II.

Attachment

RULE 57

Preliminary Attachment

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

(a) In an action for the recovery of a specified amount of money or damages, other than moral
and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-
delict against a party who is about to depart from the Philippines with intent to defraud his
creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his
own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or
clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or
for a willful violation of duty;

(c) In an action to recover the possession of property unjustly or fraudulently taken, detained or
converted, when the property, or any part thereof, has been concealed, removed, or disposed of
to prevent its being found or taken by the applicant or an authorized person;

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring
the obligation upon which the action is brought, or in the performance thereof;

(e) In an action against a party who has removed or disposed of his property, or is about to do so,
with intent to defraud his creditors; or

(f) In an action against a party who does not reside and is not found in the Philippines, or on
whom summons may be served by publication. (1a)

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

Section 3. Affidavit and bond required. An order of attachment shall be granted only when it appears
by the affidavit of the applicant, or of some other person who personally knows the facts, that a sufficient
cause of action exists, that the case is one of those mentioned in section 1 hereof, that there is no other
sufficient security for the claim sought to be enforced by the action, and that the amount due to the
applicant, or the value of the property the possession of which he is entitled to recover, is as much as the
sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by
the next succeeding section, must be duly filed with the court before the order issues. (3a)
Section 4. Condition of applicant's bond. The party applying for the order must thereafter give a bond
executed to the adverse party in the amount fixed by the court in its order granting the issuance of the
writ, conditioned that the latter will pay all the costs which may be adjudged to the adverse party and all
damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto. (4a)

Section 5. Manner of attaching property. The sheriff enforcing the writ shall without delay and with all
reasonable diligence attach, to await judgment and execution in the action, only so much of the property
in the Philippines of the party against whom the writ is issued, not exempt from execution, as may be
sufficient to satisfy the applicant's demand, unless the former makes a deposit with the court from which
the writ is issued, or gives a counter-bond executed to the applicant, in an amount equal to the bond fixed
by the court in the order of attachment or to the value of the property to be attached, exclusive of costs.
No levy on attachment pursuant to the writ issued under section 2 hereof shall be enforced unless it is
preceded, or contemporaneously accompanied, by service of summons, together with a copy of the
complaint, the application for attachment the applicant's affidavit and bond, and the order and writ of
attachment, on the defendant within the Philippines.

The requirement of prior or contemporaneous service of summons shall not apply where the summons
could not be served personally or by substituted service despite diligent efforts, or the defendant is a
resident of the Philippines temporarily absent therefrom, or the defendant is a non-resident of the
Philippines, or the action is one in rem or quasi in rem. (5a)

Section 6. Sheriff's return. After enforcing the writ, the sheriff must likewise without delay make a
return thereon to the court from which the writ issued, with a full statement of his proceedings under the
writ and a complete inventory of the property attached, together with any counter-bond given by the party
against whom attachment is issued, and serve copies thereof on the applicant. (6a)

Section 7. Attachment of real and personal property; recording thereof. Real and personal property
shall be attached by the sheriff executing the writ in the following manner:

(a) Real property, or growing crops thereon, or any interest therein, standing upon the record of
the registry of deeds of the province in the name of the party against whom attachment is issued,
or not appearing at all upon such records, or belonging to the party against whom attachment is
issued and held by any other person, or standing on the records of the registry of deeds in the
name of any other person, by filing with the registry of deeds a copy of the order, together with a
description of the property attached, and a notice that it is attached, or that such real property and
any interest therein held by or standing in the name of such other person are attached, and by
leaving a copy of such order, description, and notice with the occupant of the property, if any, or
with such other person or his agent if found within the province. Where the property has been
brought under the operation of either the Land Registration Act or the Property Registration
Decree, the notice shall contain a reference to the number of the certificate of title, the volume
and page in the registration book where the certificate is registered, and the registered owner or
owners thereof.

The registrar of deeds must index attachments filed under this section in the names of the
applicant, the adverse party, or the person by whom the property is held or in whose name it
stands in the records. If the attachment is not claimed on the entire area of the land covered by
the certificate of title, a description sufficiently accurate for the identification of the land or interest
to be affected shall be included in the registration of such attachment;

(b) Personal property capable of manual delivery, by taking and safely keeping it in his custody,
after issuing the corresponding receipt therefor.
 (c) Stocks or shares, or an interest in stocks or shares, of any corporation or company, by leaving
with the president or managing agent thereof, a copy of the writ, and a notice stating that the
stock or interest of the party against whom the attachment is issued is attached in pursuance of
such writ;

(d) Debts and credits, including bank deposits, financial interest, royalties, commissions and other
personal property not capable of manual delivery, by leaving with the person owing such debts, or
having in his possession or under his control, such credits or other personal property, or with his
agent, a copy of the writ, and notice that the debts owing by him to the party against whom
attachment is issued, and the credits and other personal property in his possession, or under his
control, belonging to said party, are attached in pursuance of such writ;

(e) The interest of the party against whom attachment is issued in property belonging to the
estate of the decedent, whether as heir, legatee, or devisee, by serving the executor or
administrator or other personal representative of the decedent with a copy of the writ and notice
that said interest is attached. A copy of said writ of attachment and of said notice shall also be
filed in the office of the clerk of the court in which said estate is being settled and served upon the
heir, legatee or devisee concerned.

If the property sought to be attached is in custodia legis, a copy of the writ of attachment shall be filed
with the proper court or quasi-judicial agency, and notice of the attachment served upon the custodian of
such property. (7a)

Section 8. Effect of attachment of debts, credits and all other similar personal property. All persons
having in their possession or under their control any credits or other similar personal property belonging
to the party against whom attachment is issued, or owing any debts to him, at the time of service upon
them of the copy of the writ of attachment and notice as provided in the last preceding section, shall be
liable to the applicant for the amount of such credits, debts or other similar personal property, until the
attachment is discharged, or any judgment recovered by him is satisfied, unless such property is
delivered or transferred, or such debts are paid, to the clerk, sheriff, or other proper officer of the court
issuing the attachment. (8a)

Section 9. Effect of attachment of interests in property belonging to the estate of a decedent. The
attachment of the interest of an heir, legatee, or devisee in the property belonging to the estate of a
decedent shall not impair the powers of the executor, administrator, or other personal representative of
the decedent over such property for the purpose of administration. Such personal representative,
however, shall report the attachment to the court when any petition for distribution is filed, and in the order
made upon such petition, distribution may be awarded to such heir, legatee or devisee, but the property
attached shall be ordered delivered to the sheriff making the levy, subject to the claim of such heir,
legatee, or devisee, or any person claiming under him. (9a)

Section 10. Examination of party whose property is attached and persons indebted to him or controlling
his property; delivery of property to sheriff. Any person owing debts to the party whose property is
attached or having in his possession or under his control any credit or other personal property belonging
to such party, may be required to attend before the court in which the action is pending, or before a
commissioner appointed by the court, and be examined on oath respecting the same. The party whose
property is attached may also be required to attend for the purpose of giving information respecting his
property, and may be examined on oath. The court may, after such examination, order personal property
capable of manual delivery belonging to him, in the possession of the person so required to attend before
the court, to be delivered to the clerk of the court or sheriff on such terms as may be just, having
reference to any lien thereon or claim against the same, to await the judgment in the action. (10a)

Section 11. When attached property may be sold after levy on attachment and before entry of judgment.
Whenever it shall be made to appear to the court in which the action is pending, upon hearing with
notice to both parties, that the property attached is perishable, or that the interests of all the parties to the
action will be subserved by the sale thereof, the court may order such property to be sold at public
auction in such manner as it may direct, and the proceeds of such sale to be deposited in court to abide
the judgment in the action. (11a)

Section 12. Discharge of attachment upon giving counter-bond. After a writ of attachment has been
enforced, the party whose property has been attached, or the person appearing on his behalf, may move
for the discharge of the attachment wholly or in part on the security given. The court shall, after due notice
and hearing, order the discharge of the attachment if the movant makes a cash deposit, or files a counter-
bond executed to the attaching party with the clerk of the court where the application is made, in an
amount equal to that fixed by the court in the order of attachment, exclusive of costs. But if the
attachment is sought to be discharged with respect to a particular property, the counter-bond shall be
equal to the value of that property as determined by the court. In either case, the cash deposit or the
counter-bond shall secure the payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an
attachment in accordance with the provisions of this section, the property attached, or the proceeds of
any sale thereof, shall be delivered to the party making the deposit or giving the counter-bond, or to the
person appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so
released. Should such counter-bond for any reason be found to be or become insufficient, and the party
furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new order
of attachment. (12a)

Section 13. Discharge of attachment on other grounds. The party whose property has been ordered
attached may file a motion with the court in which he action is pending, before or after levy or even after
the release of the attached property, for an order to set aside or discharge the attachment on the ground
that the same was improperly or irregularly issued or enforced, or that the bond is insufficient. If the
attachment is excessive, the discharge shall be limited to the excess. If the motion be made on affidavits
on the part of the movant but not otherwise, the attaching party may oppose the motion by counter-
affidavits or other evidence in addition to that on which the attachment was made. After due notice and
hearing, the court shall order the setting aside or the corresponding discharge of the attachment if it
appears that it was improperly or irregularly issued or enforced, or that the bond is insufficient, or that the
attachment is excessive, and the defect is not cured forthwith. (13a)

Section 14. Proceedings where property claimed by third person. If the property attached is claimed
by any person other than the party against whom attachment had been issued or his agent, and such
person makes an affidavit of his title thereto, or right to the possession thereof, stating the grounds of
such right or title, and serves such affidavit upon the sheriff while the latter has possession of the
attached property, and a copy thereof upon the attaching party, the sheriff shall not be bound to keep the
property under attachment, unless the attaching party or his agent, on demand of the sheriff, shall file a
bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the
property levied upon. In case of disagreement as to such value, the same shall be decided by the court
issuing the writ of attachment. No claim for damages for the taking or keeping of the property may be
enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from
the date of the filing of the bond.

The sheriff shall not be liable for damages for the taking or keeping of such property to any such third-
party claimant, if such bond shall be filed. Nothing herein contained shall prevent such claimant or any
third person from vindicating his claim to the property, or prevent the attaching party from claiming
damages against a third-party claimant who filed a frivolous or plainly spurious claim, in the same or a
separate action.

When the writ of attachment is issued in favor of the Republic of the Philippines, or any officer duly
representing it, the filing of such bond shall not be required, and in case the sheriff is sued for damages
as a result of the attachment, he shall be represented by the Solicitor General, and if held liable therefor,
the actual damages adjudged by the court shall be paid by the National Treasurer out of the funds to be
appropriated for the purpose. (14a)

Section 15. Satisfaction of judgment out of property attached, return of sheriff. If judgment be
recovered by the attaching party and execution issue thereon, the sheriff may cause the judgment to be
satisfied out of the property attached, if it be sufficient for that purpose in the following manner:

(a) By paying to the judgment obligee the proceeds of all sales of perishable or other property
sold in pursuance of the order of the court, or so much as shall be necessary to satisfy the
judgment;

(b) If any balance remains due, by selling so much of the property, real or personal, as may be
necessary to satisfy the balance, if enough for that purpose remain in the sheriff's hands, or in
those the clerk of the court;

(c) By collecting from all persons having in their possession credits belonging to the judgment
obligor, or owing debts to the latter at the time of the attachment of such credits or debts, the
amount of such credits and debts as determined by the court in the action, and stated in the
judgment, and paying the proceeds of such collection over to the judgment obligee.

