Judge Falcon. In that

DFA also pointed out that the Filipino people and the governments international

RTC petition, BCA prayed for the following:

standing would suffer great damage if a TRO would be issued to stop the e-

35

Passport Project. The DFA mainly anchored its opposition on Republic Act No.
WHEREFORE, BCA respectfully prays that this Honorable Court, before the

8975, which prohibits trial courts from issuing a TRO, preliminary injunction or

constitution of the arbitral tribunal in PDRCI Case No. 30-2006/BGF, grant

mandatory injunction against the bidding or awarding of a contract or project of

petitioner interim relief in the following manner:

the national government.

(a) upon filing of this Petition, immediately issue an order temporarily

On January 23, 2007, after summarily hearing the parties oral arguments on

restraining Respondents [DFA and BSP], their agents, representatives,

BCAs application for the issuance of a TRO, the trial court ordered the issuance

awardees, suppliers and assigns (i) from awarding a new contract to

of a TRO restraining the DFA and the BSP, their agents, representatives,

implement the Project, or any similar electronic passport or visa project;

awardees, suppliers and assigns from awarding a new contract to implement the

or (ii) if such contract has been awarded, from implementing such Project

Project or any similar electronic passport or visa project, or if such contract has

or similar projects until further orders from this Honorable Court;

been awarded, from implementing such or similar projects. 39 The trial court also
set for hearing BCAs application for preliminary injunction.

(b) after notice and hearing, issue a writ of preliminary injunction

ordering Respondents [DFA and BSP], their agents, representatives,

Consequently, the DFA filed a Motion for Reconsideration 40 of the January 23,

awardees, suppliers and assigns to desist (i) from awarding a new

2007 Order. The BSP, in turn, also sought to lift the TRO and to dismiss the

contract to implement the Project or any similar electronic passport or

petition. In its Urgent Omnibus Motion dated February 1, 2007, 41 the BSP

visa project; or (ii) if such contract has been awarded, from implementing

asserted that BCA is not entitled to an injunction, as it does not have a clear right

such Project or similar projects, and to maintain the status quo ante

which ought to be protected, and that the trial court has no jurisdiction to enjoin

the implementation of the e-Passport Project which, the BSP alleged, is a national

The motion to dismiss is denied for lack of merit. The motions for reconsideration

government project under Republic Act No. 8975.

and to lift temporary restraining Order are now moot and academic by reason of
the expiration of the TRO.45

In the hearings set for BCAs application for preliminary injunction, BCA
presented as witnesses, Mr. Bonifacio Sumbilla, its President, Mr. Celestino

On February 16, 2007, BCA filed an Amended Petition,46 wherein paragraphs

Mercader, Jr. from the Independent Verification and Validation Contractor

3.3(b) and 4.3 were modified to add language to the effect that unless petitioners

commissioned by the DFA under the Amended BOT Agreement, and DFA

were enjoined from awarding the e-Passport Project, BCA would be deprived of its

Assistant Secretary Domingo Lucenario, Jr. as adverse party witness.

constitutionally-protected right to perform its contractual obligations under the

original and amended BOT Agreements without due process of law. Subsequently,

The DFA and the BSP did not present any witness during the hearings for BCAs

on February 26, 2007, the DFA and the BSP received the Writ of Preliminary

application for preliminary injunction. According to the DFA and the BSP, the

Injunction dated February 23, 2007.

trial court did not have any jurisdiction over the case considering that BCA did
not pay the correct docket fees and that only the Supreme Court could issue a

Hence, on March 2, 2007, the DFA and the BSP filed the instant Petition

TRO on the bidding for a national government project like the e-Passport Project

for Certiorari47 and prohibition under Rule 65 of the Rules of Court with a prayer

pursuant to the provisions of Republic Act No. 8975. Under Section 3 of Republic

for the issuance of a temporary restraining order and/or a writ of preliminary

Act No. 8975, the RTC could only issue a TRO against a national government

injunction, imputing grave abuse of discretion on the trial court when it granted

project if it involves a matter of extreme urgency involving a constitutional issue,

interim relief to BCA and issued the assailed Order dated February 14, 2007 and

such that unless a TRO is issued, grave injustice and irreparable injury will arise.

the writ of preliminary injunction dated February 23, 2007.

Thereafter, BCA filed an Omnibus Comment [on Opposition and Supplemental

The DFA and the BSP later filed an Urgent Motion for Issuance of a Temporary

Opposition (To the Application for Temporary Restraining Order and/or Writ of

Restraining Order and/or Writ of Preliminary Injunction dated March 5, 2007. 48

Preliminary Injunction)] and Opposition [to Motion for Reconsideration (To the
Temporary Restraining Order dated January 23, 2007)] and Urgent Omnibus

On March 12, 2007, the Court required BCA to file its comment on the said

Motion [(i) To Lift Temporary Restraining Order; and (ii) To Dismiss the Petition]

petition within ten days from notice and granted the Office of the Solicitor

dated January 31, 2007.42 The DFA and the BSP filed their separate Replies (to

Generals urgent motion for issuance of a TRO and/or writ of preliminary

BCAs

Omnibus

injunction,49 thus:

2007,

respectively.

44

Comment)

dated

February

9,

2007 43 and

February

13,

After deliberating on the petition for certiorari and prohibition with temporary
On February 14, 2007, the trial court issued an Order granting BCAs application

restraining order and/or writ of preliminary injunction assailing the Order dated

for preliminary injunction, to wit:

14 February 2007 of the Regional Trial Court, Branch 71, Pasig City, in Civil Case
No. 71079, the Court, without necessarily giving due course thereto, resolves to

WHEREFORE, in view of the above, the court resolves that it has jurisdiction over

require respondents to COMMENT thereon (not to file a motion to dismiss) within

the instant petition and to issue the provisional remedy prayed for, and therefore,

ten (10) days from notice.

hereby GRANTS petitioners [BCAs] application for preliminary injunction.

Accordingly, upon posting a bond in the amount of Ten Million Pesos

The Court further resolves to GRANT the Office of the Solicitor Generals urgent

(P10,000,000.00), let a writ of preliminary injunction issue ordering respondents

motion for issuance of a temporary restraining order and/or writ of preliminary

[DFA and BSP], their agents, representatives, awardees, suppliers and assigns to

injunction dated 05 March 2007 and ISSUE a TEMPORARY RESTRAINING

desist (i) from awarding a new contract to implement the project or any similar

ORDER, as prayed for, enjoining respondents from implementing the assailed

electronic passport or visa project or (ii) if such contract has been awarded from

Order dated 14 February 2007 and the Writ of Preliminary Injunction dated 23

implementing such project or similar projects.

February 2007, issued by respondent Judge Franco T. Falcon in Civil Case No.

71079 entitled BCA International Corporation vs. Department of Foreign Affairs

contrary, it is the Filipino people, who petitioners protect, that will

and Bangko Sentral ng Pilipinas, and from conducting further proceedings in said

sustain serious and severe injury by the injunction.54

case until further orders from this Court.

At the outset, we dispose of the procedural objections of BCA to the petition, to
BCA filed on April 2, 2007 its Comment with Urgent Motion to Lift TRO, 50 to

wit: (a) petitioners did not follow the hierarchy of courts by filing their petition

which the DFA and the BSP filed their Reply dated August 14, 2007. 51

directly with this Court, without filing a motion for reconsideration with the RTC
and without filing a petition first with the Court of Appeals; (b) the person who

In a Resolution dated June 4, 2007, 52 the Court denied BCAs motion to lift TRO.

verified the petition for the DFA did not have personal knowledge of the facts of

BCA filed another Urgent Omnibus Motion dated August 17, 2007, for the

the case and whose appointment to his position was highly irregular; and (c) the

reconsideration of the Resolution dated June 4, 2007, praying that the TRO

verification by the Assistant Governor and General Counsel of the BSP of only

issued on March 12, 2007 be lifted and that the petition be denied.

selected paragraphs of the petition was with the purported intent to mislead this
Court.

In a Resolution dated September 10, 2007,

53

the Court denied BCAs Urgent

Omnibus Motion and gave due course to the instant petition. The parties were

Although the direct filing of petitions for certiorari with the Supreme Court is

directed to file their respective memoranda within 30 days from notice of the

discouraged when litigants may still resort to remedies with the lower courts, we

Courts September 10, 2007 Resolution.

have in the past overlooked the failure of a party to strictly adhere to the
hierarchy of courts on highly meritorious grounds. Most recently, we relaxed the

Petitioners DFA and BSP submit the following issues for our consideration:

rule on court hierarchy in the case of Roque, Jr. v. Commission on

Elections,55 wherein we held:

Issues
The policy on the hierarchy of courts, which petitioners indeed failed to observe,
I

is not an iron-clad rule. For indeed the Court has full discretionary power to take

Whether or not the respondent judge gravely abused his discretion amounting to

forcertiorari and mandamus filed directly with it for exceptionally compelling

cognizance

lack or excess of jurisdiction when he issued the assailed order, which effectively
enjoined the implementation of the e-passport project -- A national government
project under Republic Act No. 8975.

and

assume

jurisdiction

of

special

civil

actions

reasons or if warranted by the nature of the issues clearly and specifically raised
in the petition.56 (Emphases ours.)
The Court deems it proper to adopt a similarly liberal attitude in the present case
in consideration of the transcendental importance of an issue raised herein. This

II

is the first time that the Court is confronted with the question of whether an

Whether or not the respondent judge acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in granting respondent BCAs "interim
relief" inasmuch as:
(I) Respondent BCA has not established a clear right that can be
protected by an injunction; and
(II) Respondent BCA has not shown that it will sustain grave and
irreparable injury that must be protected by an injunction. On the

information and communication technology project, which does not conform to

our traditional notion of the term "infrastructure," is covered by the prohibition on
the issuance of court injunctions found in Republic Act No. 8975, which is
entitled "An Act to Ensure the Expeditious Implementation and Completion of
Government Infrastructure Projects by Prohibiting Lower Courts from Issuing
Temporary Restraining Orders, Preliminary Injunctions or Preliminary Mandatory
Injunctions, Providing Penalties for Violations Thereof, and for Other Purposes."
Taking into account the current trend of computerization and modernization of
administrative and service systems of government offices, departments and
agencies, the resolution of this issue for the guidance of the bench and bar, as
well as the general public, is both timely and imperative.

Anent BCAs claim that Mr. Edsel T. Custodio (who verified the Petition on behalf

The prohibition invoked by petitioners is found in Section 3 of Republic Act No.

of the DFA) did not have personal knowledge of the facts of the case and was

8975, which reads:

appointed to his position as Acting Secretary under purportedly irregular

circumstances, we find that BCA failed to sufficiently prove such allegations. In

Section 3. Prohibition on the Issuance of Temporary Restraining Orders,

any event, we have previously held that "[d]epending on the nature of the

Preliminary Injunctions and Preliminary Mandatory Injunctions. No court,

allegations in the petition, the verification may be based either purely on personal

except the Supreme Court, shall issue any temporary restraining order,

knowledge, or entirely on authentic records, or on both sources."57 The alleged

preliminary

lack of personal knowledge of Mr. Custodio (which, as we already stated, BCA

government, or any of its subdivisions, officials or any person or entity, whether

failed to prove) would not necessarily render the verification defective for he could

public or private, acting under the governments direction, to restrain, prohibit or

have verified the petition purely on the basis of authentic records.

compel the following acts:

injunction

or

preliminary

mandatory

injunction

against

the

As for the assertion that the partial verification of Assistant Governor and

(a) Acquisition, clearance and development of the right-of-way and/or site

General Counsel Juan de Zuniga, Jr. was for the purpose of misleading this

or location of any national government project;

Court, BCA likewise failed to adduce evidence on this point. Good faith is always
presumed. Paragraph 3 of Mr. Zunigas verification indicates that his partial
verification is due to the fact that he is verifying only the allegations in the
petition peculiar to the BSP. We see no reason to doubt that this is the true
reason for his partial or selective verification.
In sum, BCA failed to successfully rebut the presumption that the official acts (of
Mr. Custodio and Mr. Zuniga) were done in good faith and in the regular
performance of official duty.58 Even assuming the verifications of the petition
suffered from some defect, we have time and again ruled that "[t]he ends of justice
are better served when cases are determined on the merits after all parties are
given full opportunity to ventilate their causes and defenses rather than on
technicality or some procedural imperfections."59 In other words, the Court may
suspend or even disregard rules when the demands of justice so require.60
We now come to the substantive issues involved in this case.
On whether the trial court had jurisdiction to issue a writ of preliminary
injunction in the present case
In their petition, the DFA and the BSP argue that respondent Judge Falcon
gravely abused his discretion amounting to lack or excess of jurisdiction when he
issued the assailed orders, which effectively enjoined the bidding and/or
implementation of the e-Passport Project. According to petitioners, this violated
the clear prohibition under Republic Act No. 8975 regarding the issuance of TROs
and preliminary injunctions against national government projects, such as the ePassport Project.