The sheriff shall forthwith make a return in writing to the court of his proceedings under this section and
furnish the parties with copies thereof. (15a)

Section 16. Balance due collected upon an execution; excess delivered to judgment obligor. If after
realizing upon all the property attached, including the proceeds of any debts or credits collected, and
applying the proceeds to the satisfaction of the judgment less the expenses of proceedings upon the
judgment any balance shall remain due, the sheriff must proceed to collect such balance as upon
ordinary execution. Whenever the judgment shall have been paid, the sheriff, upon reasonable demand,
must return to the judgment obligor the attached property remaining in his hands, and any proceeds of
the sale of the property attached not applied to the judgment. (16a)

Section 17. Recovery upon the counter-bond. When the judgment has become executory, the surety
or sureties on any counter-bond given pursuant to the provisions of this Rule to secure the payment of the
judgment shall become charged on such counter-bond and bound to pay the judgment obligee upon
demand the amount due under the judgment, which amount may be recovered from such surety or
sureties after notice and summary hearing in the same action. (17a)

Section 18. Disposition of money deposited. Where the party against whom attachment had been
issued has deposited money instead of giving counter-bond, it shall be applied under the direction of the
court to the satisfaction of any judgment rendered in favor of the attaching party, and after satisfying the
judgment the balance shall be refunded to the depositor or his assignee. If the judgment is in favor of the
party against whom attachment was issued, the whole sum deposited must be refunded to him or his
assignee. (18a)

Section 19. Disposition of attached property where judgment is for party against whom attachment was
issued. If judgment be rendered against the attaching party, all the proceeds of sales and money
collected or received by the sheriff, under the order of attachment, and all property attached remaining in
any such officer's hands, shall be delivered to the party against whom attachment was issued, and the
order of attachment discharged. (19a)

Section 20. Claim for damages on account of improper, irregular or excessive attachment. An
application for damages on account of improper, irregular or excessive attachment must be filed before
the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the
attaching party and his surety or sureties setting forth the facts showing his right to damages and the
amount thereof. Such damages may be awarded only after proper hearing and shall be included in the
judgment on the main case.

If the judgment of the appellate court be favorable to the party against whom the attachment was issued
he must claim damages sustained during the pendency of the appeal by filing an application in the
appellate court, with notice to the party in whose favor the attachment was issued or his surety or
sureties, before the judgment of the appellate court becomes executory. The appellate court may allow
the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching party not
exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully satisfy
the award. (20a)

A. Nature
1. Stages of Attachment
2. Contemporaneous Service of Summons

ALFREDO C. LIM, JR. v. SPOUSES TITO S. LAZARO and CARMEN T. LAZARO, G.R. No. 185734, July 3, 2013

Civil procedure; Writ of preliminary attachment subsists until judgment is satisfied. 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. 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.

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.

In Chemphil Export & Import Corporation v. CA, the Court pronounced that a writ of attachment is not
extinguished by the execution of a compromise agreement between the parties.
 G.R. No. 185734, July 03, 2013

ALFREDO C. LIM, JR., Petitioner, v. SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO,
Respondents.

RESOLUTION

PERLAS-BERNABE, J.:

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

The Facts

On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the issuance of a writ of
preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S. Lazaro and
Carmen T. Lazaro (Sps. Lazaro) the sum of 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-64940, T-64939, and T-
86369 (subject TCTs), registered in the names of Sps. Lazaro, were levied upon.9

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

Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement13 whereby Sps.
Lazaro agreed to pay Lim, Jr. the amount of 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 reconsideration19 which was, however, denied on July 26, 2007,20 prompting him
to file a petition for certiorari21 before the CA.
 The CA Ruling

On July 10, 2008, the CA rendered the assailed decision,22 finding no grave abuse of discretion on the 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 reconsideration24 which was likewise denied by the CA in its December 18,
2008 Resolution.25

Hence, the instant petition.

The Issue Before the Court

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

The 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: cralavvo nline lawlib rary

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.

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). cralawlib rary

Chemphil Export & Import Corporation v. CA, G.R. Nos. 112438-39 and 113394, December 12, 1995, 251
28

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)

29
Id. at 287-290. cralawl ibra ry

30
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).
Ligon vs RTC Branch 56 Makati City

G.R. No. 190028 February 26, 2014

LETICIA P. LIGON, Petitioner, vs.

THE REGIONAL TRIAL COURT, BRANCH 56 AT MAKATI CITY AND ITS PRESIDING JUDGE, JUDGE REYNALDO M.
LAIGO, SHERIFF IV LUCITO V. ALEJO, ATTY. SILVERIO GARING, MR. LEONARDO J. TING, AND MR. BENITO G.
TECHICO, Respondents.

FACTS: Petitioner Ligon filed before the QC RTC a complaint for the collection of a sum of money with prayer for
the issuance of a writ of preliminary attachment against the Sps. Baladjay, a certain Olivia Marasigan (Marasigan),
Polished Arrow Holdings, Inc. (Polished Arrow), and its incorporators. The complaint alleges among others that the
spouses Baladjay enticed her to extend a short-term loan secured by a PDC which bounced upon presentment, and
that the subject property was transferred to respondent Polished Arrow allegedly defendants dummy corporation
to defraud creditors. The application for the writ was granted so the subject property was levied upon by
annotating the writ on the dorsal portion of TCT No. 9273.

While the case was pending, a similar complaint for the sum of money damages, and cancellation of title with
prayer for issuance of a writ of preliminary attachment was lodged before the RTC Makati by the Sps Vicente
against the same respondents. During the proceedings therein, a writ of preliminary attachment also against the
subject property was issued and annotated on the dorsal portion of TCT No. 9273.

While the case is still pending in QC, the Makati RTC rendered a decision rescinding the transfer of the subject
property to Polished Arrow upon a finding that the same was made in fraud of creditors. Consequently, the Makati
City RTC directed the Register of Deeds of Muntinlupa City to: (a) cancel TCT No. 9273 in the name of Polished
Arrow; and (b) restore TCT No. 8502 in its previous condition in the name of Rosario Baladjay. In the subsequent
execution proceedings, the property was sold at a public auction to respondent Ting.

The RTC Makati then ordered the RD under pain of contempt to issue a new certificate in favor of Ting free from
any liens and encumbrances.

Meanwhile the QC RTC ruled in favor of Ligon who sought its execution and discovered the earlier attachment
annotation in her favor has been deleted.

ISSUE: W/N the Makati RTC gravely abused its discretion when it ordered the deletion of Ligons attachment lien

HELD: YES. Case law instructs that an attachment is a proceeding in rem, and, hence, is against the particular
property, enforceable against the whole world. Accordingly, the attaching creditor acquires a specific lien on the
attached property which nothing can subsequently destroy except the very dissolution of the attachment or levy
itself. Such a proceeding, in effect, means that the property attached is an indebted thing and a virtual
condemnation of it to pay the owners debt. The lien continues until the debt is paid, or sale is had under
execution issued on the judgment, or until the judgment is satisfied, or the attachment discharged or vacated in
some manner provided by law. Thus, a prior registration40 of an attachment lien creates a preference, such that
when an attachment has been duly levied upon a property, a purchaser thereof subsequent to the attachment
takes the property subject to the said attachment.42 As provided under PD 1529, said registration operates as a
form of constructive notice to all.

Notwithstanding the subsequent cancellation of TCT No. 9273 due to the Makati City RTCs December 9, 2004
Decision rescinding the transfer of the subject property from Sps. Baladjay to Polished Arrow upon a finding that
the same was made in fraud of creditors, Ligons attachment lien over the subject property continued to subsist
since the attachment she had earlier secured binds the property itself, and, hence, continues until the judgment
debt of Sps. Baladjay to Ligon as adjudged in the Quezon City Case is satisfied, or the attachment discharged or
vacated in some manner provided by law. The grave abuse of discretion of the Makati City RTC lies with its
directive to issue a new certificate of title in the name of Ting (i.e., TCT No. 19756),47 free from any liens and
encumbrances. This course of action clearly negates the efficacy of Ligons attachment lien and, also, defies the
legal characterization of attachment proceedings. It bears noting that Ligons claim, secured by the aforesaid
attachment, is against Sps. Baladjay whose ownership over the subject property had been effectively restored in
view of the RTCs rescission of the propertys previous sale to Polished Arrow.48Thus, Sps. Ligons attachment lien
against Sps. Baladjay as well as their successors-in-interest should have been preserved, and the annotation
thereof carried over to any subsequent certificate of title,49 the most recent of which as it appears on record is
TCT No. 31001 in the name of Techico, without prejudice to the latters right to protect his own ownership interest
over the subject property.
Torres vs Satsatin

G.R. No. 166759 November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR RESOURCES, INC.,Petitioners,

vs.

NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL SATSATIN and NIKKI NORLIN SATSATIN,
Respondents.

FACTS: On October 25, 2002, the petitioners filed a complaint for a sum of money and damages against herein
respondents.

On October 30 2002, they filed an Ex-Parte Motition for the Issuance of a writ of preliminary attachment alleging
that the respondents are about to depart from the Philippines that there is no other sufficient security for the
claim sought to be enforced; and that they are willing to post a bond fixed by the court to answer for all costs
which may be adjudged to the respondents and all damages which respondents may sustain by reason of the
attachment prayed for.

On October 30, 2002, the trial court issued an Order9 directing the petitioners to post a bond in the amount
ofP7,000,000.00 before the court issues the writ of attachment.

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

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

Thereafter, the RTC issued a Writ of Attachment dated November 15, 2002, directing the sheriff to attach the
estate, real or personal, of the respondents.

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

On November 21, 2002 or two days after the writ was implemented, summons, together with a copy of the
complaint, was served upon the respondents.

Respondents argued that the subject writ was improper and irregular having been issued and enforced without the
lower court acquiring jurisdiction over the persons of the respondents. They maintained that the writ of
attachment was implemented without serving upon them the summons together with the complaint. They also
argued that the bond issued in favor of the petitioners was defective, because the bonding company failed to
obtain the proper clearance that it can transact business with the RTC of Dasmarias, Cavite. They added that the
various clearances which were issued in favor of the bonding company were applicable only in the courts of the
cities of Pasay, Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.
ISSUE1: W/N the bond was properly issued

HELD1: NO. The CA correctly found that there was grave abuse of discretion amounting to lack of or in excess of
jurisdiction on the part of the trial court in approving the bond posted by petitioners despite the fact that not all
the requisites for its approval were complied with. In accepting a surety bond, it is necessary that all the requisites
for its approval are met; otherwise, the bond should be rejected.

Every bond should be accompanied by a clearance from the Supreme Court showing that the company concerned
is qualified to transact business which is valid only for thirty (30) days from the date of its issuance.38 However, it
is apparent that the Certification39 issued by the Office of the Court Administrator (OCA) at the time the bond was
issued would clearly show that the bonds offered by Western Guaranty Corporation may be accepted only in the
RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the surety bond issued by the bonding company should
not have been accepted by the RTC of Dasmarias, Branch 90, since the certification secured by the bonding
company from the OCA at the time of the issuance of the bond certified that it may only be accepted in the above-
mentioned cities.

ISSUE2: W/N writ was properly implemented

HELD2: NO. In Cuartero v. Court of Appeals, this Court held that the grant of the provisional remedy of attachment
involves three stages: first, the court issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it is
not necessary that jurisdiction over the person of the defendant be first obtained. However, once the
implementation of the writ commences, the court must have acquired jurisdiction over the defendant, for without
such jurisdiction, the court has no power and authority to act in any manner against the defendant. Any order
issuing from the Court will not bind the defendant

At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so since the
motion for its issuance can be filed at the commencement of the action or at any time before entry of judgment.
However, at the time the writ was implemented, the trial court has not acquired jurisdiction over the persons of
the respondent since no summons was yet served upon them. The proper officer should have previously or
simultaneously with the implementation of the writ of attachment, served a copy of the summons upon the
respondents in order for the trial court to have acquired jurisdiction upon them and for the writ to have binding
effect. Consequently, even if the writ of attachment was validly issued, it was improperly or irregularly enforced
and, therefore, cannot bind and affect the respondents.
G.R. No. L-48080 August 31, 1942

JOSE DE BORJA, petitioner,

vs.

SERVILLANO PLATON and FRANCISCO DE BORJA, respondents.

Vicente J. Francisco for petitioner.

E. V. Filamor for respondents.

No appearance for respondent judge

BOCOBO, J.:

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

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

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

The order for preliminary attachment is questioned upon several grounds, among which are: (1) that no writ of
attachment can be issued in favor of a defendant who presents a counterclaim; (2) and the defendants' affidavit
was fatally defective.
On the first point, we believe a writ of preliminary attachment may be issued in favor of a defendant who sets up a
counterclaim. For the purpose of the protection afforded by such attachment, it is immaterial whether the
defendants Borja and wife simply presented a counterclaim or brought a separate civil action against Jose de Borja,
plaintiff in the previous case and petitioner herein. To lay down a subtle distinction would be to sanction that
formalism and that technicality which are discountenanced by the modern laws of procedure for the sake of
speedy and substantial justice. In the present case we see no reason why the order of the trial court should be
disturbed, this question being a matter within its discretion and we find no grave abuse of that discretion.

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

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

Yulo, C.J., Moran, Ozaeta and Paras, JJ., concur.

SECOND DIVISION

PROFESSIONAL VIDEO, INC., G.R. No. 155504

Petitioner,
Present:

QUISUMBING, J., Chairperson,

*
YNARES-SANTIAGO,
**
CHICO-NAZARIO,
- versus - ***
LEONARDO-DE CASTRO, and
BRION, JJ.

TECHNICAL EDUCATION AND Promulgated:

SKILLS DEVELOPMENT
AUTHORITY, June 26, 2009
Respondent.

x ---------------------------------------------------------------------------------------------------------- x

DECISION

BRION, J.:

We resolve the petition filed by Professional Video, Inc. (PROVI)1 to annul

and set aside the Decision2 of the Court of Appeals (CA) in CA-G.R. SP No.
67599, and its subsequent Order denying PROVIs motion for reconsideration. 3 The
assailed CA decision nullified:
*
Designated additional Member of the Second Division per Special Order No. 645 dated May 15, 2009.
**
Designated additional Member of the Second Division effective June 3, 2009 per Special Order No. 658 dated
June 3, 2009.
***
Designated additional Member of the Second Division effective May 11, 2009 per Special Order No. 635 dated
May 7, 2009.
1
Petition for review on certiorari under Rule 45 of the Rules of Court; rollo, pp. 8-21.
2
Dated July 23, 2002, penned by Associate Justice Eliezer R. De Los Santos, with Acting Presiding Justice Cancio
C. Garcia (retired member of this Court) and Associate Justice Marina L. Buzon (retired), concurring; id., pp. 22-
31.
3
Dated September 27, 2002; id., pp. 32-33.
 a. the Order4 dated July 16, 2001 of the Regional Trial Court (RTC),
Pasig City, in Civil Case No. 68527, directing the
attachment/garnishment of the properties of respondent Technical
Education and Skills Development Authority (TESDA) amounting to
Thirty Five Million Pesos (P35,000,000.00); and
b. the RTCs August 24, 2001 Order5 denying respondent TESDAs
motion to discharge/quash writ of attachment.

THE FACTUAL BACKGROUND

PROVI is an entity engaged in the sale of high technology equipment,

information technology products and broadcast devices, including the supply of
plastic card printing and security facilities.

TESDA is an instrumentality of the government established under Republic

Act (R.A.) No. 7796 (the TESDA Act of 1994) and attached to the Department of
Labor and Employment (DOLE) to develop and establish a national system of
skills standardization, testing, and certification in the country. 6 To fulfill this
mandate, it sought to issue security-printed certification and/or identification
polyvinyl (PVC) cards to trainees who have passed the certification process.

TESDAs Pre-Qualification Bids Award Committee (PBAC) conducted two

(2) public biddings on June 25, 1999 and July 22, 1999 for the printing and
encoding of PVC cards. A failure of bidding resulted in both instances since only
4
Penned by Judge Mariano M. Singzon, Jr.; id., pp. 86-87.
5
Id., pp. 88-89.
6
R.A. No. 7796, Section 14(b)(1).
two (2) bidders PROVI and Sirex Phils. Corp. submitted proposals.

Due to the failed bidding, the PBAC recommended that TESDA enter into a
negotiated contract with PROVI. On December 29, 1999, TESDA and PROVI
signed and executed their Contract Agreement Project: PVC ID Card Issuance (the
Contract Agreement) for the provision of goods and services in the printing and
encoding of PVC cards.7 Under this Contract Agreement, PROVI was to provide
TESDA with the system and equipment compliant with the specifications defined
in the Technical Proposal. In return, TESDA would pay PROVI the amount of
Thirty-Nine Million Four Hundred and Seventy-Five Thousand Pesos
(P39,475,000) within fifteen (15) days after TESDAs acceptance of the contracted
goods and services.

On August 24, 2000, TESDA and PROVI executed an Addendum to the

Contract Agreement Project: PVC ID Card Issuance (Addendum),8 whose terms
bound PROVI to deliver one hundred percent (100%) of the enumerated supplies
to TESDA consisting of five hundred thousand (500,000) pieces of security foil;
five (5) pieces of security die with TESDA seal; five hundred thousand (500,000)
pieces of pre-printed and customized identification cards; one hundred thousand
(100,000) pieces of scannable answer sheets; and five hundred thousand (500,000)
customized TESDA holographic laminate. In addition, PROVI would install and
maintain the following equipment: one (1) unit of Micropoise, two (2) units of card
printer, three (3) units of flatbed scanner, one (1) unit of OMR scanner, one (1)
unit of Server, and seven (7) units of personal computer.

7
Rollo, pp. 45-47.
8
Id., pp. 51-54.
 TESDA in turn undertook to pay PROVI thirty percent (30%) of the total
cost of the supplies within thirty (30) days after receipt and acceptance of the
contracted supplies, with the balance payable within thirty (30) days after the
initial payment.

According to PROVI, it delivered the following items to TESDA on the

dates indicated:

Date Particulars Amount

26 April 2000 48,500 pre-printed cards P 2,764,500.00

07 June 2000 330,000 pre-printed cards 18,810,000.00
07 August 2000 121,500 pre-printed cards 6,925,500.00
26 April 2000 100,000 scannable answer sheets 600,000.00
06 June 2000 5 Micro-Poise customized die 375,000.00
13 June 2000 35 boxes @ 15,000 imp/box 10,000,000.00
Custom hologram Foil
Total P 39,475,000.00

PROVI further alleged that out of TESDAs liability of P39,475,000.00,

TESDA paid PROVI only P3,739,500.00, leaving an outstanding balance of
P35,735,500.00, as evidenced by PROVIs Statement of Account.9 Despite the two
demand letters dated March 8 and April 27, 2001 that PROVI sent TESDA, 10 the
outstanding balance remained unpaid.

On July 11, 2001, PROVI filed with the RTC a complaint for sum of money
with damages against TESDA. PROVI additionally prayed for the issuance of a

9
Id., p. 55.
10
Id., pp. 56-57.
writ of preliminary attachment/garnishment against TESDA. The case was
docketed as Civil Case No. 68527. In an Order dated July 16, 2001, the RTC
granted PROVIs prayer and issued a writ of preliminary attachment against the
properties of TESDA not exempt from execution in the amount of
P35,000,000.00.11

TESDA responded on July 24, 2001 by filing a Motion to Discharge/Quash

the Writ of Attachment, arguing mainly that public funds cannot be the subject of
garnishment.12 The RTC denied TESDAs motion, and subsequently ordered the
manager of the Land Bank of the Philippines to produce TESDAs bank statement
for the garnishment of the covered amount.13

Faced with these rulings, TESDA filed a Petition for Certiorari with the CA
to question the RTC orders, imputing grave abuse of discretion amounting to lack
or excess of jurisdiction on the trial court for issuing a writ of preliminary
attachment against TESDAs public funds.14

The CA set aside the RTCs orders after finding that: (a) TESDAs funds are
public in nature and, therefore, exempt from garnishment; and (b) TESDAs
purchase of the PVC cards was a necessary incident of its governmental function;
consequently, it ruled that there was no legal basis for the issuance of a writ of
preliminary attachment/garnishment.15 The CA subsequently denied PROVIs
motion for reconsideration;16 hence, the present petition.

11
Id., pp. 86-87.
12
Id., pp. 95-108.
13
Order dated September 10, 2001; id., p. 120.
14
Filed on November 15, 2001; id., pp. 60-85.
15
Dated July 23, 2002; id., pp. 23-31.
16
In a Resolution dated September 27, 2002; id., p. 33.
 THE PETITION

The petition submits to this Court the single issue of whether or not the writ
of attachment against TESDA and its funds, to cover PROVIs claim against
TESDA, is valid. The issue involves a pure question of law and requires us to
determine whether the CA was correct in ruling that the RTC gravely abused its
discretion in issuing a writ of attachment against TESDA.

PROVI argues that the CA should have dismissed TESDAs petition for
certiorari as the RTC did not commit any grave abuse of discretion when it issued
the Orders dated July 16, 2001 and August 24, 2001. According to PROVI, the
RTC correctly found that when TESDA entered into a purely commercial contract
with PROVI, TESDA went to the level of an ordinary private citizen and could no
longer use the defense of state immunity from suit. PROVI further contends that it
has alleged sufficient ultimate facts in the affidavit it submitted to support its
application for a writ of preliminary attachment. Lastly, PROVI maintains that
sufficient basis existed for the RTCs grant of the writ of preliminary attachment,
since TESDA fraudulently misapplied or embezzled the money earmarked for the
payment of the contracted supplies and services, as evidenced by the Certification
as to Availability of Funds.

TESDA claims that it entered the Contract Agreement and Addendum in the
performance of its governmental function to develop and establish a national
system of skills standardization, testing, and certification; in the performance of
this governmental function, TESDA is immune from suit. Even assuming that it
had impliedly consented to be sued by entering into a contract with PROVI,
TESDA posits that the RTC still did not have the power to garnish or attach its
funds since these are public funds. Lastly, TESDA points out that PROVI failed to
comply with the elements for the valid issuance of a writ of preliminary
attachment, as set forth in Section 1, Rule 57 of the 1997 Rules of Civil Procedure.

THE COURTS RULING

We find, as the CA did, that the RTCs questioned order involved a

gross misreading of the law and jurisprudence amounting to action in excess
of its jurisdiction. Hence, we resolve to DENY PROVIs petition for lack of
merit.

TESDA is an instrumentality
of the government undertaking
governmental functions.

R.A. No. 7796 created the Technical Education and Skills Development
Authority or TESDA under the declared policy of the State to provide relevant,
accessible, high quality and efficient technical education and skills development in
support of the development of high quality Filipino middle-level manpower
responsive to and in accordance with Philippine development goals and priorities.17
TESDA replaced and absorbed the National Manpower and Youth Council, the
Bureau of Technical and Vocational Education and the personnel and functions
pertaining to technical-vocational education in the regional offices of the
Department of Education, Culture and Sports and the apprenticeship program of

17
Supra note 6, Section 2.
the Bureau of Local Employment of the DOLE.18 Thus, TESDA is an
unincorporated instrumentality of the government operating under its own charter.