(b) Bidding or awarding of contract/project of the national government as

defined under Section 2 hereof;
(c) Commencement, prosecution, execution, implementation, operation of
any such contract or project;
(d) Termination or rescission of any such contract/project; and
(e) The undertaking or authorization of any other lawful activity
necessary for such contract/project.
This prohibition shall apply in all cases, disputes or controversies instituted by a
private party, including but not limited to cases filed by bidders or those claiming
to have rights through such bidders involving such contract/project. This
prohibition shall not apply when the matter is of extreme urgency involving a
constitutional issue, such that unless a temporary restraining order is issued,
grave injustice and irreparable injury will arise. The applicant shall file a bond, in
an amount to be fixed by the court, which bond shall accrue in favor of the
government if the court should finally decide that the applicant was not entitled
to the relief sought.
If after due hearing the court finds that the award of the contract is null and void,
the court may, if appropriate under the circumstances, award the contract to the
qualified and winning bidder or order a rebidding of the same, without prejudice
to any liability that the guilty party may incur under existing laws.

From the foregoing, it is indubitable that no court, aside from the Supreme Court,

financed and operated by the public sector but which will now be wholly or partly

may enjoin a "national government project" unless the matter is one of extreme

implemented by the private sector, including but not limited to, power plants,

urgency involving a constitutional issue such that unless the act complained of is

highways, ports, airports, canals, dams, hydropower projects, water supply,

enjoined, grave injustice or irreparable injury would arise.

irrigation, telecommunications, railroads and railways, transport systems, land

reclamation projects, industrial estates or townships, housing, government

What then are the "national government projects" over which the lower courts are

buildings, tourism projects, markets, slaughterhouses, warehouses, solid waste

without jurisdiction to issue the injunctive relief as mandated by Republic Act No.

management, information technology networks and database infrastructure,

8975?

education and health facilities, sewerage, drainage, dredging, and other

infrastructure and development projects as may be authorized by the appropriate

Section 2(a) of Republic Act No. 8975 provides:

agency.

Section 2. Definition of Terms.

In contrast, Republic Act No. 9184, 62 also known as the Government Procurement
Reform Act, defines infrastructure projects in Section 5(k) thereof in this manner:

(a) "National government projects" shall refer to all current and future national
government infrastructure, engineering works and service contracts, including

(k) Infrastructure Projects - include the construction, improvement, rehabilitation,

projects undertaken by government-owned and -controlled corporations, all

demolition, repair, restoration or maintenance of roads and bridges, railways,

projects covered by Republic Act No. 6975, as amended by Republic Act No. 7718,

airports,

otherwise known as the Build-Operate-and-Transfer Law, and other related and

information technology projects, irrigation, flood control and drainage, water

necessary activities, such as site acquisition, supply and/or installation of

supply, sanitation, sewerage and solid waste management systems, shore

equipment and materials, implementation, construction, completion, operation,

protection, energy/power and electrification facilities, national buildings, school

maintenance, improvement, repair and rehabilitation, regardless of the source of

buildings, hospital buildings and other related construction projects of the

funding.

government. (Emphasis supplied.)

As petitioners themselves pointed out, there are three types of national

In the present petition, the DFA and the BSP contend that the bidding for the

government projects enumerated in Section 2(a), to wit:

supply, delivery, installation and commissioning of a system for the production of

seaports,

communication

facilities,

civil

works

components

of

Electronic Passport Booklets, is a national government project within the

(a) current and future national government infrastructure projects,

definition of Section 2 of Republic Act No. 8975. Petitioners also point to the

engineering works and service contracts, including projects undertaken

Senate deliberations on Senate Bill No. 2038 63 (later Republic Act No. 8975) which

by government-owned and controlled corporations;

allegedly show the legislatives intent to expand the scope and definition of
national government projects to cover not only the infrastructure projects

(b) all projects covered by R.A. No. 6975, as amended by R.A. No. 7718,

enumerated in Presidential Decree No. 1818, but also future projects that may

or the Build-Operate-and-Transfer ( BOT) Law; and

likewise be considered national government infrastructure projects, like the ePassport Project, to wit:

(c) other related and necessary activities, such as site acquisition, supply
implementation,

Senator Cayetano. x x x Mr. President, the present bill, the Senate Bill No. 2038,

construction, completion, operation, maintenance, improvement repair

is actually an improvement of P.D. No. 1818 and definitely not a repudiation of

and rehabilitation, regardless of the source of funding.

what I have earlier said, as my good friend clearly stated. But this is really an

and/or

installation

of

equipment

and

materials,

effort to improve both the scope and definition of the term "government projects"
Under Section 2(a) of the BOT Law as amended by Republic Act No.
7718,

61

private sector infrastructure or development projects are those normally

and to ensure that lower court judges obey and observe this prohibition on the
issuance of TROs on infrastructure projects of the government.

xxxx

In relation to information technology projects, infrastructure projects refer to the

"civil works components" thereof. (R.A. No. 9184 [2003], Sec. 5[c]{sic}).64

Senator Cayetano. That is why, Mr. President, I did try to explain why I would
accept the proposed amendment, meaning the totality of the repeal of P.D. 1818

Respondent BSPs request for bid, for the supply, delivery, installation and

which is not found in the original version of the bill, because of my earlier

commissioning of a system for the production of Electronic Passport Booklets

explanation that the definition of the term government infrastructure project

appears to be beyond the scope of the term "civil works." Respondents did not

covers all of those enumerated in Section 1 of P.D. No. 1818. And the reason for

present evidence to prove otherwise.65 (Emphases ours.)

that, as we know, is we do not know what else could be considered government

infrastructure project in the next 10 or 20 years.

From the foregoing, it can be gleaned that the trial court accepted BCAs
reasoning that, assuming the e-Passport Project is a project under the BOT Law,

x x x So, using the Latin maxim of expression unius est exclusion alterius, which

Section 2 of the BOT Law must be read in conjunction with Section 5(c) of

means what is expressly mentioned is tantamount to an express exclusion of the

Republic Act No. 9184 or the Government Procurement Reform Act to the effect

others, that is the reason we did not include particularly an enumeration of

that only the civil works component of information technology projects are to be

certain activities of the government found in Section 1 of P.D. No. 1818. Because

considered "infrastructure." Thus, only said civil works component of an

to do that, it may be a good excuse for a brilliant lawyer to say Well, you know,

information technology project cannot be the subject of a TRO or writ of

since it does not cover this particular activity, ergo, the Regional Trial Court may

injunction issued by a lower court.

issue TRO.
Although the Court finds that the trial court had jurisdiction to issue the writ of
Using the foregoing discussions to establish that the intent of the framers of the

preliminary injunction, we cannot uphold the theory of BCA and the trial court

law was to broaden the scope and definition of national government projects and

that the definition of the term "infrastructure project" in Republic Act No. 9184

national infrastructure projects, the DFA and the BSP submit that the said scope

should be applied to the BOT Law.

and definition had since evolved to include the e-Passport Project. They assert
that the concept of "infrastructure" must now refer to any and all elements that

Section 5 of Republic Act No. 9184 prefaces the definition of the terms therein,

provide support, framework, or structure for a given system or organization,

including the term "infrastructure project," with the following phrase: "For

including information technology, such as the e-Passport Project.

purposes of this Act, the following terms or words and phrases shall mean or be
understood as follows x x x."

Interestingly, petitioners represented to the trial court that the e-Passport Project
is a BOT project but in their petition with this Court, petitioners simply claim

This Court has stated that the definition of a term in a statute is not conclusive

that the e-Passport Project is a national government project under Section 2 of

as to the meaning of the same term as used elsewhere. 66 This is evident when the

Republic Act No. 8975. This circumstance is significant, since relying on the claim

legislative definition is expressly made for the purposes of the statute containing

that the e-Passport Project is a BOT project, the trial court ruled in this wise:

such definition.67

The prohibition against issuance of TRO and/or writ of preliminary injunction

There is no legal or rational basis to apply the definition of the term

under RA 8975 applies only to national government infrastructure project covered

"infrastructure project" in one statute to another statute enacted years before and

by the BOT Law, (RA 8975, Sec 3[b] in relation to Sec. 2).

which already defined the types of projects it covers. Rather, a reading of the two
statutes involved will readily show that there is a legislative intent to treat

The national government projects covered under the BOT are enumerated under

information technology projects differently under the BOT Law and the

Sec. 2 of RA6957, as amended, otherwise known as the BOT Law. Notably, it

Government Procurement Reform Act.

includes "information technology networks and database infrastructure."

In the BOT Law as amended by Republic Act No. 7718, the national

For purposes of these Implementing Rules and Regulations, the terms and

infrastructure and development projects covered by said law are enumerated in

phrases hereunder shall be understood as follows:

Section 2(a) as follows:

xxxx
SEC. 2. Definition of Terms. - The following terms used in this Act shall have the
meanings stated below:

v. Private Sector Infrastructure or Development Projects - The general

description of infrastructure or Development Projects normally financed, and

(a) Private sector infrastructure or development projects - The general description of

operated by the public sector but which will now be wholly or partly financed,

infrastructure or development projects normally financed and operated by the

constructed and operated by the private sector, including but not limited to,

public sector but which will now be wholly or partly implemented by the private

power plants, highways, ports, airports, canals, dams, hydropower projects, water

sector, including but not limited to, power plants, highways, ports, airports,

supply, irrigation, telecommunications, railroad and railways, transport systems,

canals, dams, hydropower projects, water supply, irrigation, telecommunications,

land reclamation projects, industrial estates or townships, housing, government

railroads and railways, transport systems, land reclamation projects, industrial

buildings, tourism projects, public markets, slaughterhouses, warehouses, solid

estates of townships, housing, government buildings, tourism projects, markets,

waste

slaughterhouses, warehouses, solid waste management, information technology

infrastructure, education and health facilities, sewerage, drainage, dredging, and

networks and database infrastructure, education and health facilities, sewerage,

other infrastructure and development projects as may otherwise be authorized by

drainage, dredging, and other infrastructure and development projects as may be

the appropriate Agency/LGU pursuant to the Act or these Revised IRR. Such

authorized by the appropriate agency pursuant to this Act. Such projects shall be

projects shall be undertaken through Contractual Arrangements as defined

undertaken through contractual arrangements as defined hereunder and such

herein, including such other variations as may be approved by the President of

other variations as may be approved by the President of the Philippines.

the Philippines.