Among others, TESDA is empowered to: approve trade skills standards and
trade tests as established and conducted by private industries; establish and
administer a system of accreditation of both public and private institutions;
establish, develop and support the institutions' trainors' training and/or programs;
exact reasonable fees and charges for such tests and trainings conducted, and retain
such earnings for its own use, subject to guidelines promulgated by the Authority;
and perform such other duties and functions necessary to carry out the provisions
of the Act, consistent with the purposes of the creation of TESDA.19

Within TESDAs structure, as provided by R.A. No. 7769, is a Skills

Standards and Certification Office expressly tasked, among others, to develop and
establish a national system of skills standardization, testing and certification in the
country; and to conduct research and development on various occupational areas in
order to recommend policies, rules and regulations for effective and efficient skills
standardization, testing and certification system in the country.20 The law likewise
mandates that [T]here shall be national occupational skills standards to be
established by TESDA-accredited industry committees. The TESDA shall develop
and implement a certification and accreditation program in which private groups
and trade associations are accredited to conduct approved trade tests, and the local
government units to promote such trade testing activities in their respective areas
in accordance with the guidelines to be set by the TESDA. The Secretary of Labor
18
Id., Section 5.
19
Id., Section 8.
20
Id., Section 14(b).
and Employment shall determine the occupational trades for mandatory
certification. All certificates relating to the national trade skills testing and
certification system shall be issued by the TESDA through its Secretariat.21

All these measures are undertaken pursuant to the constitutional command

that [T]he State affirms labor as a primary social economic force, and shall protect
the rights of workers and promote their welfare;22 that [T]he State shall protect and
promote the right of all citizens to quality education at all levels, and shall take
appropriate steps to make such education accessible to all;23 in order to afford
protection to labor and promote full employment and equality of employment
opportunities for all.24

Under these terms, both constitutional and statutory, we do not believe that
the role and status of TESDA can seriously be contested: it is an unincorporated
instrumentality of the government, directly attached to the DOLE through the
participation of the Secretary of Labor as its Chairman, for the performance of
governmental functions i.e., the handling of formal and non-formal education and
training, and skills development. As an unincorporated instrumentality operating
under a specific charter, it is equipped with both express and implied powers,25 and
all State immunities fully apply to it.26

21
Id., Section 22.
22
CONSTITUTION, Article II, Section 18.
23
Id., Article XIV, Section 1.
24
Id., Article XIII, Section 3.
25
See Laguna Lake Development Authority v. Court of Appeals, G.R. No. 110120, March 16, 1994, 231 SCRA 292;
Republic v. Court of Appeals, G.R. No. 90482, August 5, 1991, 200 SCRA 226.
26
See Farolan, Jr. v. Court of Tax Appeals, G.R. No. 42204, January 21, 1993, 217 SCRA 298; Pacific Products,
Inc. v. Ong, G.R. No. 33777, January 30, 1990, 181 SCRA 536.
TESDA, as an agency of the State,
cannot be sued without its consent.

The rule that a state may not be sued without its consent is embodied in
Section 3, Article XVI of the 1987 Constitution and has been an established
principle that antedates this Constitution.27 It is as well a universally recognized
principle of international law that exempts a state and its organs from the
jurisdiction of another state.28 The principle is based on the very essence of
sovereignty, and on the practical ground that there can be no legal right as against
the authority that makes the law on which the right depends.29 It also rests on
reasons of public policy that public service would be hindered, and the public
endangered, if the sovereign authority could be subjected to law suits at the
instance of every citizen and, consequently, controlled in the uses and dispositions
of the means required for the proper administration of the government.30

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

27
Metran v. Paredes, 79 Phil. 819 (1948).
28
JUSMAG Philippines v. NLRC, G.R. No. 108813, December 15, 1994, 239 SCRA 224.
29
Republic v. Sandoval, G.R. No. 84645, March 19, 1993, 220 SCRA 124, citing Kawanakoa v. Polyblank, 205 U.S.
349-353, 51 L. Ed. 834 (1907).
30
Ibid., citing The Siren v. United States, 7 Wall. 152, 19 L. Ed. 129 (1869).
standardization, testing, and certification in the country. From the perspective of
this function, the core reason for the existence of state immunity applies i.e., the
public policy reason that the performance of governmental function cannot be
hindered or delayed by suits, nor can these suits control the use and disposition of
the means for the performance of governmental functions. In Providence
Washington Insurance Co. v. Republic of the Philippines,31 we said:
[A] continued adherence to the doctrine of non-suability is not to be deplored for
as against the inconvenience that may be caused private parties, the loss of
governmental efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well known
propensity on the part of our people to go to court, at the least provocation, the
loss of time and energy required to defend against law suits, in the absence of
such a basic principle that constitutes such an effective obstacle, could very well
be imagined.

PROVI argues that TESDA can be sued because it has effectively waived its
immunity when it entered into a contract with PROVI for a commercial purpose.
According to PROVI, since the purpose of its contract with TESDA is to provide
identification PVC cards with security seal which TESDA will thereafter sell to
TESDA trainees, TESDA thereby engages in commercial transactions not
incidental to its governmental functions.

TESDAs response to this position is to point out that it is not engaged in

business, and there is nothing in the records to show that its purchase of the PVC
cards from PROVI is for a business purpose. While TESDA admits that it will
charge the trainees with a fee for the PVC cards, it claims that this fee is only to
recover their costs and is not intended for profit.

31
G.R. No. L-26386, September 30, 1969, 29 SCRA 598.
 We agree with TESDA. As the appellate court found, the PVC cards
purchased by TESDA from PROVI are meant to properly identify the trainees who
passed TESDAs National Skills Certification Program the program that
immediately serves TESDAs mandated function of developing and establishing a
national system of skills standardization, testing, and certification in the country. 32
Aside from the express mention of this function in R.A. No. 7796, the details of
this function are provided under DOLE Administrative Order No. 157, S. 1992, as
supplemented by Department Order Nos. 3 thru 3-F, S. 1994 and Department
Order No. 13, S. 1994.33

Admittedly, the certification and classification of trainees may be

undertaken in ways other than the issuance of identification cards, as the RTC
stated in its assailed Order.34 How the mandated certification is to be done,
however, lies within the discretion of TESDA as an incident of its mandated
function, and is a properly delegated authority that this Court cannot inquire into,
unless its exercise is attended by grave abuse of discretion.

That TESDA sells the PVC cards to its trainees for a fee does not
characterize the transaction as industrial or business; the sale, expressly authorized
by the TESDA Act,35 cannot be considered separately from TESDAs general
governmental functions, as they are undertaken in the discharge of these functions.
Along this line of reasoning, we held in Mobil Philippines v. Customs Arrastre
Services:36

32
R.A. No. 7796, Section 14(b)(1).
33
Whereas Clause of Contract Agreement Project: PVC ID Card Issuance; rollo, pp. 45-47.
34
Supra note 4.
35
See: Section 8 (5) to (10), R.A. No. 7796.
36
G.R. No. L-23139, December 17, 1966, 18 SCRA 1120.
 Now, the fact that a non-corporate government entity performs a function
proprietary in nature does not necessarily result in its being suable. If said non-
governmental function is undertaken as an incident to its governmental function,
there is no waiver thereby of the sovereign immunity from suit extended to such
government entity.

TESDAs funds are public in

character, hence exempt from
attachment or garnishment.

Even assuming that TESDA entered into a proprietary contract with PROVI
and thereby gave its implied consent to be sued, TESDAs funds are still public in
nature and, thus, cannot be the valid subject of a writ of garnishment or attachment.
Under Section 33 of the TESDA Act, the TESDA budget for the implementation of
the Act shall be included in the annual General Appropriation Act; hence, TESDA
funds, being sourced from the Treasury, are moneys belonging to the government,
or any of its departments, in the hands of public officials. 37 We specifically spoke
of the limits in dealing with this fund in Republic v. Villasor38 when we said:

This fundamental postulate underlying the 1935 Constitution is now made

explicit in the revised charter. It is therein expressly provided, The State may not
be sued without its consent. A corollary, both dictated by logic and sound sense,
from such a basic concept, is that public funds cannot be the object of
garnishment proceedings even if the consent to be sued had been previously
granted and the state liability adjudged. Thus in the recent case of
Commissioner of Public Highways vs. San Diego, such a well-settled doctrine was
restated in the opinion of Justice Teehankee:

The universal rule that where the State gives its consent to be sued
by private parties either by general or special law, it may limit
claimant's action 'only up to the completion of proceedings anterior
to the stage of execution' and that the power of the Courts ends
when the judgment is rendered, since government funds and
properties may not be seized under writs of execution or

37
Blacks Law Dictionary, 6th Ed., p. 1229.
38
G.R. No. L-30671, November 28, 1973, 54 SCRA 84.
 garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds
must be covered by the corresponding appropriation as
required by law. The functions and public services rendered by
the State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific
objects, as appropriated by law. [Emphasis supplied.]

We reiterated this doctrine in Traders Royal Bank v. Intermediate Appellate

Court,39 where we said:

The NMPCs implied consent to be sued notwithstanding, the trial court

did not have the power to garnish NMPC deposits to answer for any eventual
judgment against it. Being public funds, the deposits are not within the reach
of any garnishment or attachment proceedings. [Emphasis supplied.]

As pointed out by TESDA in its Memorandum,40 the garnished funds

constitute TESDAs lifeblood in government parlance, its MOOE41 whose
withholding via a writ of attachment, even on a temporary basis, would paralyze
TESDAs functions and services. As well, these funds also include TESDAs
Personal Services funds from which salaries of TESDA personnel are sourced.
Again and for obvious reasons, the release of these funds cannot be delayed.

PROVI has not shown that it is

entitled to the writ of attachment.

Even without the benefit of any immunity from suit, the attachment of
TESDA funds should not have been granted, as PROVI failed to prove that
TESDA fraudulently misapplied or converted funds allocated under the Certificate
as to Availability of Funds. Section 1, Rule 57 of the Rules of Court sets forth the

39
G.R. No. 68514, December 17, 1990, 192 SCRA 305.
40
Rollo, pp. 188-202.
41
Maintenance and Other Operating Expenses.
grounds for issuance of a writ of preliminary attachment, as follows:

SECTION 1. Grounds upon which attachment may issue. A plaintiff or any

proper party may, at the commencement of the action or at any time thereafter,
have the property of the adverse party attached as security for the satisfaction of
any judgment that may be recovered in the following cases:

(a) In an action for recovery of a specified amount of money or

damages, other than moral and exemplary, on a cause of action arising from law,
contract, quasi-contract, delict or quasi-delict against a party who is about to
depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently

misapplied or converted to his use by a public officer, or an officer of a
corporation, or an attorney, factor, broker, agent or clerk, in the course of
his employment as such, or by any other person in a fiduciary capacity, or
for a willful violation of duty;

(c) In an action to recover the possession of property unjustly or fraudulently

taken, detained or converted, when the property or any part thereof, has been
concealed, removed or disposed of to prevent its being found or taken by the
applicant or an authorized person;

(d) In an action against a party who has been guilty of fraud in

contracting the debt or incurring the obligation upon which the action is
brought, or in concealing or disposing of the property for the taking,
detention or conversion of which the action is brought;

(e) In an action against a party who has removed or disposed of his

property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who does not reside and is not found in
the Philippines, or on whom summons may be served by publication. [Emphasis
supplied.]

Jurisprudence teaches us that the rule on the issuance of a writ of attachment

must be construed strictly in favor of the defendant. Attachment, a harsh remedy,
must be issued only on concrete and specific grounds and not on general averments
merely quoting the words of the pertinent rules.42 Thus, the applicants affidavit

42
Dy v. Enage, G.R. No. L-3535, March 17, 1976, 670 SCRA 96.
must contain statements clearly showing that the ground relied upon for the
attachment exists.

Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon,
applies only where money or property has been embezzled or converted by a
public officer, an officer of a corporation, or some other person who took
advantage of his fiduciary position or who willfully violated his duty.

PROVI, in this case, never entrusted any money or property to TESDA.