For the construction stage of these infrastructure projects, the project proponent

xxxx

management, information

technology

networks

and

database

may obtain financing from foreign and/or domestic sources and/or engage the
services of a foreign and/or Filipino contractor: Provided, That, in case an
infrastructure or a development facility's operation requires a public utility
franchise, the facility operator must be a Filipino or if a corporation, it must be
duly registered with the Securities and Exchange Commission and owned up to at
least sixty percent (60%) by Filipinos: Provided, further, That in the case of foreign
contractors, Filipino labor shall be employed or hired in the different phases of
construction where Filipino skills are available: Provided, finally, That projects
which would have difficulty in sourcing funds may be financed partly from direct
government appropriations and/or from Official Development Assistance (ODA) of
foreign governments or institutions not exceeding fifty percent (50%) of the project
cost, and the balance to be provided by the project proponent. (Emphasis
supplied.)
A similar provision appears in the Revised IRR of the BOT Law as amended, to
wit:
SECTION 1.3 - DEFINITION OF TERMS

SECTION 2.2 - ELIGIBLE TYPES OF PROJECTS

The

Construction,

rehabilitation,

improvement,

betterment,

expansion,

modernization, operation, financing and maintenance of the following types of

projects which are normally financed and operated by the public sector which will
now be wholly or partly financed, constructed and operated by the private sector,
including other infrastructure and development projects as may be authorized by
the appropriate agencies, may be proposed under the provisions of the Act and
these Revised IRR, provided however that such projects have a cost recovery
component which covers at least 50% of the Project Cost, or as determined by the
Approving Body:
xxxx
h. Information

technology

(IT)

and

data

base

infrastructure,

including

modernization of IT, geo-spatial resource mapping and cadastral survey for

resource accounting and planning. (Underscoring supplied.)

Undeniably, under the BOT Law, wherein the projects are to be privately funded,

The idea that the definitions of terms found in the Government Procurement

the entire information technology project, including the civil works component

Reform Act were not meant to be applied to projects under the BOT Law is further

and the technological aspect thereof, is considered an infrastructure or

reinforced by the following provision in the IRR of the Government Procurement

development project and treated similarly as traditional "infrastructure" projects.

Reform Act:

All the rules applicable to traditional infrastructure projects are also applicable to
information technology projects. In fact, the MRP/V Project awarded to BCA
under the BOT Law appears to include both civil works (i.e., site preparation of
the Central Facility, regional DFA offices and foreign service posts) and non-civil
works aspects (i.e., development, installation and maintenance in the Philippines
and foreign service posts of a computerized passport and visa issuance system,
including creation of databases, storage and retrieval systems, training of
personnel and provision of consumables).
In contrast, under Republic Act No. 9184 or the Government Procurement Reform
Act, which contemplates projects to be funded by public funds, the term
"infrastructure project" was limited to only the "civil works component" of
information technology projects. The non-civil works component of information
technology projects would be treated as an acquisition of goods or consulting
services as the case may be.
This limited definition of "infrastructure project" in relation to information
technology projects under Republic Act No. 9184 is significant since the IRR of
Republic Act No. 9184 has some provisions that are particular to infrastructure
projects and other provisions that are applicable only to procurement of goods or
consulting services.68
Implicitly, the civil works component of information technology projects are
subject to the provisions on infrastructure projects while the technological and
other components would be covered by the provisions on procurement of goods or
consulting services as the circumstances may warrant.
When Congress adopted a limited definition of what is to be considered
"infrastructure" in relation to information technology projects under the
Government Procurement Reform Act, legislators are presumed to have taken into
account previous laws concerning infrastructure projects (the BOT Law and
Republic Act No. 8975) and deliberately adopted the limited definition. We can
further presume that Congress had written into law a different treatment for
information technology projects financed by public funds vis-a-vis privately
funded projects for a valid legislative purpose.

Section 1. Purpose and General Coverage

This Implementing Rules and Regulations (IRR) Part A, hereinafter called "IRR-A,"
is promulgated pursuant to Section 75 of Republic Act No. 9184 (R.A. 9184),
otherwise known as the "Government Procurement Reform Act" (GPRA), for the
purpose of prescribing the necessary rules and regulations for the modernization,
standardization, and regulation of the procurement activities of the government.
This IRR-A shall cover all fully domestically-funded procurement activities from
procurement planning up to contract implementation and termination, except for
the following:
a) Acquisition of real property which shall be governed by Republic Act
No. 8974 (R.A. 8974), entitled "An Act to Facilitate the Acquisition of
Right-of-Way Site or Location for National Government Infrastructure
Projects and for Other Purposes," and other applicable laws; and
b) Private sector infrastructure or development projects and other
procurement covered by Republic Act No. 7718 (R.A. 7718), entitled "An
Act

Authorizing

the

Financing,

Construction,

Operation

and

Maintenance of Infrastructure Projects by the Private Sector, and for

Other Purposes," as amended: Provided, however, That for the portions
financed by the Government, the provisions of this IRR-A shall apply.
The IRR-B for foreign-funded procurement activities shall be the subject of a
subsequent issuance. (Emphases supplied.)
The foregoing provision in the IRR can be taken as an administrative
interpretation that the provisions of Republic Act No. 9184 are inapplicable to a
BOT project except only insofar as such portions of the BOT project that are
financed by the government.
Taking into account the different treatment of information technology projects
under the BOT Law and the Government Procurement Reform Act, petitioners
contention the trial court had no jurisdiction to issue a writ of preliminary

injunction in the instant case would have been correct if the e-Passport Project

government infrastructure, engineering works, service contract or project under

was a project under the BOT Law as they represented to the trial court.

the BOT Law. In other words, to be considered a service contract or related

activity, petitioners must show that the e-Passport Project is an infrastructure

However, petitioners presented no proof that the e-Passport Project was a BOT

project or necessarily related to an infrastructure project. This, petitioners failed

project. On the contrary, evidence adduced by both sides tended to show that the

to do for they saw fit not to present any evidence on the details of the e-Passport

e-Passport Project was a procurement contract under Republic Act No. 9184.

Project before the trial court and this Court. There is nothing on record to
indicate that the e-Passport Project has a civil works component or is necessarily

The BSPs on-line request for expression of interest and to bid for the e-Passport

related to an infrastructure project.

Project69 from the BSP website and the newspaper clipping 70 of the same request
expressly stated that "[t]he two stage bidding procedure under Section 30.4 of the

Indeed, the reference to Section 30.4 75 of the IRR of Republic Act No. 9184 (a

Implementing Rules and Regulation (sic) Part-A of Republic Act No. 9184 relative

provision specific to the procurement of goods) in the BSPs request for interest

to the bidding and award of the contract shall apply." During the testimony of

and to bid confirms that the e-Passport Project is a procurement of goods and not

DFA Assistant Secretary Domingo Lucenario, Jr. before the trial court, he

an infrastructure project. Thus, within the context of Republic Act No. 9184

admitted that the e-Passport Project is a BSP procurement project and that it is

which is the governing law for the e-Passport Project the said Project is not an

the "BSP that will pay the suppliers." 71 In petitioners Manifestation dated July 29,

infrastructure project that is protected from lower court issued injunctions under

200872 and the Erratum73thereto, petitioners informed the Court that a contract

Republic Act No. 8975, which, to reiterate, has for its purpose the expeditious and

"for the supply of a complete package of systems design, technology, hardware,

efficient implementation and completion of government infrastructure projects.

software, and peripherals, maintenance and technical support, ecovers and

datapage security laminates for the centralized production and personalization of

We note that under Section 28, Republic Act No. 9285 or the Alternative Dispute

Machine Readable Electronic Passport" was awarded to Francois Charles

Resolution Act of 2004,76 the grant of an interim measure of protection by the

Oberthur Fiduciaire. In the Notice of Award dated July 2, 2008

proper court before the constitution of an arbitral tribunal is allowed:

74

attached to

petitioners pleading, it was stated that the failure of the contractor/supplier to

submit the required performance bond would be sufficient ground for the

Sec. 28. Grant of Interim Measure of Protection. (a) It is not incompatible with an

imposition of administrative penalty under Section 69 of the IRR-A of Republic Act

arbitration agreement for a party to request, before constitution of the tribunal,

No. 9184.

from a Court an interim measure of protection and for the Court to grant such
measure. After constitution of the arbitral tribunal and during arbitral

Being a government procurement contract under Republic Act No. 9184, only the

proceedings, a request for an interim measure of protection, or modification

civil works component of the e-Passport Project would be considered an

thereof, may be made with the arbitral tribunal or to the extent that the arbitral

infrastructure project that may not be the subject of a lower court-issued writ of

tribunal has no power to act or is unable to act effectively, the request may be

injunction under Republic Act No. 8975.

made with the Court. The arbitral tribunal is deemed constituted when the sole
arbitrator or the third arbitrator, who has been nominated, has accepted the

Could the e-Passport Project be considered as "engineering works or a service

nomination and written communication of said nomination and acceptance has

contract" or as "related and necessary activities" under Republic Act No. 8975

been received by the party making the request.

which may not be enjoined?

(a) The following rules on interim or provisional relief shall be observed:
We hold in the negative. Under Republic Act No. 8975, a "service contract" refers
to "infrastructure contracts entered into by any department, office or agency of

(1) Any party may request that provisional relief be granted against the

the national government with private entities and nongovernment organizations

adverse party.

for services related or incidental to the functions and operations of the

department, office or agency concerned." On the other hand, the phrase "other
related and necessary activities" obviously refers to activities related to a

(2) Such relief may be granted:

(i) to prevent irreparable loss or injury;

However, as discussed above, the prohibition in Republic Act No. 8975 is

inoperative in this case, since petitioners failed to prove that the e-Passport

(ii) to provide security for the performance of any obligation;

Project is national government project as defined therein. Thus, the trial court
had jurisdiction to issue a writ of preliminary injunction against the e-Passport

(iii) to produce or preserve any evidence; or

Project.

(iv) to compel any other appropriate act or omission.

On whether the trial courts issuance of a writ of injunction was proper

(3) The order granting provisional relief may be conditioned upon the

Given the above ruling that the trial court had jurisdiction to issue a writ of

provision of security or any act or omission specified in the order.

injunction and going to the second issue raised by petitioners, we answer the

(4) Interim or provisional relief is requested by written application

the circumstances of this case?

transmitted by reasonable means to the Court or arbitral tribunal as the

case may be and the party against whom the relief is sought, describing
in appropriate detail the precise relief, the party against whom the relief
is requested, the grounds for the relief, and the evidence supporting the

question: Was the trial courts issuance of a writ of injunction warranted under

Petitioners attack on the propriety of the trial courts issuance of a writ of

injunction is two-pronged: (a) BCA purportedly has no clear right to the injunctive
relief sought; and (b) BCA will suffer no grave and irreparable injury even if the

request.

injunctive relief were not granted.

(5) The order shall be binding upon the parties.

To support their claim that BCA has no clear right to injunctive relief, petitioners

(6) Either party may apply with the Court for assistance in implementing

project. Moreover, the MRP/V Project purportedly involves a technology (the 2D

mainly allege that the MRP/V Project and the e-Passport Project are not the same

or enforcing an interim measure ordered by an arbitral tribunal.

optical bar code) that has been rendered obsolete by the latest ICAO developments

(7) A party who does not comply with the order shall be liable for all

contactless integrated circuit). Parenthetically, and not as a main argument,

damages resulting from noncompliance, including all expenses and

reasonable attorneys fees, paid in obtaining the orders judicial
enforcement.
Section 3(h) of the same statute provides that the "Court" as referred to in Article
6 of the Model Law shall mean a Regional Trial Court.
Republic Act No. 9285 is a general law applicable to all matters and controversies
to be resolved through alternative dispute resolution methods. This law allows a
Regional Trial Court to grant interim or provisional relief, including preliminary
injunction, to parties in an arbitration case prior to the constitution of the
arbitral tribunal. This general statute, however, must give way to a special law
governing national government projects, Republic Act No. 8975 which prohibits
courts, except the Supreme Court, from issuing TROs and writs of preliminary
injunction in cases involving national government projects.

while the e-Passport Project will comply with the latest ICAO standards (the
petitioners imply that BCA has no clear contractual right under the Amended
BOT Agreement since BCA had previously assigned all its rights and obligations
under the said Agreement to PPC.
BCA, on the other hand, claims that the Amended BOT Agreement also
contemplated the supply and/or delivery of e-Passports with the integrated circuit
technology in the future and not only the machine readable passport with the 2D
optical bar code technology. Also, it is BCAs assertion that the integrated circuit
technology is only optional under the ICAO issuances. On the matter of its
assignment of its rights to PPC, BCA counters that it had already terminated
(purportedly at DFAs request) the assignment agreement in favor of PPC and that
even assuming the termination was not valid, the Amended BOT Agreement
expressly stated that BCA shall remain solidarily liable with its assignee, PPC.
Most of these factual allegations and counter-allegations already touch upon the
merits of the main controversy between the DFA and BCA, i.e., the validity and

propriety of the termination of the Amended BOT Agreement (the MRP/V Project)

With respect to petitioners contention that BCA will suffer no grave and

between the DFA and BCA. The Court deems it best to refrain from ruling on

irreparable injury so as to justify the grant of injunctive relief, the Court finds

these matters since they should be litigated in the appropriate arbitration or

that this particular argument merits consideration.

court proceedings between or among the concerned parties.

The BOT Law as amended by Republic Act No. 7718, provides:
One preliminary point, however, that must be settled here is whether BCA retains
a right to seek relief against the DFA under the Amended BOT Agreement in view

SEC. 7. Contract Termination. - In the event that a project is revoked, cancelled or

of BCAs previous assignment of its rights to PPC. Without preempting any factual

terminated by the Government through no fault of the project proponent or by

finding that the appropriate court or arbitral tribunal on the matter of the validity

mutual agreement, the Government shall compensate the said project proponent

of the assignment agreement with PPC or its termination, we agree with BCA that

for its actual expenses incurred in the project plus a reasonable rate of return

it remained a party to the Amended BOT Agreement, notwithstanding the

thereon not exceeding that stated in the contract as of the date of such

execution of the assignment agreement in favor of PPC, for it was stipulated in the

revocation, cancellation or termination: Provided, That the interest of the

Amended BOT Agreement that BCA would be solidarily liable with its assignee.

Government in this instances shall be duly insured with the Government Service

For convenient reference, we reproduce the relevant provision of the Amended

Insurance System [GSIS] or any other insurance entity duly accredited by the

BOT Agreement here:

Office of the Insurance Commissioner:Provided, finally, That the cost of the

insurance coverage shall be included in the terms and conditions of the bidding

Section 20.15. It is clearly and expressly understood that BCA may assign, cede

referred to above.

and transfer all of its rights and obligations under this Amended BOT Agreement
to PPC [Philippine Passport Corporation], as fully as if PPC is the original

In the event that the government defaults on certain major obligations in the

signatory to this Amended BOT Agreement, provided however that BCA shall

contract and such failure is not remediable or if remediable shall remain

nonetheless be jointly and severally liable with PPC for the performance of

unremedied for an unreasonable length of time, the project proponent/contractor

all

may, by prior notice to the concerned national government agency or local

the

obligations

and

liabilities

under

this

Amended

BOT

Agreement. (Emphasis supplied.)

government unit specifying the turn-over date, terminate the contract. The project
proponent/contractor shall be reasonably compensated by the Government for

Furthermore, a review of the records shows that the DFA continued to address its
correspondence regarding the MRP/V Project to both BCA and PPC, even after the
execution of the assignment agreement. Indeed, the DFAs Notice of Termination
dated December 9, 2005 was addressed to Mr. Bonifacio Sumbilla as President of
both BCA and PPC and referred to the Amended BOT Agreement "executed
between the Department of Foreign Affairs (DFA), on one hand, and the BCA

equivalent or proportionate contract cost as defined in the contract. (Emphases

supplied.)
In addition, the Amended BOT Agreement, which is the law between and among
the parties to it, pertinently provides:

Corporation

Section 17.01 Default In case a party commits an act constituting an event

(BCA/PPC)." At the very least, the DFA is estopped from questioning the

of default, the non-defaulting party may terminate this Amended BOT

personality of BCA to bring suit in relation to the Amended BOT Agreement since

Agreement by serving a written notice to the defaulting party specifying the

the DFA continued to deal with both BCA and PPC even after the signing of the

grounds for termination and giving the defaulting party a period of ninety (90)

assignment agreement. In any event, if the DFA truly believes that PPC is an

days within which to rectify the default. If the default is not remedied within this

indispensable party to the action, the DFA may take necessary steps to implead

period to the satisfaction of the non-defaulting party, then the latter will serve

PPC but this should not prejudice the right of BCA to file suit or to seek relief for

upon the former a written notice of termination indicating the effective date of

causes of action it may have against the DFA or the BSP, for undertaking the e-

termination.

International

Corporation

and/or

Passport Project on behalf of the DFA.

the

Philippine

Passport

Section 17.02 Proponents Default If this Amended BOT Agreement is terminated

B. Pay liquidated damages to the BCA equivalent to the following

by reason of the BCAs default, the DFA shall have the following options:

amounts, which may be charged to the insurance proceeds referred to in

Article 12:

A. Allow the BCAs unpaid creditors who hold a lien on the MRP/V
Facility to foreclose on the MRP/V Facility. The right of the BCAs

(1) In the event of termination prior to completion of the

unpaid creditors to foreclose on the MRP/V Facility shall be valid for the

implementation of the MRP/V Project,damages shall be paid

duration of the effectivity of this Amended BOT Agreement; or,

equivalent to the value of completed implementation, minus

the aggregate amount of the attendant liabilities assumed

B. Allow the BCAs unpaid creditors who hold a lien on the MRP/V

by the DFA, plus ten percent (10%) thereof. The amount of

Facility to designate a substitute BCA for the MRP/V Project, provided

such compensation shall be determined as of the date of the

the designated substitute BCA is qualified under existing laws and

notice of termination and shall become due and demandable

acceptable to the DFA. This substitute BCA shall hereinafter be referred

ninety (90) days after the date of this notice of termination.

to as the "Substitute BCA." The Substitute BCA shall assume all the

Under this Amended BOT Agreement, the term "Value of the

BCAs rights and privileges, as well as the obligations, duties and

Completed Implementation" shall mean the aggregate of all

responsibilities hereunder; provided, however, that the DFA shall at all

reasonable costs and expenses incurred by the BCA in

times and its sole option, have the right to invoke and exercise any other

connection with, in relation to and/or by reason of the MRP/V

remedy which may be available to the DFA under any applicable laws,

Project, excluding all interest and capitalized interest, as

rules and/or regulations which may be in effect at any time and from

certified by a reputable and independent accounting firm to be

time to time. The DFA shall cooperate with the creditors with a view to

appointed by the BCA and subject to the approval by the DFA,

facilitating the choice of a Substitute BCA, who shall take-over the

such approval shall not be unreasonably withheld.

operation, maintenance and management of the MRP/V Project, within

three (3) months from the BCAs receipt of the notice of termination from

(2) In the event of termination after completion of design,

the DFA. The Substituted BCA shall have all the rights and obligations of

development, and installation of the MRP/V Project, just

the previous BCA as contained in this Amended BOT Agreement; or

C. Take-over the MRP/V Facility and assume all attendant liabilities
thereof.
D. In all cases of termination due to the default of the BCA, it shall

compensation shall be paid equivalent to the present value

of the net income which the BCA expects to earn or realize
during the unexpired or remaining term of this Amended
BOT Agreement using the internal rate of return on equity
(IRRe) defined in the financial projections of the BCA and agreed
upon by the parties, which is attached hereto and made as an

pay DFA liquidated damagesequivalent to the applicable the (sic)

integral part of this Amended BOT Agreement as Schedule "1".

Performance Security.

(Emphases supplied.)

Section 17.03 DFAs Default If this Amended BOT Agreement is terminated by

The validity of the DFAs termination of the Amended BOT Agreement and the

the BCA by reason of the DFAs Default, the DFA shall:

determination of the party or parties in default are issues properly threshed out
in arbitration proceedings as provided for by the agreement itself. However, even if

A. Be obligated to take over the MRP/V Facility on an "as is, where is"
basis, and shall forthwith assume attendant liabilities thereof; and

we hypothetically accept BCAs contention that the DFA terminated the Amended
BOT Agreement without any default or wrongdoing on BCAs part, it is not
indubitable that BCA is entitled to injunctive relief.

The BOT Law expressly allows the government to terminate a BOT agreement,

be shown that the invasion of the right sought to be protected is material and

even without fault on the part of the project proponent, subject to the payment of

substantial, that the right of complainant is clear and unmistakable and that

the actual expenses incurred by the proponent plus a reasonable rate of return.

there is an urgent and paramount necessity for the writ to prevent serious
damage. Moreover, an injunctive remedy may only be resorted to when there is a

Under the BOT Law and the Amended BOT Agreement, in the event of default on

pressing necessity to avoid injurious consequences which cannot be remedied

the part of the government (in this case, the DFA) or on the part of the proponent,

under any standard compensation. (Emphasis supplied.)

the non-defaulting party is allowed to terminate the agreement, again subject to

proper compensation in the manner set forth in the agreement.

As the Court explained previously in Philippine Airlines, Inc. v. National Labor

Relations Commission79:

Time and again, this Court has held that to be entitled to injunctive relief the
party seeking such relief must be able to show grave, irreparable injury that is

An injury is considered irreparable if it is of such constant and frequent

not capable of compensation.

recurrence that no fair and reasonable redress can be had therefor in a court of
law, or where there is no standard by which their amount can be measured with

In Lopez v. Court of Appeals,

77

we held:

reasonable accuracy, that is, it is not susceptible of mathematical computation. It

is considered irreparable injury when it cannot be adequately compensated in

Generally, injunction is a preservative remedy for the protection of one's

substantive right or interest. It is not a cause of action in itself but merely a
provisional remedy, an adjunct to a main suit. It is resorted to only when there is

damages due to the nature of the injury itself or the nature of the right or
property injured or when there exists no certain pecuniary standard for the
measurement of damages. (Emphases supplied.)

a pressing necessity to avoid injurious consequences which cannot be remedied

under any standard compensation. The application of the injunctive writ rests

It is still contentious whether this is a case of termination by the DFA alone or

upon the existence of an emergency or of a special reason before the main case

both the DFA and BCA. The DFA contends that BCA, by sending its own Notice of

can be regularly heard. The essential conditions for granting such temporary

Default, likewise terminated or "abandoned" the Amended BOT Agreement. Still,

injunctive relief are that the complaint alleges facts which appear to be sufficient

whether this is a termination by the DFA alone without fault on the part of BCA

to constitute a proper basis for injunction and that on the entire showing from the

or a termination due to default on the part of either party, the BOT Law and the

contending parties, the injunction is reasonably necessary to protect the legal

Amended BOT Agreement lay down the measure of compensation to be paid

rights of the plaintiff pending the litigation. Two requisites are necessary if a

under the appropriate circumstances.

preliminary injunction is to issue, namely, the existence of a right to be protected

and the facts against which the injunction is to be directed are violative of said

Significantly, in BCAs Request for Arbitration with the PDRCI, it prayed for,

right. In particular, for a writ of preliminary injunction to issue, the existence of

among others, "a judgment ordering respondent [DFA] to pay damages to

the right and the violation must appear in the allegation of the complaint and a

Claimant [BCA], reasonably estimated at P50,000,000.00 as of [the date of the

preliminary injunction is proper only when the plaintiff (private respondent

Request for Arbitration], representing lost business opportunities; financing fees,

herein) appears to be entitled to the relief demanded in his complaint. (Emphases

costs and commissions; travel expenses; legal fees and expenses; and costs of

supplied.)

arbitration, including the fees of the arbitrator/s."80 All the purported damages
that BCA claims to have suffered by virtue of the DFAs termination of the

We reiterated this point in Transfield Philippines, Inc. v. Luzon Hydro

Amended BOT Agreement are plainly determinable in pecuniary terms and can be

Corporation,

"reasonably estimated" according to BCAs own words.