While the Contract Agreement is supported by a Certificate as to Availability of
Funds (Certificate) issued by the Chief of TESDAs Accounting Division, this
Certificate does not automatically confer ownership over the funds to PROVI.
Absent any actual disbursement, these funds form part of TESDAs public funds,
and TESDAs failure to pay PROVI the amount stated in the Certificate cannot be
construed as an act of fraudulent misapplication or embezzlement. In this regard,
Section 86 of Presidential Decree No. 1445 (The Accounting Code) provides:

Section 86. Certificate showing appropriation to meet contract. Except in a case

of a contract for personal service, for supplies for current consumption or to be
carried in stock not exceeding the estimated consumption for three months, or
banking transactions of government-owned or controlled banks, no contract
involving the expenditure of public funds by any government agency shall be
entered into or authorized unless the proper accounting official or the agency
concerned shall have certified to the officer entering into the obligation that funds
have been duly appropriated for the purpose and that the amount necessary to
cover the proposed contract for the current fiscal year is available for expenditure
on account thereof, subject to verification by the auditor concerned. The
certification signed by the proper accounting official and the auditor who verified
it, shall be attached to and become an integral part of the proposed contract, and
the sum so certified shall not thereafter be available for expenditure for any
other purpose until the obligation of the government agency concerned under
the contract is fully extinguished. [Emphasis supplied.]
By law, therefore, the amount stated in the Certification should be intact and
remains devoted to its purpose since its original appropriation. PROVI can rebut
the presumption that necessarily arises from the cited provision only by evidence
to the contrary. No such evidence has been adduced.

Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty
of fraud in contracting a debt or incurring an obligation, or in concealing or
disposing of the property for the taking, detention or conversion of which the
action is brought. In Wee v. Tankiansee,43 we held that for a writ of attachment to
issue under this Rule, the applicant must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred
from the debtors mere non-payment of the debt or failure to comply with his
obligation. The affidavit, being the foundation of the writ, must contain particulars
showing how the imputed fraud was committed for the court to decide whether or
not to issue the writ. To reiterate, a writ of attachment can only be granted on
concrete and specific grounds and not on general averments merely quoting the
words of the rules.44

The affidavit filed by PROVI through Elmer Ramiro, its President and Chief
Executive Officer, only contained a general allegation that TESDA had fraudulent
misapplied or converted the amount of P10,975,000.00 that was allotted to it.
Clearly, we cannot infer any finding of fraud from PROVIs vague assertion, and
the CA correctly ruled that the lower court acted with grave abuse of discretion in
granting the writ of attachment despite want of any valid ground for its issuance.

43
G.R. No. 171124, February 13, 2008, 545 SCRA 263.
44
D.P. Lub Oil Marketing Center, Inc. v. Nicolas, G.R. No. 76113, November 16, 1990, 191 SCRA 423.
 For all these reasons, we support the appellate courts conclusion that no
valid ground exists to support the grant of the writ of attachment against TESDA.
The CAs annulment and setting aside of the Orders of the RTC were therefore
fully in order.

WHEREFORE, premises considered, we hereby DENY the petition filed

by petitioner Professional Video, Inc., and AFFIRM the Court of Appeals
Decision dated July 23, 2002, and Resolution of September 27, 2002, in CA-G.R.
SP No. 67599. Costs against the petitioner.

SO ORDERED.
48 Phil. 238

[ G.R. No. 23237, November 14, 1925 ]

WALTER E. OLSEN & CO., PLAINTIFF AND APPELLEE, VS. WALTER E. OLSEN,
DEFENDANT AND APPELLANT.

DECISION

VILLA-REAL, J.:

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

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

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

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

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

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

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

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

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

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

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

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

considerations of the trial court which we make ours.

For the foregoing, and no error having been found in the judgment appealed from, the same
is hereby affirmed, with the costs against the defendant-appellant. So ordered.

Avancea, C. J., Street, Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.
Johnson, J., did not take part.
THIRD DIVISION
ALEJANDRO NG WEE, Petitioner,
- versus -
MANUEL TANKIANSEE, Respondent.

G.R. No. 171124

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the September 14, 2005 Decision[1] of the Court of Appeals (CA)
in CA-G.R. SP No. 90130 and its January 6, 2006 Resolution[2] denying the
motion for reconsideration thereof.

The facts are undisputed. Petitioner Alejandro Ng Wee, a valued client of

Westmont Bank (now United Overseas Bank), made several money placements
totaling P210,595,991.62 with the banks affiliate, Westmont Investment
Corporation (Wincorp), a domestic entity engaged in the business of an investment
house with the authority and license to extend credit.[3]

Sometime in February 2000, petitioner received disturbing news on Wincorps

financial condition prompting him to inquire about and investigate the companys
operations and transactions with its borrowers. He then discovered that the
company extended a loan equal to his total money placement to a corporation
[Power Merge] with a subscribed capital of only P37.5M. This credit facility
originated from another loan of about P1.5B extended by Wincorp to another
corporation [Hottick Holdings]. When the latter defaulted in its obligation,
Wincorp instituted a case against it and its surety. Settlement was, however,
reached in which Hotticks president, Luis Juan L. Virata (Virata), assumed the
obligation of the surety.[4]
Under the scheme agreed upon by Wincorp and Hotticks president, petitioners
money placements were transferred without his knowledge and consent to the loan
account of Power Merge through an agreement that virtually freed the latter of any
liability. Allegedly, through the false representations of Wincorp and its officers
and directors, petitioner was enticed to roll over his placements so that Wincorp
could loan the same to Virata/Power Merge.[5]

Finding that Virata purportedly used Power Merge as a conduit and connived with
Wincorps officers and directors to fraudulently obtain for his benefit without any
intention of paying the said placements, petitioner instituted, on October 19, 2000,
Civil Case No. 00-99006 for damages with the Regional Trial Court (RTC) of
Manila.[6] One of the defendants impleaded in the complaint is herein respondent
Manuel Tankiansee, Vice-Chairman and Director of Wincorp.[7]

On October 26, 2000, on the basis of the allegations in the complaint and the
October 12, 2000 Affidavit[8] of petitioner, the trial court ordered the issuance of a
writ of preliminary attachment against the properties not exempt from execution of
all the defendants in the civil case subject, among others, to petitioners filing of a
P50M-bond.[9] The writ was, consequently, issued on November 6, 2000.[10]

Arguing that the writ was improperly issued and that the bond furnished was
grossly insufficient, respondent, on December 22, 2000, moved for the discharge
of the attachment.[11] The other defendants likewise filed similar motions.[12] On
October 23, 2001, the RTC, in an Omnibus Order,[13] denied all the motions for
the discharge of the attachment. The defendants, including respondent herein, filed
their respective motions for reconsideration[14] but the trial court denied the same
on October 14, 2002.[15]
Incidentally, while respondent opted not to question anymore the said orders, his
co-defendants, Virata and UEM-MARA Philippines Corporation (UEM-MARA),
assailed the same via certiorari under Rule 65 before the CA [docketed as CA-G.R.
SP No. 74610]. The appellate court, however, denied the certiorari petition on
August 21, 2003,[16] and the motion for reconsideration thereof on March 16,
2004.[17] In a petition for review on certiorari before this Court, in G.R. No.
162928, we denied the petition and affirmed the CA rulings on May 19, 2004 for
Viratas and UEM-MARAs failure to sufficiently show that the appellate court
committed any reversible error.[18] We subsequently denied the petition with
finality on August 23, 2004.[19]

On September 30, 2004, respondent filed before the trial court another Motion to
Discharge Attachment,[20] re-pleading the grounds he raised in his first motion but
raising the following additional grounds: (1) that he was not present in Wincorps
board meetings approving the questionable transactions;[21] and (2) that he could
not have connived with Wincorp and the other defendants because he and
Pearlbank Securities, Inc., in which he is a major stockholder, filed cases against
the company as they were also victimized by its fraudulent schemes.[22]

Ruling that the grounds raised were already passed upon by it in the previous
orders affirmed by the CA and this Court, and that the additional grounds were
respondents affirmative defenses that properly pertained to the merits of the case,
the trial court denied the motion in its January 6, 2005 Order.[23]

With the denial of its motion for reconsideration,[24] respondent filed a certiorari
petition before the CA docketed as CA-G.R. SP No. 90130. On September 14,
2005, the appellate court rendered the assailed Decision[25] reversing and setting
aside the aforementioned orders of the trial court and lifting the November 6, 2000
Writ of Preliminary Attachment[26] to the extent that it concerned respondents
properties. Petitioner moved for the reconsideration of the said ruling, but the CA
denied the same in its January 6, 2006 Resolution.[27]

Thus, petitioner filed the instant petition on the following grounds:

A.
IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF APPEALS
SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION FOR
CERTIORARI FILED BY RESPONDENT, SINCE IT MERELY RAISED
ERRORS IN JUDGMENT, WHICH, UNDER PREVAILING JURISPRUDENCE,
ARE NOT THE PROPER SUBJECTS OF A WRIT OF CERTIORARI.

B.
MOREOVER, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF
APPEALS COMMITTED SERIOUS LEGAL ERROR IN RESOLVING
FAVORABLY THE GROUNDS ALLEGED BY RESPONDENT IN HIS
PETITION AND (SIC) LIFTING THE WRIT OF PRELIMINARY
ATTACHMENT, SINCE THESE GROUNDS ALREADY RELATE TO THE
MERITS OF CIVIL CASE NO. 00-99006 WHICH, UNDER PREVAILING
JURISPRUDENCE, CANNOT BE USED AS BASIS (SIC) FOR DISCHARGING
A WRIT OF PRELIMINARY ATTACHMENT.

C.
LIKEWISE, IT IS RESPECTFULLY SUBMITTED THAT THE COURT OF
APPEALS ERRED IN SUSTAINING THE ERRORS IN JUDGMENT
ALLEGED BY RESPONDENT, NOT ONLY BECAUSE THESE ARE BELIED
BY THE VERY DOCUMENTS HE SUBMITTED AS PROOF OF SUCH
ERRORS, BUT ALSO BECAUSE THESE HAD EARLIER BEEN RESOLVED
WITH FINALITY BY THE LOWER COURT.[28]

For his part, respondent counters, among others, that the general and sweeping
allegation of fraud against respondent in petitioners affidavitrespondent as an
officer and director of Wincorp allegedly connived with the other defendants to
defraud petitioneris not sufficient basis for the trial court to order the attachment of
respondents properties. Nowhere in the said affidavit does petitioner mention the
name of respondent and any specific act committed by the latter to defraud the
former. A writ of attachment can only be granted on concrete and specific grounds
and not on general averments quoting perfunctorily the words of the Rules.
Connivance cannot also be based on mere association but must be particularly
alleged and established as a fact. Respondent further contends that the trial court,
in resolving the Motion to Discharge Attachment, need not actually delve into the
merits of the case. All that the court has to examine are the allegations in the
complaint and the supporting affidavit. Petitioner cannot also rely on the decisions
of the appellate court in CA-G.R. SP No. 74610 and this Court in G.R. No. 162928
to support his claim because respondent is not a party to the said cases.[29]

We agree with respondents contentions and deny the petition.

In the case at bench, the basis of petitioners application for the issuance of the writ
of preliminary attachment against the properties of respondent is Section 1(d) of
Rule 57 of the Rules of Court which pertinently reads:
Section 1. Grounds upon which attachment may issue.At the commencement of the
action or at any time before entry of judgment, a plaintiff or any proper party may
have the property of the adverse party attached as security for the satisfaction of
any judgment that may be recovered in the following cases:

xxxx
(d) In an action against a party who has been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought, or in the
performance thereof.