78

where we likewise opined:

Before a writ of preliminary injunction may be issued, there must be a clear

Indeed, the right of BCA, a party which may or may not have been in default on

showing by the complaint that there exists a right to be protected and that the

its BOT contract, to have the termination of its BOT contract reversed is not

acts against which the writ is to be directed are violative of the said right. It must

guaranteed by the BOT Law. Even assuming BCAs innocence of any breach of

contract, all the law provides is that BCA should be adequately compensated for

Now, BCA likewise claims that unless it is granted injunctive relief, it would suffer

its losses in case of contract termination by the government.

grave and irreparable injury since the bidding out and award of the e-Passport
Project would be tantamount to a violation of its right against deprivation of

There is one point that none of the parties has highlighted but is worthy of

property without due process of law under Article III, Section 1 of the

discussion. In seeking to enjoin the government from awarding or implementing a

Constitution. We are unconvinced.1avvphi1

machine readable passport project or any similar electronic passport or visa

project and praying for the maintenance of the status quo ante pending the

Article III, Section 1 of the Constitution provides "[n]o person shall be deprived of

resolution on the merits of BCAs Request for Arbitration, BCA effectively seeks to

life, liberty, or property without due process of law, nor shall any person be denied

enjoin the termination of the Amended BOT Agreement for the MRP/V Project.

the equal protection of the laws." Ordinarily, this constitutional provision has
been applied to the exercise by the State of its sovereign powers such as, its

There is no doubt that the MRP/V Project is a project covered by the BOT Law

legislative power,81police power,82 or its power of eminent domain.83

and, in turn, considered a "national government project" under Republic Act No.
8795. Under Section 3(d) of that statute, trial courts are prohibited from issuing a

In the instant case, the State action being assailed is the DFAs termination of the

TRO or writ of preliminary injunction against the government to restrain or

Amended BOT Agreement with BCA. Although the said agreement involves a

prohibit the termination or rescission of any such national government

public service that the DFA is mandated to provide and, therefore, is imbued with

project/contract.

public interest, the relationship of DFA to BCA is primarily contractual and their
dispute involves the adjudication of contractual rights. The propriety of the DFAs

The rationale for this provision is easy to understand. For if a project proponent

acts, in relation to the termination of the Amended BOT Agreement, should be

that the government believes to be in default is allowed to enjoin the termination

gauged against the provisions of the contract itself and the applicable statutes to

of its contract on the ground that it is contesting the validity of said termination,

such contract. These contractual and statutory provisions outline what

then the government will be unable to enter into a new contract with any other

constitutes due process in the present case. In all, BCA failed to demonstrate that

party while the controversy is pending litigation. Obviously, a courts grant of

there is a constitutional issue involved in this case, much less a constitutional

injunctive relief in such an instance is prejudicial to public interest since

issue of extreme urgency.

government would be indefinitely hampered in its duty to provide vital public

goods and services in order to preserve the private proprietary rights of the

As for the DFAs purported failure to appropriate sufficient amounts in its budget

project proponent. On the other hand, should it turn out that the project

to pay for liquidated damages to BCA, this argument does not support BCAs

proponent was not at fault, the BOT Law itself presupposes that the project

position that it will suffer grave and irreparable injury if it is denied injunctive

proponent can be adequately compensated for the termination of the contract.

relief. The DFAs liability to BCA for damages is contingent on BCA proving that it

Although BCA did not specifically pray for the trial court to enjoin the termination

is entitled to such damages in the proper proceedings. The DFA has no obligation

of the Amended BOT Agreement and thus, there is no direct violation of Republic

to set aside funds to pay for liquidated damages, or any other kind of damages, to

Act No. 8795, a grant of injunctive relief as prayed for by BCA will indirectly

BCA until there is a final and executory judgment in favor of BCA. It is illogical

contravene the same statute.

and impractical for the DFA to set aside a significant portion of its budget for an
event that may never happen when such idle funds should be spent on providing

Verily, there is valid reason for the law to deny preliminary injunctive relief to

necessary services to the populace. For if it turns out at the end of the arbitration

those who seek to contest the governments termination of a national government

proceedings that it is BCA alone that is in default, it would be the one liable for

contract. The only circumstance under which a court may grant injunctive relief

liquidated damages to the DFA under the terms of the Amended BOT Agreement.

is the existence of a matter of extreme urgency involving a constitutional issue,

such that unless a TRO or injunctive writ is issued, grave injustice and

With respect to BCAs allegation that the e-Passport Project is grossly

irreparable injury will result.

disadvantageous to the Filipino people since it is the government that will be

spending for the project unlike the MRP/V Project which would have been
privately funded, the same is immaterial to the issue at hand. If it is true that the

award of the e-Passport Project is inimical to the public good or tainted with some

It does not escape the attention of the Court that the delay in the submission of

anomaly, it is indeed a cause for grave concern but it is a matter that must be

this controversy to arbitration was caused by the ambiguity in Section 19.02 of

investigated and litigated in the proper forum. It has no bearing on the issue of

the Amended BOT Agreement regarding the proper body to which a dispute

whether BCA would suffer grave and irreparable injury such that it is entitled to

between the parties may be submitted and the failure of the parties to agree on

injunctive relief from the courts.

such an arbitral tribunal. However, this Court cannot allow this impasse to
continue indefinitely. The parties involved must sit down together in good faith

In all, we agree with petitioners DFA and BSP that the trial courts issuance of a

and finally come to an understanding regarding the constitution of an arbitral

writ of preliminary injunction, despite the lack of sufficient legal justification for

tribunal mutually acceptable to them.

the same, is tantamount to grave abuse of discretion.

WHEREFORE, the instant petition is hereby GRANTED. The assailed Order dated
To be very clear, the present decision touches only on the twin issues of (a) the

February 14, 2007 of the Regional Trial Court of Pasig in Civil Case No. 71079

jurisdiction of the trial court to issue a writ of preliminary injunction as an

and

interim relief under the factual milieu of this case; and (b) the entitlement of BCA

are REVERSED and SET

to injunctive relief. The merits of the DFA and BCAs dispute regarding the

hereby DISMISSED.

the

Writ

of

Preliminary
ASIDE.

Injunction
Furthermore,

dated
Civil

February
Case

No.

23,

2007

71079

is

termination of the Amended BOT Agreement must be threshed out in the proper
arbitration proceedings. The civil case pending before the trial court is purely for
the grant of interim relief since the main case is to be the subject of arbitration
proceedings.

No pronouncement as to costs.
SO ORDERED.

BCAs petition for interim relief before the trial court is essentially a petition for a
provisional remedy (i.e., preliminary injunction) ancillary to its Request for
Arbitration in PDRCI Case No. 30-2006/BGF. BCA specifically prayed that the
trial court grant it interim relief pending the constitution of the arbitral tribunal
in the said PDRCI case. Unfortunately, during the pendency of this case, PDRCI
Case No. 30-2006/BGF was dismissed by the PDRCI for lack of jurisdiction, in
view of the lack of agreement between the parties to arbitrate before the

G.R. No. 203585

MILA

CABOVERDE

July 29, 2013

TANTANO and ROSELLER

CABOVERDE, Petitioners,

PDRCI.84In Philippine National Bank v. Ritratto Group, Inc.,85 we held:

vs.

A writ of preliminary injunction is an ancillary or preventive remedy that may

LABRADOR, and JOSEPHINE E. CABOVERDE, Respondents.

DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE CABOVERDE-

only be resorted to by a litigant to protect or preserve his rights or interests and

for no other purpose during the pendency of the principal action. The dismissal of

DECISION

the principal action thus results in the denial of the prayer for the issuance of the
writ. x x x. (Emphasis supplied.)

VELASCO, JR., J.:

In view of intervening circumstances, BCA can no longer be granted injunctive

The Case

relief and the civil case before the trial court should be accordingly dismissed.
However, this is without prejudice to the parties litigating the main controversy in
arbitration proceedings, in accordance with the provisions of the Amended BOT
Agreement, which should proceed with dispatch.

Assailed in this petition for review under Rule 45 are the Decision and Resolution
of the Court of Appeals (CA) rendered on June 25, 2012 and September 21, 2012,
respectively, in CA-G.R. SP. No. 03834, which effectively affirmed the Resolutions
dated February 8, 20 I 0 and July 19, 2010 of the Regional Trial Court (RTC) of

Sindangan, Zamboanga del Norte, Branch 11, in Civil Case No. S-760, approving

that Josephine shall have special authority, among others, to provide for the

respondent Dominalda Espina-Caboverde's application for receivership and

medicine of her mother.

appointing the receivers over the disputed properties.

The parties submitted the PSA to the court on or about March 10, 2008 for
The Facts

approval.2

Petitioners Mila Caboverde Tantano (Mila) and Roseller Caboverde (Roseller) are

Before the RTC could act on the PSA, Dominalda, who, despite being impleaded in

children of respondent Dominalda Espina-Caboverde (Dominalda) and siblings of

the case as defendant, filed a Motion to Intervene separately in the case. Mainly,

other respondents in this case, namely: Eve Caboverde-Yu (Eve), Fe Caboverde-

she claimed that the verified Answer which she filed with her co-defendants

Labrador (Fe), and Josephine E. Caboverde (Josephine).

contained several material averments which were not representative of the true
events and facts of the case. This document, she added, was never explained to

Petitioners and their siblings, Ferdinand, Jeanny and Laluna, are the registered

her or even read to her when it was presented to her for her signature.

owners and in possession of certain parcels of land, identified as Lots 2, 3 and 4

located at Bantayan, Sindangan and Poblacion, Sindangan in Zamboanga del

On May 12, 2008, Dominalda filed a Motion for Leave to Admit Amended Answer,

Norte, having purchased them from their parents, Maximo and Dominalda

attaching her Amended Answer where she contradicted the contents of the

Caboverde.

aforesaid verified Answer by declaring that there never was a sale of the three (3)

contested parcels of land in favor of Ferdinand, Mila, Laluna, Jeanny and Roseller
The present controversy started when on March 7, 2005, respondents Eve and Fe

and that she and her husband never received any consideration from them. She

filed a complaint before the RTC of Sindangan, Zamboanga del Norte where they

made it clear that they intended to divide all their properties equally among all

prayed for the annulment of the Deed of Sale purportedly transferring Lots 2, 3

their children without favor. In sum, Dominalda prayed that the reliefs asked for

and 4 from their parents Maximo and Dominalda in favor of petitioners Mila and

in the Amended Complaint be granted with the modification that her conjugal

Roseller and their other siblings, Jeanny, Laluna and Ferdinand. Docketed as

share and share as intestate heir of Maximo over the contested properties be

Civil Case No. S-760, the case was raffled to Branch 11 of the court.

recognized.3

In their verified Answer, the defendants therein, including Maximo and

The RTC would later issue a Resolution granting the Motion to Admit Amended

Dominalda, posited the validity and due execution of the contested Deed of Sale.