For a writ of attachment to issue under this rule, the applicant must sufficiently
show the factual circumstances of the alleged fraud because fraudulent intent
cannot be inferred from the debtors mere non-payment of the debt or failure to
comply with his obligation.[30] The applicant must then be able to demonstrate
that the debtor has intended to defraud the creditor.[31] In Liberty Insurance
Corporation v. Court of Appeals,[32] we explained as follows:

To sustain an attachment on this ground, it must be shown that the debtor in

contracting the debt or incurring the obligation intended to defraud the creditor.
The fraud must relate to the execution of the agreement and must have been the
reason which induced the other party into giving consent which he would not have
otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of
the Rules of Court, fraud should be committed upon contracting the obligation
sued upon. A debt is fraudulently contracted if at the time of contracting it the
debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is
a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case.[33]
In the instant case, petitioners October 12, 2000 Affidavit[34] is bereft of any
factual statement that respondent committed a fraud. The affidavit narrated only
the alleged fraudulent transaction between Wincorp and Virata and/or Power
Merge, which, by the way, explains why this Court, in G.R. No. 162928, affirmed
the writ of attachment issued against the latter. As to the participation of
respondent in the said transaction, the affidavit merely states that respondent, an
officer and director of Wincorp, connived with the other defendants in the civil
case to defraud petitioner of his money placements. No other factual averment or
circumstance details how respondent committed a fraud or how he connived with
the other defendants to commit a fraud in the transaction sued upon. In other
words, petitioner has not shown any specific act or deed to support the allegation
that respondent is guilty of fraud.

The affidavit, being the foundation of the writ,[35] must contain such particulars as
to how the fraud imputed to respondent was committed for the court to decide
whether or not to issue the writ.[36] Absent any statement of other factual
circumstances to show that respondent, at the time of contracting the obligation,
had a preconceived plan or intention not to pay, or without any showing of how
respondent committed the alleged fraud, the general averment in the affidavit that
respondent is an officer and director of Wincorp who allegedly connived with the
other defendants to commit a fraud, is insufficient to support the issuance of a writ
of preliminary attachment.[37] In the application for the writ under the said
ground, compelling is the need to give a hint about what constituted the fraud and
how it was perpetrated[38] because established is the rule that fraud is never
presumed.[39] Verily, the mere fact that respondent is an officer and director of the
company does not necessarily give rise to the inference that he committed a fraud
or that he connived with the other defendants to commit a fraud. While under
certain circumstances, courts may treat a corporation as a mere aggroupment of
persons, to whom liability will directly attach, this is only done when the
wrongdoing has been clearly and convincingly established.[40]

Let it be stressed that the provisional remedy of preliminary attachment is harsh

and rigorous for it exposes the debtor to humiliation and annoyance.[41] The rules
governing its issuance are, therefore, strictly construed against the applicant,[42]
such that if the requisites for its grant are not shown to be all present, the court
shall refrain from issuing it, for, otherwise, the court which issues it acts in excess
of its jurisdiction.[43] Likewise, the writ should not be abused to cause
unnecessary prejudice. If it is wrongfully issued on the basis of false or insufficient
allegations, it should at once be corrected.[44]

Considering, therefore, that, in this case, petitioner has not fully satisfied the legal
obligation to show the specific acts constitutive of the alleged fraud committed by
respondent, the trial court acted in excess of its jurisdiction when it issued the writ
of preliminary attachment against the properties of respondent.

We are not unmindful of the rule enunciated in G.B. Inc., etc. v. Sanchez, et
al.,[45] that

[t]he merits of the main action are not triable in a motion to discharge an
attachment otherwise an applicant for the dissolution could force a trial of the
merits of the case on his motion.[46]

However, the principle finds no application here because petitioner has not yet
fulfilled the requirements set by the Rules of Court for the issuance of the writ
against the properties of respondent.[47] The evil sought to be prevented by the
said ruling will not arise, because the propriety or impropriety of the issuance of
the writ in this case can be determined by simply reading the complaint and the
affidavit in support of the application.

Furthermore, our ruling in G.R. No. 162928, to the effect that the writ of
attachment is properly issued insofar as it concerns the properties of Virata and
UEM-MARA, does not affect respondent herein, for, as correctly ruled by the CA,
respondent is never a party thereto.[48] Also, he is not in the same situation as
Virata and UEM-MARA since, as aforesaid, while petitioners affidavit detailed the
alleged fraudulent scheme perpetrated by Virata and/or Power Merge, only a
general allegation of fraud was made against respondent.

We state, in closing, that our ruling herein deals only with the writ of preliminary
attachment issued against the properties of respondentit does not concern the other
parties in the civil case, nor affect the trial courts resolution on the merits of the
aforesaid civil case.

WHEREFORE, premises considered, the petition is DENIED. The September 14,

2005 Decision and the January 6, 2006 Resolution of the Court of Appeals in CA-
G.R. SP No. 90130 are AFFIRMED.

SO ORDERED.
NG WEE V. TANKIANSEE (REMEDIAL)

For a writ of attachment to issue under this rule, the applicant must sufficiently
show the factual circumstances of the alleged fraud because fraudulent intent
cannot be inferred from the debtor's mere non-payment of the debt or failure to
comply with his obligation. The applicant must then be able to demonstrate that the
debtor has intended to defraud the creditor.

In the instant case, petitioner's affidavit is bereft of any factual statement that
respondent committed fraud. As to the participation of the respondent in the
transaction, the affidavit merely states that respondent, an officer and director of
Wincorp, connived with the other defendants in the civil case to defraud petitioner
of his money placements. In other words, petitioner has not shown any specific act
or deed to support the allegation that respondent is guilty of fraud.

Considering therefore, that in this case, petitioner has not fully satisfied the legal
obligation to show the specific acts constitutive of the alleged fraud committed by
respondent, the trial court acted in excess of its jurisdiction when it issued the writ
of preliminary attachment against the properties of respondent.

We are not unmindful of the rule enunciated in GB Inc. v. Sanchez, that the merits
of the main action are not triable in a motion to discharge an attachment,
otherwise, an applicant for the dissolution could force a trial of the merits of the
case on his motion.
G.R. No. 104405 May 13, 1993

LIBERTY INSURANCE CORPORATION, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. NAPOLEON K. FLOJO, Presiding Judge of
Branch II, RTC Manila; ATILLA ARKIN, the CITY SHERIFF OF MANILA, the REGISTER OF
DEEDS OF MANILA and the REGISTER OF DEEDS OF MAKATI, METRO MANILA, respondents.

Cochico, Lopez, Delgado , Aquino & De la Merced for petitioner.

Edgar Dennis A. Padernal for private respondent.

BIDIN, J.:

This is a petition for review on certiorari seeking to set aside and to declare null and void the
decision dated September 17, 1991 of the respondent Court of Appeals dismissing petitioner's
petition for review and its resolution dated February 7, 1992 denying petitioner's Motion for
Reconsideration.

On May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty. Jose H. Imperial entered into an
agreement with Coca-Cola Bottlers Philippines to promote two concerts featuring a group known as
"Earth, Wind and Fire" on June 12 and 13, 1988 with Coca-Cola sponsoring the concerts and the
former promoting the same.

To ensure compliance with the terms of the agreement, Coca-Cola required Imperial Organizations
to put up a performance bond. Petitioner Liberty Insurance, upon application of Imperial
Organization put up the performance bond in the amount of Three Million Pesos (P3,000,000.00),
the principal condition of which was to "fully and faithfully guarantee the terms and conditions" of the
agreement dated May 24, 1988 entered into between Coca-Cola and Imperial Organizations. More
particularly, the bond was to guarantee the return to Coca-Cola of "whatever portion of the cash
sponsorship and cash advances to be made by Coca-Cola to finance the holding of the concerts on
the dates aforesaid . . . ." (Rollo, pp. 37)

In turn, and as a condition for the issuance of said performance bond, petitioner required Imperial
Organizations, Jose H. Imperial, Atilla Arkin, and Carmen Madlangbayan to execute an indemnity
agreement in its favor to indemnify it for any and all damages including attorney's fees which the
petitioner may incur by reason of the issuance of the bond.

It appears that while the concerts took place, Imperial Organizations and private respondents failed
to comply with their obligations to Coca Cola, as a result of which petitioner became liable upon its
performance bond paying Coca-Cola Three Million Pesos. Petitioner, demanded reimbursement
from Imperial, Arkin And Madlangbayan based on their indemnity bond but to no avail.

On August 7, 1988 petitioner filed with the Regional Trial Court, National Capital Region, Branch 2,
Manila a complaint for damages with application for the issuance of a writ of preliminary attachment
against private respondents.

On September 20, 1988, the Trial Court thru the Hon. Rosario A. de Leon, issued an order allowing
the issuance of the writ, stating that.:
 . . . There could have been fraud committed by the defendants Arkin and
Madlangbayan in promising to give as security or collateral to their Indemnity
Agreement, which caused the plaintiff to release the security bond, when as it
turned out, the Transfer Certificate of Title of a parcel of land supposedly
issued by the Register of Deeds of Rizal turned out to be fake, as the true
land title number was issued over a different parcel of land issued in the
name of a person other than defendant Madlangbayan, while defendant Atilla
Arkin delivered an official receipt in the name of a third party but which
vehicle was allegedly sold to him free from lien and encumbrance, when it
turned out that the car was heavily mortgaged to a third party, . . . .

The conclusion of fraud is inevitable in view of the above circumstances, for

any (sic) rate fraud is a state of mind that maybe inferred from the
circumstances extant in the case (Republic vs. Gonzales, 13 SCRA 633).

In addition to the fact that these representations/promises of Arkin and

Madlangbayan were made prior to the release of the bond (the bond by then
had already been executed), it can still be said that this fraud existed when
the obligation was contracted in line with Sec. 1, par (d), Rule 57, which
reads: An attachment may issue in an action against a party who has been
guilty of fraud in contracting or incurring the obligation upon which the action
is brought.

A debt is fraudulently contracted if at the time of contracting it, the debtor

entertained an intention not to pay, or an intention not to keep a collateral
agreement regarding the disposition of a property purchased on credit.
(Francisco, Rules of Court, Second [1985] Edition, p. 21) . . . (Rollo, pp. 38-
39)

On May 10, 1989 respondent Arkin filed a motion to Quash/ Recall Writ of Attachment. On October
19, 1989, the trial court, this time presided by respondent judge Napoleon K. Flojo, denied the
motion, reasoning out as follows:

Defendant Atilla Arkin posits that no ground existed for the issuance of the
preliminary attachment because he was not guilty of fraud in incurring the
obligation under the indemnity agreement.

The Court granted the prayer for a writ of preliminary attachment after a
finding of fraud from the evidence adduced by the parties. This conclusion
was supported by substantial evidence. There is no cogent reason from the
arguments posed by the movant to warrant and/or recall of the writ.

Furthermore, the complaint invokes another ground for the grant of the writ
and that is, "in an action against a party who has removed be (sic) disposed
of his property, or is about to do so, with the intent to defraud his creditors," .
. ., evidenced by three conveyances or disposals of properties by defendant
Atilla Arkin though made before the institution of the action, is a circumstance
tending to show fraudulent conveyance with intent to defraud his creditors.
Especially so, when the payment of herein claim which the action is brought
is not secured by any mortgage or pledge of real (sic) personal property and
plaintiff had no other sufficient security for the enforcement of the claim.
(Rollo, p. 58; emphasis supplied).
After more than a year, or on December 14, 1990, Arkin filed a Motion for Reconsideration of the
aforementioned order of denial.

On March 6, 1991, respondent judge reversed his earlier ruling and instead issued two orders, (1)
granting Arkin's Motion for Reconsideration and directing the lifting of the writ of preliminary
attachment earlier issued, and (2) ordering the deputy sheriff assigned to said court to immediately
discharge or lift said writ. The first order, among other things, states:

xxx xxx xxx

The Court, presided at the time by Judge Rosalio De Leon, found that the
defendant has been guilty of fraud in inveigling the plaintiff to issue the surety
bond by offering false collaterals. The ground relied upon by the Court to
issue the attachment was based on Section 1 (d) of Rule 57 of the Rules of
Court , which states:

"Sec. 1. Grounds upon which attachment may issue. A

plaintiff or any party may, at the commencement of the action
or at anytime thereafter, have the property of the adverse
party attached as security for the satisfaction of any judgment
that may be recovered in the following cases:

xxx xxx xxx

(d) In action (sic) against a party who has been guilty of fraud
in contracting the obligation upon which the action is brought,
. . . ."

To constitute a ground for attachment, fraud should be committed prior to or

simultaneous with the birth of the obligation sued upon, which in this case is
the May 30, 1988 surety bond.

xxx xxx xxx

A close examination of the evidence on record shows that the delivery of the
fake collaterals were made to Eduardo Cunanan on June 1, 1988, or two (2)
days after the issuance by the plaintiff of the surety bond. Thus, the offering
of the fake Transfer Certificate of Title and encumbered Mercedes Benz car
was not prior to or simultaneous with the execution of the Surety Bond. Such
being the case, the offer of the collaterals were not the cause which induced
the plaintiff to issue the surety bond. It is therefore clear that the issuance of
the surety bond on May 30, 1988 was not based on the alleged fraud of the
defendant Arkin offering the fake collaterals.

xxx xxx xxx

With regards (sic) to the allegations that the defendant Arkin has removed or
disposed of his property, with intent to defraud his creditors, suffice it to say
that (when) the law authorizes the issuance of a writ preliminary attachment
(it) should be construed in favor of the defendant and before issuing an Order
to that effect, the judge should require that all the requisites prescribed by
 law be complied (with), without which a judge acquires no jurisdiction to issue
the writ.

xxx xxx xxx

Furthermore, allegations that debtors were removing or disposing some of

the properties with intent to defraud creditors must be specific.

xxx xxx xxx

In the present case the plaintiff did not prove the intent of defendant Arkin to
defraud creditors. Aside From the fact that the alleged dispositions were
made long prior to the filing of the case, the alleged dispositions were made
of conjugal partnership property which were then the subjects of partition
between Arkin and his estranged wife. . . . (Rollo, pp. 42-43).

Aggrieved, petitioner filed a special civil action for certiorari with respondent Court of Appeals to set
aside the above orders of respondent judge.

Respondent court dismissed the petition on the ground that the filing of the said petition was
premature considering that there was yet a remedy available in the ordinary course of law, i.e., filing
a motion for reconsideration of the challenged orders. Hence, this petition with the following
assignment of errors:

I. A MOTION FOR RECONSIDERATION IS NOT ALWAYS A CONDITION

PRECEDENT TO THE FILING OF A SPECIAL CIVIL ACTION FOR
CERTIORARI, AS THERE IS NO APPEAL OR ANY PLAIN, SPEEDY AND
ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW AVAILABLE
TO HEREIN PETITIONER;

II. RESPONDENT HONORABLE COURT OF APPEALS ERRED IN

UPHOLDING THE DISSOLUTION OF THE WRIT OF PRELIMINARY
ATTACHMENT ON THE BASIS OF SECTION 13, RULE 57, OF THE
RULES OF THE COURT SUPPORTED (SIC) BY ANY EVIDENCE;

III. RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR

OF LAW IN CONCLUDING THAT HEREIN PETITIONER FAILED TO RAISE
AS AN ISSUE THE DELAYED FILING OF PRIVATE RESPONDENT'S
MOTION FOR RECONSIDERATION DATED DECEMBER 14, 1990, IN
PETITIONER'S OPPOSITION THERETO.

IV. THE APPREHENSION OF THE HEREIN PETITIONER REGARDING

THE PROPENSITY OF PRIVATE RESPONDENT TO DISPOSE OF HIS
PROPERTIES IN FRAUD OF HIS CREDITORS TURNED OUT TO BE
TRUE AND CORRECT. (Rollo, pp. 24-26, 30).

In brief, the questions posited by the instant petition may be consolidated into two issues, namely:

1) Whether or not the writ of preliminary attachment in question was properly or regularly issued and
2) Whether or not petitioner's failure to file a motion for reconsideration of the questioned orders of
the court a quo bars the filing of a special civil action for certiorari before the respondent court.
In an action against a party who has been guilty of fraud in contracting the debt or incurring the
obligation upon which the action is brought, Section 1 (d) of Rule 57 authorizes the plaintiff or any
proper party to have the property of the adverse party attached as security for the satisfaction of any
judgment that may be recovered therein. Thus:

Rule 57, Sec. 1. Grounds upon which attachment may

issue.

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

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or
incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the
agreement and must have been the reason which induced the other party into giving consent which
he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57
of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt
is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or
intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct
evidence but may be inferred from the circumstances attendant in each case (Republic v. Gonzales,
13 SCRA 633 [1965]).

Here, it has been established that all the collaterals given by the respondent Arkin as security for the
bond were either fraudulent or heavily encumbered. Records show that Transfer Certificate of Title
No. 300011 supposedly issued by the Register of Deeds of Rizal covering a parcel of land with an
area of 25,750 square meters located at Muntinlupa, Las Pias, M.M. and registered in the name of
Carmen Madlangbayan, used as one of the collaterals, turned out to be fake and spurious as the
genuine TCT No. 300011 of the Office of the Register of Deeds of Rizal covers a parcel of land
located in
Angono, Rizal with an area of 514 square meters registered in the name of persons other than
respondents Imperial, Arkin, and Madlangbayan. Likewise, the supposed lien-free motor vehicle
offered as collateral turned out to be heavily mortgaged and was even disposed of without informing
petitioner. Furthermore, it has also been proven that subsequent to the issuance of the May 30,
1988 surety bond, respondent Arkin started disposing of his other properties. Prior to the filing of the
complaint, respondent not only had sold the motor vehicle given as collateral but that his two other
condominium units were also alienated in favor of a company of which respondent Arkin is the
president. All these circumstances unerringly point to the devious scheme of respondent Arkin to
defraud petitioner.

It is therefore clear that fraud was present when private respondent, among others, entered into an
indemnity agreement with petitioner. The actuations of respondent Arkin indubitably lead to the
conclusion that he never entertained the idea of fulfilling his obligations under the agreement and
was bent on defrauding petitioner from the very beginning.

Under the circumstances, we perceive no impropriety or irregularity in the issuance of the writ of
attachment especially so where petitioner has fully complied with the requirements for the issuance
thereof.

On the contrary, what we see as having been attended by irregularity is the assailed order of
respondent judge lifting the writ of attachment based on grounds which are contradicted by the
evidence on record. It is a fact that respondent Arkin gave fake land titles as collaterals and even
disposed of real properties in his obvious attempt to defraud petitioner. And yet, respondent judge
concluded that petitioner's allegation that respondent Arkin's fraudulent alienation of his properties
has no foundation in fact. This is plain absurdity. As respondent judge himself noted in his earlier
order denying respondent Arkin's motion to quash writ of attachment, the latter's three (3)
conveyances, "though made before the institution of the action, is a circumstance tending to show
fraudulent conveyance with intent to defraud his creditors. Especially so, when the payment of
herein claim upon which the action is brought is not secured by any mortgage or pledge of real (or)
personal property and plaintiff had no other sufficient security for the enforcement of the claim"
(Rollo, p. 58). Such being the case, respondent Arkin's claim that the writ of attachment has been
irregularly issued should not have merited serious consideration by respondent judge.

Be that as it may, the instant case being "an action against a party who has been guilty of fraud in
contracting the obligation upon which the action is brought", respondent Arkin is not allowed to file a
motion to dissolve the attachment on the ground that the writ has been improperly or irregularly
issued. As we held in Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480
[1989]):

. . ., when the preliminary attachment is issued upon a ground which is at the

same time the applicant's cause of action: e.g., . . . an action against a party
who has been guilty of fraud in contracting the debt or incurring the obligation
upon which the action is brought, the defendant is not allowed to file a motion
to dissolve the attachment under Section 13 of Rule 57 by offering to show
the falsity of the factual averments in the plaintiff's application and affidavits
on which the writ was based and consequently that the writ based therein
had been improperly, or irregularly, issued the reason being that the
hearing on such motion for dissolution of the writ would be tantamount to a
trial on the merits. In other words, the merits of the action would be ventilated
at a mere hearing of a motion, instead of the regular trial. Therefore, when
the writ of attachment is of this nature, the only way it can be dissolved is by
a counterbond.

Petitioner next contends that motion for reconsideration need not at all times be resorted to before a
special civil action for certiorari may be instituted before respondent court.

Ordinarily, certiorari will not lie unless an inferior court, through a motion for reconsideration, had
been given an opportunity to correct the imputed errors. However, this rule admits of exceptions
such as 1) when the issue raised is one purely, of law; 2) where public interest is involved; 3) in
cases of urgency (Quirino vs. Grospe, 169 SCRA 702 [1989]); or 4) where special circumstances
warrant immediate or more direct action (People vs. Dacudao, 170 SCRA 489 [1989]).

In the case at bar, petitioner's failure to file a motion for reconsideration in the trial court before
commencing certiorari proceedings in the Court of Appeals is not fatal considering the existence of
special circumstances that warrant immediate and more direct action (Saldaa vs. CA, 190 SCRA
396 [1990]).

The indecent haste with which respondent Arkin had been disposing of his properties demonstrates
the imperative need for a more adequate relief requiring an immediate and more direct action. There
was an urgency which caused the present case to fall under one of the exceptions thereby allowing
petitioner to file a petition for certiorari without the need of first filing a motion for reconsideration.

Filing a motion for reconsideration would have served no useful purpose nor can it be considered a
plain, speedy and adequate remedy since the order directing the sheriff to discharge or lift the writ of
attachment was issued on the same day the order granting the quashal was made. It would not have
automatically forestalled Arkin from further disposing of his properties. It is rather disturbing how
respondent judge, after ruling in his order of October 19, 1989, denying respondent's motion to
quash, that the trial court's finding of fraud in incurring the obligation under the indemnity agreement
was supported by substantial evidence, would, in his order of March 6, 1991 granting the motion for
reconsideration, based on the same substantial evidence supporting a finding of fraud, later reverse
himself and declare that "the plaintiff (petitioner herein) did not prove the intent of defendant Arkin to
defraud creditors."

Through the order for the "immediate" lifting of the writ, respondent Judge, in one swift stroke,
completely subverted the valid order of attachment issued after a finding of fraud, which finding he
himself has declared as supported by substantial evidence. We hold that respondent judge in issuing
the contested orders has acted capriciously, whimsically and arbitrarily and with grave abuse of
discretion amounting to lack or in excess of jurisdiction correctible by the special writ of certiorari.

WHEREFORE, the petition is GRANTED. The assailed order of respondent judge dated March 6,
1991 is SET ASIDE and the order dated October 19, 1989 is hereby REINSTATED. Costs against
private respondent.

SO ORDERED.
Issuance of Writ of Preliminary Attachment
Allied Banking Corp. v. South Pacific Sugar Corp. (as cited in the case of Santiago and Tanchan v.
Allied Banking Corporation G.R. No. 164510)

"Such general averment will not suffice to support the issuance of the writ of preliminary attachment. It is
necessary to recite in what particular manner an applicant for writ of attachment was defrauded."

"...in this jurisdiction, fraud is never presumed."

"...written contracts x x x are presumed to have been entered into for a sufficient consideration."

Ng Wee v. Tankiansee (as cited in the case of Santiago and Tanchan v. Allied Banking Corporation G.R.
No. 164510)

"The affidavit, being the foundation of the writ, must contain such particulars as to how the fraud imputed
to respondent was committed for the court to decide whether or not to issue the writ. Absent any
statement of other factual circumstances to show the respondent, at the time of contracting the obligation,
had a preconceived plan or intention not to pay, or without any showing of how respondent committed the
alleged fraud, the general averment in the affidavit x x x is insufficient to support the issuance of a writ of
preliminary attachment."