Answer.4

During the pendency of Civil Case No. S-760, Maximo died. On May 30, 2007, Eve

On May 13, 2008, the court approved the PSA, leaving three (3) contested

and Fe filed an Amended Complaint with Maximo substituted by his eight (8)

properties, Lots 2, 3, and 4, for further proceedings in the main case.

children and his wife Dominalda. The Amended Complaint reproduced the
allegations in the original complaint but added eight (8) more real properties of

Fearing that the contested properties would be squandered, Dominalda filed with

the Caboverde estate in the original list.

the RTC on July 15, 2008 a Verified Urgent Petition/Application to place the
controverted Lots 2, 3 and 4 under receivership. Mainly, she claimed that while

As encouraged by the RTC, the parties executed a Partial Settlement Agreement

she had a legal interest in the controverted properties and their produce, she

(PSA) where they fixed the sharing of the uncontroverted properties among

could not enjoy them, since the income derived was solely appropriated by

themselves, in particular, the adverted additional eight (8) parcels of land

petitioner Mila in connivance with her selected kin. She alleged that she

including

PSA,

immediately needs her legal share in the income of these properties for her daily

Dominaldas daughter, Josephine, shall be appointed as Administrator. The PSA

sustenance and medical expenses. Also, she insisted that unless a receiver is

provided that Dominalda shall be entitled to receive a share of one-half (1/2) of

appointed by the court, the income or produce from these properties is in grave

the net income derived from the uncontroverted properties. The PSA also provided

danger of being totally dissipated, lost and entirely spent solely by Mila and some

their

respective

products

and

improvements.

Under

the

of her selected kin. Paragraphs 5, 6, 7, and 8 of the Verified Urgent

On October 9, 2009, petitioners and their siblings filed a Manifestation formally

Petition/Application

expressing their concurrence to the proposal for receivership on the condition,

for

Receivership5(Application

for

Receivership)

capture

Dominaldas angst and apprehensions:

inter alia, that Mila be appointed the receiver, and that, after getting the 2/10
share of Dominalda from the income of the three (3) parcels of land, the

5. That all the income of Lot Nos. 2, 3 and 4 are collected by Mila

remainder shall be divided only by and among Mila, Roseller, Ferdinand, Laluna

Tantano, thru her collector Melinda Bajalla, and solely appropriated by

and Jeanny. The court, however, expressed its aversion to a party to the action

Mila Tantano and her selected kins, presumably with Roseller E.

acting as receiver and accordingly asked the parties to nominate neutral persons.7

Caboverde, Ferdinand E. Caboverde, Jeanny Caboverde and Laluna

Caboverde, for their personal use and benefit;

On February 8, 2010, the trial court issued a Resolution granting Dominaldas

application for receivership over Lot Nos. 2, 3 and 4. The Resolution reads:

6. That defendant Dominalda Espina Caboverde, who is now sickly, in

dire need of constant medication or medical attention, not to mention the

As regards the second motion, the Court notes the urgency of placing Lot 2

check-ups, vitamins and other basic needs for daily sustenance, yet

situated at Bantayan, covered by TCT No. 46307; Lot 3 situated at Poblacion,

despite the fact that she is the conjugal owner of the said land, could not

covered by TCT No. T-8140 and Lot 4 also situated at Poblacion covered by TCT

even enjoy the proceeds or income as these are all appropriated solely by

No. T-8140, all of Sindangan, Zamboanga del Norte under receivership as

Mila Tantano in connivance with some of her selected kins;

defendant Dominalda Espina Caboverde (the old and sickly mother of the rest of
the parties) who claims to be the owner of the one-half portion of the properties

7. That unless a receiver is appointed by the court, the income or

under litigation as her conjugal share and a portion of the estate of her deceased

produce from these lands, are in grave danger of being totally dissipated,

husband Maximo, is in dire need for her medication and daily sustenance. As

lost and entirely spent solely by Mila Tantano in connivance with some of

agreed by the parties, Dominalda Espina Caboverde shall be given 2/10 shares of

her selected kins, to the great damage and prejudice of defendant

the net monthly income and products of the said properties.8

Dominalda Espina Caboverde, hence, there is no other most feasible,

convenient, practicable and easy way to get, collect, preserve, administer

In the same Resolution, the trial court again noted that Mila, the nominee of

and dispose of the legal share or interest of defendant Dominalda Espina

petitioners, could not discharge the duties of a receiver, she being a party in the

Caboverde except the appointment of a receiver x x x;

case.9 Thus, Dominalda nominated her husbands relative, Annabelle Saldia,

while Eve nominated a former barangay kagawad, Jesus Tan.10

xxxx
Petitioners thereafter moved for reconsideration raising the arguments that the
9. That insofar as the defendant Dominalda Espina Caboverde is

concerns raised by Dominalda in her Application for Receivership are not grounds

concerned, time is of the utmost essence. She immediately needs her

for placing the properties in the hands of a receiver and that she failed to prove

legal share and legal interest over the income and produce of these lands

her claim that the income she has been receiving is insufficient to support her

so that she can provide and pay for her vitamins, medicines, constant

medication and medical needs. By Resolution 11 of July 19, 2010, the trial court

regular medical check-up and daily sustenance in life. To grant her share

denied the motion for reconsideration and at the same time appointed Annabelle

and interest after she may have passed away would render everything

Saldia as the receiver for Dominalda and Jesus Tan as the receiver for Eve. The

that she had worked for to naught and waste, akin to the saying "aanhin

trial court stated:

pa ang damo kung patay na ang kabayo."

As to the issue of receivership, the Court stands by its ruling in granting the
On August 27, 2009, the court heard the Application for Receivership and

same, there being no cogent reason to overturn it. As intimated by the movant-

persuaded the parties to discuss among themselves and agree on how to address

defendant Dominalda Caboverde, Lots 2, 3 and 4 sought to be under receivership

the immediate needs of their mother.

are not among those lots covered by the adverted Partial Amicable Settlement. To

the mind of the Court, the fulfilment or non-fulfilment of the terms and

conditions laid therein nonetheless have no bearing on these three lots. Further,

preliminary injunction may be issued, there must be a clear showing that there

as correctly pointed out by her, there is possibility that these Lots 2, 3, and 4, of

exists a right to be protected and that the acts against which the writ is to be

which the applicant has interest, but are in possession of other defendants who

directed are violative of the said right and will cause irreparable injury.

are the ones enjoying the natural and civil fruits thereof which might be in the
danger of being lost, removed or materially injured. Under this precarious

Unfortunately, petitioners failed to show that the acts of the receivers in this case

condition, they must be under receivership, pursuant to Sec. 1 (a) of Rule 59.

are inimical to their rights as owners of the property. They also failed to show that

Also, the purpose of the receivership is to procure money from the proceeds of

the non-issuance of the writ of injunction will cause them irreparable injury. The

these properties to spend for medicines and other needs of the movant defendant

court-appointed receivers merely performed their duties as administrators of the

Dominalda Caboverde who is old and sickly. This circumstance falls within the

disputed lots. It must be stressed that the trial court specifically appointed these

purview of Sec. 1(d), that is, "Whenever in other cases it appears that the

receivers to preserve the properties and its proceeds to avoid any prejudice to the

appointment of a receiver is the most convenient and feasible means of

parties until the main case is resolved, Hence, there is no urgent need to issue

preserving, administering, or disposing of the property in litigation."

the injunction.

Both Annabelle Saldia and Jesus Tan then took their respective oaths of office

ACCORDINGLY, the motion for reconsideration is DENIED for lack of merit.

and filed a motion to fix and approve bond which was approved by the trial court
over petitioners opposition.

SO ORDERED.

Undaunted, petitioners filed an Urgent Precautionary Motion to Stay Assumption

xxxx

of Receivers dated August 9, 2010 reiterating what they stated in their motion for
reconsideration and expressing the view that the grant of receivership is not
warranted under the circumstances and is not consistent with applicable rules
and jurisprudence. The RTC, on the postulate that the motion partakes of the
nature of a second motion for reconsideration, thus, a prohibited pleading, denied
it via a Resolution dated October 7, 2011 where it likewise fixed the receivers
bond at PhP 100,000 each. The RTC stated:
[1] The appointed receivers, JESUS A. TAN and ANNABELLE DIAMANTE-SALDIA,
are considered duly appointed by this Court, not only because their appointments
were made upon their proper nomination from the parties in this case, but
because their appointments have been duly upheld by the Court of Appeals in its
Resolution dated 24 May 2011 denying the herein defendants (petitioners therein)
application for a writ of preliminary injunction against the 8 February 2010
Resolution of this Court placing the properties (Lots 2, 3 and 4) under
receivership by the said JESUS A. TAN and ANNABELLE DIAMANTE-SALDIA, and
Resolution dated 29 July 2011 denying the herein defendants (petitioners
therein) motion for reconsideration of the 24 May 2011 Resolution, both, for lack
of merit. In its latter Resolution, the Court of Appeals states:
A writ of preliminary injunction, as an ancillary or preventive remedy, may only
be resorted to by a litigant to protect or preserve his rights or interests and for no
other purpose during the pendency of the principal action. But before a writ of

WHEREFORE, premises considered, this Court RESOLVES, as it is hereby

RESOLVED, that:
1. The defendants "Urgent Precautionary Motion to Stay Assumption of
Receivers" be DENIED for lack of merit. Accordingly, it being patently a
second motion for reconsideration, a prohibited pleading, the same is
hereby ordered EXPUNGED from the records;
2. The "Motion to Fix the Bond, Acceptance and Approval of the Oath of
Office, and Bond of the Receiver" of defendant Dominalda Espina
Caboverde, be GRANTED with the receivers bond set and fixed at ONE
HUNDRED THOUSAND PESOS (PhP100,000.00) each.12
It should be stated at this juncture that after filing their Urgent Precautionary
Motion to Stay Assumption of Receivers but before the RTC could rule on it,
petitioners filed a petition for certiorari with the CA dated September 29, 2010
seeking to declare null and void the February 8, 2010 Resolution of the RTC
granting the Application for Receivership and its July 19, 2010 Resolution
denying the motion for reconsideration filed by petitioners and appointing the
receivers nominated by respondents. The petition was anchored on two grounds,

namely: (1) non-compliance with the substantial requirements under Section 2,

As to the second ground, petitioners insist that there is no justification for placing

Rule 59 of the 1997 Rules of Civil

the properties under receivership since there was neither allegation nor proof that
the said properties, not the fruits thereof, were in danger of being lost or

Procedure because the trial court appointed a receiver without requiring the

materially injured. They believe that the public respondent went out of line when

applicant to file a bond; and (2) lack of factual or legal basis to place the

he granted the application for receivership for the purpose of procuring money for

properties under receivership because the applicant presented support and

the medications and basic needs of Dominalda despite the income shes supposed

medication as grounds in her application which are not valid grounds for

to receive under the Partial Settlement Agreement.

receivership under the rules.

The court a quo has the discretion to decide whether or not the appointment of a
On June 25, 2012, the CA rendered the assailed Decision denying the petition on

receiver is necessary. In this case, the public respondent took into consideration

the strength of the following premises and ratiocination:

that the applicant is already an octogenarian who may not live up to the day
when this conflict will be finally settled. Thus, We find that he did not act with

Petitioners harp on the fact that the court a quo failed to require Dominalda to
post a bond prior to the issuance of the order appointing a receiver, in violation of

grave abuse of discretion amounting to lack or excess of jurisdiction when he

granted the application for receivership based on Section 1(d) of Rule 59 of the

Section 2, Rule 59 of the Rules of court which provides that:

Rules of Court.

SEC. 2. Bond on appointment of receiver.-- Before issuing the order appointing a

A final note, a petition for certiorari may be availed of only when there is no

receiver the court shall require the applicant to file a bond executed to the party
against whom the application is presented, in an amount to be fixed by the court,
to the effect that the applicant will pay such party all damages he may sustain by

appeal, nor any plain, speedy and adequate remedy in the ordinary course of law.
In this case, petitioners may still avail of the remedy provided in Section 3, Rule
59 of the said Rule where they can seek for the discharge of the receiver.

reason of the appointment of such receiver in case the applicant shall have
procured such appointment without sufficient cause; and the court may, in its

FOR REASONS STATED, the petition for certiorari is DENIED.

discretion, at any time after the appointment, require an additional bond as

further security for such damages.

SO ORDERED.13

The Manifestation dated September 30, 2009 filed by petitioners wherein "they

Petitioners Motion for Reconsideration was also denied by the CA on September

formally manifested their concurrence" to the settlement on the application for

21, 2012.14

receivership estops them from questioning the sufficiency of the cause for the
appointment of the receiver since they themselves agreed to have the properties

Hence, the instant petition, petitioners effectively praying that the approval of

placed under receivership albeit on the condition that the same be placed under

respondent

the administration of Mila. Thus, the filing of the bond by Dominalda for this

concomitant appointment of receivers be revoked.

Dominaldas

application

for

receivership

and

necessarily

the

purpose becomes unnecessary.

The Issues
It must be emphasized that the bond filed by the applicant for receivership
answers only for all damages that the adverse party may sustain by reason of the
appointment of such receiver in case the applicant shall have procured such
appointment without sufficient cause; it does not answer for damages suffered by
reason of the failure of the receiver to discharge his duties faithfully or to obey the
orders of the court, inasmuch as such damages are covered by the bond of the
receiver.

Petitioners raise the following issues in their petition:

(1) Whether or not the CA committed grave abuse of discretion in
sustaining the appointment of a receiver despite clear showing that the
reasons advanced by the applicant are not any of those enumerated by
the rules; and

(2) Whether or not the CA committed grave abuse of discretion in

xxxx

upholding the Resolution of the RTC and ruling that the receivership
bond is not required prior to appointment despite clear dictates of the

(d) Whenever in other cases it appears that the appointment of a receiver is the

rules.

most convenient and feasible means of preserving, administering, or disposing of

the property in litigation. (Emphasis supplied.)

The Courts Ruling

Indeed, Sec. 1(d) above is couched in general terms and broad in scope,
The petition is impressed with merit.

encompassing instances not covered by the other grounds enumerated under the
said section.16 However, in granting applications for receivership on the basis of

We have repeatedly held that receivership is a harsh remedy to be granted with

this section, courts must remain mindful of the basic principle that receivership

utmost

may be granted only when the circumstances so demand, either because the

circumspection

and

only

in

extreme

situations.

The

doctrinal

pronouncement in Velasco & Co. v. Gochico & Co is instructive:

property sought to be placed in the hands of a receiver is in danger of being lost

or because they run the risk of being impaired, 17 and that being a drastic and

The power to appoint a receiver is a delicate one and should be exercised with
extreme caution and only under circumstances requiring summary relief or where
the court is satisfied that there is imminent danger of loss, lest the injury thereby

harsh remedy, receivership must be granted only when there is a clear showing of
necessity for it in order to save the plaintiff from grave and immediate loss or
damage.18

caused be far greater than the injury sought to be averted. The court should
consider the consequences to all of the parties and the power should not be

Before appointing a receiver, courts should consider: (1) whether or not the injury

exercised when it is likely to produce irreparable injustice or injury to private

resulting from such appointment would probably be greater than the injury

rights or the facts demonstrate that the appointment will injure the interests of

ensuing if the status quo is left undisturbed; and (2) whether or not the

others whose rights are entitled to as much consideration from the court as those

appointment will imperil the interest of others whose rights deserve as much a

of the complainant.15

consideration from the court as those of the person requesting for receivership.19

To recall, the RTC approved the application for receivership on the stated

Moreover, this Court has consistently ruled that where the effect of the

rationale that receivership was the most convenient and feasible means to

appointment of a receiver is to take real estate out of the possession of the

preserve and administer the disputed properties. As a corollary, the RTC,

defendant before the final adjudication of the rights of the parties, the

agreeing with the applicant Dominalda, held that placing the disputed properties

appointment should be made only in extreme cases.20

under receivership would ensure that she would receive her share in the income
which she supposedly needed in order to pay for her vitamins, medicines, her

After

regular check-ups and daily sustenance. Considering that, as the CA put it, the

circumstances of this case, We find that the grant of Dominaldas Application for

carefully

considering

the

foregoing

principles

and

the

facts

and

applicant was already an octogenarian who may not live up to the day when the

Receivership has no leg to stand on for reasons discussed below.

conflict will be finally settled, the RTC did not act with grave abuse of discretion
amounting to lack or excess of jurisdiction when it granted the application for

First, Dominaldas alleged need for income to defray her medical expenses and

receivership since it was justified under Sec. 1(d), Rule 59 of the Rules of Court,

support is not a valid justification for the appointment of a receiver. The approval

which states:

of an application for receivership merely on this ground is not only unwarranted

but also an arbitrary exercise of discretion because financial need and like

Section 1. Appointment of a receiver. Upon a verified application, one or more

reasons are not found in Sec. 1 of Rule 59 which prescribes specific grounds or

receivers of the property subject of the action or proceeding may be appointed by

reasons for granting receivership. The RTCs insistence that the approval of the

the court where the action is pending, or by the Court of Appeals or by the

receivership is justified under Sec. 1(d) of Rule 59, which seems to be a catch-all

Supreme Court, or a member thereof, in the following cases:

provision, is far from convincing. To be clear, even in cases falling under such

provision, it is essential that there is a clear showing that there is imminent

her assertions, Dominalda is assured of receiving income under the PSA approved

danger that the properties sought to be placed under receivership will be lost,

by the RTC providing that she was entitled to receive a share of one-half (1/2) of

wasted or injured.

the net income derived from the uncontroverted properties. Pursuant to the PSA,
Josephine, the daughter of Dominalda, was appointed by the court as

Second, there is no clear showing that the disputed properties are in danger of

administrator of the eight (8) uncontested lots with special authority to provide for

being lost or materially impaired and that placing them under receivership is

the medicine of her mother. Thus, it was patently erroneous for the RTC to grant

most convenient and feasible means to preserve, administer or dispose of them.

the Application for Receivership in order to ensure Dominalda of income to

support herself because precisely, the PSA already provided for that. It cannot be

Based on the allegations in her application, it appears that Dominalda sought

receivership mainly because she considers this the best remedy to ensure that
she would receive her share in the income of the disputed properties. Much
emphasis has been placed on the fact that she needed this income for her medical
expenses and daily sustenance. But it can be gleaned from her application that,
aside from her bare assertion that petitioner Mila solely appropriated the fruits

over-emphasized that the parties in Civil Case No. S-760 were willing to make
arrangements to ensure that Dominalda was provided with sufficient income. In
fact, the RTC, in its February 8, 2010 Resolution granting the Application for
Receivership, noted the agreement of the parties that "Dominalda Espina
Caboverde shall be given 2/10 shares of the net monthly income and products of
said properties."21

and rentals earned from the disputed properties in connivance with some of her
siblings, Dominalda has not presented or alleged anything else to prove that the

Finally, it must be noted that the defendants in Civil Case No. S-760 are the

disputed properties were in danger of being wasted or materially injured and that

registered owners of the disputed properties that were in their possession. In

the appointment of a receiver was the most convenient and feasible means to

cases such as this, it is settled jurisprudence that the appointment should be

preserve their integrity.

made only in extreme cases and on a clear showing of necessity in order to save
the plaintiff from grave and irremediable loss or damage.22

Further, there is nothing in the RTCs February 8 and July 19, 2010 Resolutions
that says why the disputed properties might be in danger of being lost, removed

This Court has held that a receiver should not be appointed to deprive a party

or materially injured while in the hands of the defendants a quo. Neither did the

who is in possession of the property in litigation, just as a writ of preliminary

RTC explain the reasons which compelled it to have them placed under

injunction should not be issued to transfer property in litigation from the

receivership. The RTC simply declared that placing the disputed properties under

possession of one party to another where the legal title is in dispute and the party

receivership was urgent and merely anchored its approval on the fact that

having possession asserts ownership in himself, except in a very clear case of

Dominalda was an elderly in need of funds for her medication and sustenance.

evident usurpation.23

The RTC plainly concluded that since the purpose of the receivership is to
procure money from the proceeds of these properties to spend for medicines and

Furthermore, this Court has declared that the appointment of a receiver is not

other needs of the Dominalda, who is old and sickly, this circumstance falls

proper when the rights of the parties, one of whom is in possession of the

within the purview of Sec. 1(d), that is, "Whenever in other cases it appears that

property, depend on the determination of their respective claims to the title of

the appointment of a receiver is the most convenient and feasible means of

such property24 unless such property is in danger of being materially injured or

preserving, administering, or disposing of the property in litigation."

lost, as by the prospective foreclosure of a mortgage on it or its portions are being

occupied by third persons claiming adverse title.25

Verily, the RTCs purported determination that the appointment of a receiver is

the most convenient and feasible means of preserving, administering or disposing

It must be underscored that in this case, Dominaldas claim to the disputed

of the properties is nothing but a hollow conclusion drawn from inexistent factual

properties and her share in the properties income and produce is at best

considerations.

speculative precisely because the ownership of the disputed properties is yet to be

determined in Civil Case No. S-760. Also, except for Dominaldas claim that she

Third, placing the disputed properties under receivership is not necessary to save

has an interest in the disputed properties, Dominalda has no relation to their

Dominalda from grave and immediate loss or irremediable damage. Contrary to

produce or income.1wphi1

By placing the disputed properties and their income under receivership, it is as if

hand, the requirement of a receivers bond rests upon the discretion of the court.

the applicant has obtained indirectly what she could not obtain directly, which is

Sec. 2 of Rule 59 clearly states that the court may, in its discretion, at any time

to deprive the other parties of the possession of the property until the controversy

after the appointment, require an additional bond as further security for such

between them in the main case is finally settled.

damages.

26

This Court cannot countenance

this arrangement.
WHEREFORE, upon the foregoing considerations, this petition is GRANTED. The
To reiterate, the RTCs approval of the application for receivership and the

assailed CA June 25, 2012 Decision and September 21, 2012 Resolution in CA-

deprivation of petitioners of possession over the disputed properties would be

G.R. SP No. 03834 are hereby REVERSED and SET ASIDE. The Resolutions dated

justified only if compelling reasons exist. Unfortunately, no such reasons were

February 8, 2010 and July 19, 2010 of the RTC, Branch 11 in Sindangan,

alleged, much less proved in this case.

Zamboanga del Norte, in Civil Case No. S-760, approving respondent Dominalda
Espina-Caboverdes application for receivership and appointing the receivers over

In any event, Dominaldas rights may be amply protected during the pendency of

the disputed properties are likewise SET ASIDE.

Civil Case No. S-760 by causing her adverse claim to be annotated on the
certificates of title covering the disputed properties.27

SO ORDERED.

As regards the issue of whether or not the CA was correct in ruling that a bond
was not required prior to the appointment of the receivers in this case, We rule in
the negative.

G.R. No. 137705

Respondents Eve and Fe claim that there are sufficient grounds for the

SERG'S

appointment of receivers in this case and that in fact, petitioners agreed with

vs.

them on the existence of these grounds when they acquiesced to Dominaldas

PCI LEASING AND FINANCE, INC., respondent.

Application for Receivership. Thus, respondents insist that where there is

sufficient cause to appoint a receiver, there is no need for an applicants bond
because under Sec. 2 of Rule 59, the very purpose of the bond is to answer for all
damages that may be sustained by a party by reason of the appointment of a
receiver in case the applicant shall have procured such appointment without
sufficient cause. Thus, they further argue that what is needed is the receivers
bond which was already fixed and approved by the RTC. 28 Also, the CA found that
there was no need for Dominalda to file a bond considering that petitioners filed a
Manifestation where they formally consented to the receivership. Hence, it was as
if petitioners agreed that there was sufficient cause to place the disputed
properties under receivership; thus, the CA declared that petitioners were
estopped from challenging the sufficiency of such cause.
The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in that
before issuing the order appointing a receiver the court shall require the applicant
to file a bond executed to the party against whom the application is presented.
The use of the word "shall" denotes its mandatory nature; thus, the consent of
the other party, or as in this case, the consent of petitioners, is of no moment.
Hence, the filing of an applicants bond is required at all times. On the other

PRODUCTS,

August 22, 2000

INC.,

and

SERGIO

T.