Santiago and Tanchan v. Allied Banking Corporation G.R. No. 164510

"...rules require that for the writ to issue, there must be a recitation of clear and concrete factual
circumstances manifesting that the debtor practices fraud upon the creditor at the time of the execution of
their agreement in that said debtor had a pre-conceived plan or intention not to pay the creditor. Being a
state of mind, fraud cannot be merely inferred from a bare allegation of non-payment of debt or non-
performance of obligation."

"...the requirement [to prove fraud] becomes all the more stringent when the application for preliminary
attachment is directed against a defendant officer of a defendant corporation [in this case, a surety and
principal debtor], for it will not be inferred from the affiliation of one to the other that the officer participated
in or facilitated in any fraudulent practice attributed to the corporation."

Claim for damages:

"A wrongful attachment may give rise to liability for moral damages but evidence must be adduced not
only for the torment and humiliation brought upon the defendant by the attaching party but also the latter's
bad faith or malice in causing the wrongful attachment, such as evidence that the latter deliberately made
false statements in its application for attachment. Absent such evidence of malice, that attaching party
cannot be held liable for moral damages."

Liberty Insurance Corporation v. Court of Appeals (as cited in the case of Philippine Bank of
Communications v. Court of Appeals G.R. No. 115678)
"To sustain an attachment on this ground [fraud], it must be shown that the debtor in contracting the debt
or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the
agreement and must have been the reason which induced the other party into giving consent which he
would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the
Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is
fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not
to pay x x x. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from
the circumstances attendant in each case."

Philippine Bank of Communications v. Court of Appeals G.R. No. 115678

",,,fraudulent intent not to honor the admitted obligation cannot be inferred from the debtor's inability to
pay or comply with the obligations."

"...fraud may be gleaned from a preconceived plan or intention not to pay."

"...the lower court should have conducted a hearing and required private petitioner to substantiate its
allegation of fraud, embezzlement and misappropriation."

"...not only was petitioner's application defective for having merely given general averments, what is
worse, there was no hearing to afford private respondents an opportunity to ventilate their side, in
accordance with due process, in order to determine the truthfulness of the allegations of petitioner."

"Time and again, we have held that the rules on the issuance of a writ of attachment must be construed
strictly against the applicants. The stringency is required because the remedy of attachment is harsh,
extraordinary and summary in nature. If all requisites for the granting of the writ are not present, the court
which issues it acts in excess of its jurisdiction."

D.P. Lub Oil Marketing Center, Inc. v. Nicolas (as cited in the case of Philippine Bank of
Communications v. Court of Appeals G.R. No. 115678)

"There is thus the necessity of giving to private respondents an opportunity to ventilate their side in a
hearing, in accordance with due process, in order to determine the truthfulness of the allegations."
 [G.R. No. 123358. February 1, 2000]

FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs.

THE COURT OF APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding
Judge, Branch 139, Regional Trial Court, NCJR, Makati City, Metro Manila,
and LEY CONSTRUCTION AND DEVELOPMENT CORPORATION,
respondents.

DECISION

YNARES_SANTIAGO, J.:

On June 29, 1993, private respondent Ley Construction and Development Corporation filed a
Complaint for collection of a sum of money with application for preliminary attachment against
petitioner FCY Construction Group, Inc. and Francis C. Yu with the Makati Regional Trial Court
which was docketed as Civil Case No. 93-2112. Private respondent alleged that it had a joint
venture agreement with petitioner FCY Construction Group, Inc. (wherein petitioner Francis C.
Yu served as President) over the Tandang Sora Commonwealth Flyover government project for
which it had provided funds and construction materials. The Complaint was filed in order to
compel petitioners to pay its half share in the collections received in the project as well as those
yet to be received therein. In support of its application for a writ of attachment, private
respondent alleged that petitioners were guilty of fraud in incurring the obligation and had
fraudulently misapplied or converted the money paid them, to which it had an equal share.

On July 6, 1993, following an ex-parte hearing, the lower court issued an Order for the issuance
of a writ of preliminary attachment, conditioned upon the filing of a P7,000,000.00 attachment
bond.

Petitioners moved for the lifting of the writ of preliminary attachment on the following grounds:
(1) the attachment was heard, issued and implemented even before service of summons upon
them; (2) failure of the attaching officer to serve a copy of the affidavit of merit upon them; and
(3) that there was no fraud in incurring the obligation. As an alternative prayer in their Motion,
petitioners prayed that the attachment be limited to their receivables with the Department of
Public Works and Highways. This alternative prayer was later withdrawn by petitioners in a
Manifestation and Motion.

On May 25, 1994, the lower court issued another Order denying petitioners' Motion to Lift
Attachment.45 It, however, reduced and confined the attachment to receivables due petitioners
from the Tandang Sora commonwealth Flyover project.
Subsequently, petitioners filed a Motion for Reconsideration46 as well as an Omnibus Motion for
Leave to file Amended Answer and/or to delete Francis C. Yu as party-defendant.47

With the denial of both Motions by the lower court on September 4, 1994,48 petitioners filed a
Petition for Certiorari before the Court of Appeals on September 16, 1994.49 The Petition was,
however, denied on July 31, 1995;50 so was petitioners' Motion for Reconsideration.51

Hence, the instant Petition.

It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of
the Revised Rules of Court, to wit -

"SECTION 1. Grounds upon which attachment may issue. - A plaintiff or any

proper party may, at the commencement of the action or at any time thereafter,
have the property of the adverse party attached as security for the satisfaction of
any judgment that may be recovered in the following cases:

xxx xxx x x x.

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

Petitioners, however, insist that the writ of preliminary attachment was irregularly issued
inasmuch as there was no evidence of fraud in incurring the obligations sued upon.

In support of their stand, petitioners alleged that private respondent's principal witness admitted
that it was the Department of Public Works and Highways (DPWH) that induced it to deliver
materials and cash for the Tandang Sora Commonwealth Flyover project, to wit -

COURT: Now . . . as of January 5, 1993 you delivered to him (referring to

defendant FCY corporation) in cash and in kind amounting to Fifteen Million
Pesos (P15,000,000.00), now why did you keep on delivering cash and materials
to him if you were not paid a single centavo?

A Because of every need for the project, and the Public Works official
assured me that I will be given a new project after the Tandang Sora will be
finished.

Q Who is this public official that promised you?

A Director Pendosa, Teodoro Encarnacion and Secretary de Jesus your

Honor. (TSN, 6 July 1993, pp. 47-48)

xxx xxx xxx

Q What about these officials of the Department of Public Highways, what

would they do to project their sub alleged project?

A Secretary de Jesus is no longer connected there, your Honor.

Q At the time?

A At that time, he resigned.

Q Before he resigned.

A He gave me assurance that they will soon give assurance, they will soon
give me another project . . . (TSN, 6 July 1993, p. 55)52

A cursory reading of the above-cited testimony, however, readily shows that said reassurance
from the DPWH officials came, not at the inception of the obligation or contract, but during its
performance. On the other hand, the fraud of which petitioners are accused of and which was the
basis for the issuance of the questioned attachment, is fraud alleged to have been committed
upon contracting the obligation sued upon. Thus, petitioners argument that "the inducement was
the mouth-watering temptation of a DPWH promise of a 'new project after the Tandang Sora
Flyover project will be finished"' is clearly off-tangent as such inducement, if any, came not at
the inception of the obligation.

Similarly, petitioners' arguments that it was private respondent who admittedly prepared the
letter embodying the alleged joint venture agreement53 and had petitioner Francis Yu sign it must
fail. The written agreement referred to was signed by petitioner Francis Yu only on January 5,
1993, long after the project had commenced. Thus, It was only a written confirmation of an
arrangement that had already been existing and operational. Similarly then, such written
confirmation did not occur at the inception of the obligation sued upon.

In Liberty Insurance Corporation vs. Court of Appeals,54 this Court, discussing Section 1(d),
Rule 57, cautioned as follows --

To sustain an attachment on this ground, it must be shown that the debtor in

contracting the debt or incurring the obligation intended to defraud the creditor.
The fraud must relate to the execution of the agreement and must have been the
reason which induced the other party into giving consent which he would not
have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule
57 of the Rules of Court, fraud should be committed upon contracting the
obligation sued upon. A debt is fraudulently contracted if at the time of
contracting it the debtor has a preconceived plan or intention not to pay, as it is in
this case. Fraud is a state of mind and need not be proved by direct evidence but
may be inferred from the circumstances attendant in each case. (Republic v.
Gonzales, 13 SCRA 633).

From the foregoing, therefore, the alleged inducement by the DPWH officials upon private
respondent as well as the circumstances surrounding the execution of the joint venture
agreement, both appear immaterial as they were not committed upon contracting the obligation
sued upon but occurred long after the obligation has been established.

The fact that petitioners have paid a substantial amount of money to private respondent cannot
save the day for them either. As per their own accounting, such payments were for accounts
payable for labor supplied, construction materials and cash advances.55 It is not denied that no
payment of profits has been given to private respondent, which is precisely what it is suing for.

Finally, considering that the writ of preliminary attachment has been issued on account of
allegations of fraud in contracting the obligation upon which the action is brought petitioners'
efforts to have the writ of preliminary attachment dissolved on the ground that it was improperly
or irregularly issued is in vain. Indeed, in Liberty Insurance Corporation, supra, which cited
Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480), we ruled -

"x x x, when the preliminary attachment is issued upon a ground which is at the
same time the applicant's cause of action: e.g., x x x an action against a party who
has been guilty of fraud in contracting the debt or incurring the obligation upon
which the action is brought, the defendant is not allowed to file a motion to
dissolve the attachment under Section 13 of Rule 57 by offering to show the
falsity of the factual averments in the plaintiffs application and affidavits on
which the writ was based and consequently that the writ based therein had been
improperly or irregularly issued - the reason being that the hearing on such
motion for dissolution of the writ would be tantamount to a trial on the merits. In
other words, the merits of the action would be ventilated at a mere hearing of a
motion; instead of the regular trial. Therefore, when the writ of attachment is of
this nature, the only way it can be dissolved is by a counterbond."

We now come to the issue of whether or not petitioner Francis Yu should remain as party-
defendant. Petitioners argue that since the transactions were corporation to corporation only,
petitioner Francis Yu should be dropped as party-defendant considering the hornbook law that
corporate personality is a shield against personal liability of its officers. We agree that petitioner
Francis Yu cannot be made liable in his individual capacity if he indeed entered into and signed
the contract in his official capacity as President, in the absence of stipulation to that effect, due to
the personality of the corporation being separate and distinct from the persons composing it.56
However, while we agree that petitioner Francis Yu cannot be held solidarily liable with
petitioner corporation merely because he is the President thereof and was involved in the
transactions with private corporation, we also note that there exists instances when corporate
officers may be held personally liable for corporate acts. Such exceptions were outlined in
Tramat Mercantile, Inc. vs. Court of Appeals,57 as follows --
 "Personal liability of a corporate director, trustee or officer along (although not
necessarily) with the corporation may so validly attach, as a rule, only when -

1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith
or gross negligence in directing its affairs, or (c) for conflict of interest, resulting
in damages to the corporation, its stockholders or other persons;

2. He consents to the issuance of watered down stocks or who, having knowledge

thereof, does not forthwith file with the corporate secretary his written objection
thereto;

3. He agrees to hold himself personally and solidarily liable with the corporation;
or

4. He is made, by a specific provision of law, to personally answer for his

corporate action."

The attendance of these circumstances, however, cannot be determined at this stage and should
properly be threshed out during the trial on the merits. Stated differently, whether or not
petitioner Francis Yu should be held personally and solidarily liable with petitioner corporation
is a matter that should be left to the trial court's discretion, dependent as it is on evidence during
trial.

WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED. No

pronouncement as to costs.SO ORDERED.