GOQUIOLAY, petitioners,

DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be
considered as personal or movable, a party is estopped from subsequently
claiming otherwise. Hence, such property is a proper subject of a writ of replevin
obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
Decision1 of the Court of Appeals (CA) 2 in CA-GR SP No. 47332 and its February
26, 1999 Resolution3 denying reconsideration. The decretal portion of the CA
Decision reads as follows:

"WHEREFORE, premises considered, the assailed Order dated February 18, 1998

the contrary notwithstanding. They argued that to give effect to the agreement

and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are

would be prejudicial to innocent third parties. They further stated that PCI

hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is

Leasing [was] estopped from treating these machineries as personal because the

hereby LIFTED."

contracts in which the alleged agreement [were] embodied [were] totally sham and

farcical.

In its February 18, 1998 Order, the Regional Trial Court (RTC) of Quezon City
5

(Branch 218)6 issued a Writ of Seizure. 7 The March 18, 1998 Resolution8 denied
petitioners Motion for Special Protective Order, praying that the deputy sheriff be
enjoined "from seizing immobilized or other real properties in (petitioners) factory

"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.

in Cainta, Rizal and to return to their original place whatever immobilized

machineries or equipments he may have removed."9

"On April 7, 1998, they went to [the CA] via an original action for certiorari."

The Facts

Ruling of the Court of Appeals

The undisputed facts are summarized by the Court of Appeals as follows: 10

Citing the Agreement of the parties, the appellate court held that the subject
machines were personal property, and that they had only been leased, not owned,

"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing"
for short) filed with the RTC-QC a complaint for [a] sum of money (Annex E),

by petitioners. It also ruled that the "words of the contract are clear and leave no
doubt upon the true intention of the contracting parties." Observing that

with an application for a writ of replevin docketed as Civil Case No. Q-98-33500.

Petitioner Goquiolay was an experienced businessman who was "not unfamiliar

"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent

the document he signed." The CA further held:

judge issued a writ of replevin (Annex B) directing its sheriff to seize and deliver
the machineries and equipment to PCI Leasing after 5 days and upon the

with the ways of the trade," it ruled that he "should have realized the import of

"Furthermore, to accord merit to this petition would be to preempt the trial court

payment of the necessary expenses.

in ruling upon the case below, since the merits of the whole matter are laid down

"On March 24, 1998, in implementation of said writ, the sheriff proceeded to

grave abuse of discretion on the part of the [RTC] in issuing the assailed Order

petitioners factory, seized one machinery with [the] word that he [would] return
for the other machineries.
"On March 25, 1998, petitioners filed a motion for special protective order (Annex
C), invoking the power of the court to control the conduct of its officers and
amend and control its processes, praying for a directive for the sheriff to defer
enforcement of the writ of replevin.
"This motion was opposed by PCI Leasing (Annex F), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of

before us via a petition whose sole purpose is to inquire upon the existence of a
and Resolution. The issues raised herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties. The contract is being
enforced by one, and [its] validity is attacked by the other a matter x x x which
respondent court is in the best position to determine."
Hence, this Petition.11
The Issues
In

their

Memorandum,

petitioners

submit

the

following

issues

for

our

replevin.

consideration:

"In their Reply, petitioners asserted that the properties sought to be seized [were]

"A. Whether or not the machineries purchased and imported by SERGS became

immovable as defined in Article 415 of the Civil Code, the parties agreement to

real property by virtue of immobilization.

B. Whether or not the contract between the parties is a loan or a lease."12

On the other hand, Article 415 of the Civil Code enumerates immovable or real
property as follows:

In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a

"ART. 415. The following are immovable property:

preliminary matter, the Court will also address briefly the procedural points
raised by respondent.

xxx

The Courts Ruling

(5) Machinery, receptacles, instruments or implements intended by the owner of

xxx

xxx

the tenement for an industry or works which may be carried on in a building or

The Petition is not meritorious.

on a piece of land, and which tend directly to meet the needs of the said industry
or works;

Preliminary Matter:Procedural Questions

xxx

xxx

x x x"

Respondent contends that the Petition failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that

In the present case, the machines that were the subjects of the Writ of Seizure

the Petition erroneously impleaded Judge Hilario Laqui as respondent.

were placed by petitioners in the factory built on their own land. Indisputably,
they were essential and principal elements of their chocolate-making industry.

There is no question that the present recourse is under Rule 45. This conclusion

Hence, although each of them was movable or personal property on its own, all of

finds support in the very title of the Petition, which is "Petition for Review on

them have become "immobilized by destination because they are essential and

Certiorari."13

principal elements in the industry." 16 In that sense, petitioners are correct in

arguing that the said machines are real, not personal, property pursuant to

While Judge Laqui should not have been impleaded as a respondent,

14

substantial

Article 415 (5) of the Civil Code.17

justice requires that such lapse by itself should not warrant the dismissal of the
present Petition. In this light, the Court deems it proper to remove, motu proprio,

Be that as it may, we disagree with the submission of the petitioners that the said

the name of Judge Laqui from the caption of the present case.

machines are not proper subjects of the Writ of Seizure.

Main Issue: Nature of the Subject Machinery

The Court has held that contracting parties may validly stipulate that a real
property be considered as personal.18After agreeing to such stipulation, they are

Petitioners contend that the subject machines used in their factory were not
proper subjects of the Writ issued by the RTC, because they were in fact real
property. Serious policy considerations, they argue, militate against a contrary

consequently estopped from claiming otherwise. Under the principle of estoppel, a

party to a contract is ordinarily precluded from denying the truth of any material
fact found therein.

characterization.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to
Rule 60 of the Rules of Court provides that writs of replevin are issued for the

treat a house as a personal property because it had been made the subject of a

recovery of personal property only.15 Section 3 thereof reads:

chattel mortgage. The Court ruled:

"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the

"x x x. Although there is no specific statement referring to the subject house as

court shall issue an order and the corresponding writ of replevin describing the
personal property alleged to be wrongfully detained and requiring the sheriff
forthwith to take such property into his custody."

personal property, yet by ceding, selling or transferring a property by way of

chattel mortgage defendants-appellants could only have meant to convey the

house as chattel, or at least, intended to treat the same as such, so that they

In their Memorandum, petitioners contend that the Agreement is a loan and not a

should not now be allowed to make an inconsistent stand by claiming otherwise."

lease.24 Submitting documents supposedly showing that they own the subject
machines, petitioners also argue in their Petition that the Agreement suffers from

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever

"intrinsic ambiguity which places in serious doubt the intention of the parties

Textile Mills20 also held that the machinery used in a factory and essential to the

and the validity of the lease agreement itself." 25 In their Reply to respondents

industry, as in the present case, was a proper subject of a writ of replevin because

Comment, they further allege that the Agreement is invalid. 26

it was treated as personal property in a contract. Pertinent portions of the Courts

These arguments are unconvincing. The validity and the nature of the contract

ruling are reproduced hereunder:

are the lis mota of the civil action pending before the RTC. A resolution of these
"x x x. If a house of strong materials, like what was involved in the above Tumalad

questions, therefore, is effectively a resolution of the merits of the case. Hence,

case, may be considered as personal property for purposes of executing a chattel

they should be threshed out in the trial, not in the proceedings involving the

mortgage thereon as long as the parties to the contract so agree and no innocent

issuance of the Writ of Seizure.

third party will be prejudiced thereby, there is absolutely no reason why a

machinery, which is movable in its nature and becomes immobilized only by

Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under

destination or purpose, may not be likewise treated as such. This is really

Rule 60 was that questions involving title to the subject property questions

because one who has so agreed is estopped from denying the existence of the

which petitioners are now raising -- should be determined in the trial. In that

chattel mortgage."

case, the Court noted that the remedy of defendants under Rule 60 was either to
post a counter-bond or to question the sufficiency of the plaintiffs bond. They

In the present case, the Lease Agreement clearly provides that the machines in

were not allowed, however, to invoke the title to the subject property. The Court

question are to be considered as personal property. Specifically, Section 12.1 of

ruled:

the Agreement reads as follows:21

"In other words, the law does not allow the defendant to file a motion to dissolve
"12.1 The PROPERTY is, and shall at all times be and remain, personal property

or discharge the writ of seizure (or delivery) on ground of insufficiency of the

notwithstanding that the PROPERTY or any part thereof may now be, or hereafter

complaint or of the grounds relied upon therefor, as in proceedings on preliminary

become, in any manner affixed or attached to or embedded in, or permanently

attachment or injunction, and thereby put at issue the matter of the title or right

resting upon, real property or any building thereon, or attached in any manner to

of possession over the specific chattel being replevied, the policy apparently being

what is permanent."

that said matter should be ventilated and determined only at the trial on the
merits."28

Clearly then, petitioners are estopped from denying the characterization of the
subject machines as personal property. Under the circumstances, they are proper

Besides, these questions require a determination of facts and a presentation of

subjects of the Writ of Seizure.

evidence, both of which have no place in a petition for certiorari in the CA under
Rule 65 or in a petition for review in this Court under Rule 45.29

It should be stressed, however, that our holding -- that the machines should be
deemed personal property pursuant to the Lease Agreement is good only insofar
as the contracting parties are concerned.

22

Reliance on the Lease Agreement

Hence, while the parties are bound by

the Agreement, third persons acting in good faith are not affected by its

It should be pointed out that the Court in this case may rely on the Lease

stipulation characterizing the subject machinery as personal. 23 In any event, there

Agreement, for nothing on record shows that it has been nullified or annulled. In

is no showing that any specific third party would be adversely affected.

fact, petitioners assailed it first only in the RTC proceedings, which had ironically
been instituted by respondent. Accordingly, it must be presumed valid and

Validity of the Lease Agreement

binding as the law between the parties.

Makati Leasing and Finance Corporation 30 is also instructive on this point. In that

Verily, the above-mentioned consequences, if they come true, should not be

case, the Deed of Chattel Mortgage, which characterized the subject machinery as

blamed on this Court, but on the petitioners for failing to avail themselves of the

personal property, was also assailed because respondent had allegedly been

remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The

required "to sign a printed form of chattel mortgage which was in a blank form at

provision states:

the time of signing." The Court rejected the argument and relied on the Deed,
ruling as follows:

"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately

"x x x. Moreover, even granting that the charge is true, such fact alone does not

require the return of the property, but if he does not so object, he may, at any

render a contract void ab initio, but can only be a ground for rendering said

time before the delivery of the property to the applicant, require the return

contract voidable, or annullable pursuant to Article 1390 of the new Civil Code,

thereof, by filing with the court where the action is pending a bond executed to

by a proper action in court. There is nothing on record to show that the mortgage

the applicant, in double the value of the property as stated in the applicants

has been annulled. Neither is it disclosed that steps were taken to nullify the

affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and

same. x x x"

for the payment of such sum to him as may be recovered against the adverse
party, and by serving a copy bond on the applicant."

Alleged Injustice Committed on the Part of Petitioners

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Petitioners contend that "if the Court allows these machineries to be seized, then

Appeals AFFIRMED. Costs against petitioners.

its workers would be out of work and thrown into the streets." 31 They also allege
that the seizure would nullify all efforts to rehabilitate the corporation.
Petitioners

arguments

do

not

preclude

the

implementation

SO ORDERED.
of

the

Writ.1wphi1 As earlier discussed, law and jurisprudence support its propriety.