G.R. No. 115678 February 23, 2001

PHILIPPINES BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF APPEALS and BERNARDINO VILLANUEVA, respondents.

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

G.R. No. 119723 February 23, 2001

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. HON. COURT OF APPEALS and FILIPINAS TEXTILE MILLS, INC., respondents.

YNARES-SANTIAGO, J.:

Before us are consolidated petitions for review both filed by Philippine Bank of Communications; one against the May 24, 1994 Decision of respondent Court of Appeals in CA-G.R. SP No. 328631 and the other against its March 31, 1995 Decision in CA-G.R. SP No. 32762.2 Both Decisions set aside and nullified the August 11, 1993 Order3of the Regional Trial Court of Manila, Branch 7, granting the issuance of a writ of preliminary attachment in Civil Case No. 91-56711.

The case commenced with the filing by petitioner, on April 8, 1991, of a Complaint against private respondent Bernardino Villanueva, private respondent Filipinas Textile Mills and one Sochi Villanueva (now deceased) before the Regional Trial Court of Manila. In the said Complaint, petitioner sought the payment of P2,244,926.30 representing the proceeds or value of various textile goods, the purchase of which was covered by irrevocable letters of credit and trust receipts executed by petitioner with private respondent Filipinas Textile Mills as obligor; which, in turn, were covered by surety agreements executed by private respondent Bernardino Villanueva and Sochi Villanueva. In their Answer, private respondents admitted the existence of the surety agreements and trust receipts but countered that they had already made payments on the amount demanded and that the interest and other charges imposed by petitioner were onerous.

On May 31, 1993, petitioner filed a Motion for Attachment,4 contending that violation of the trust receipts law constitutes estafa, thus providing ground for the issuance of a writ of preliminary attachment; specifically under paragraphs "b" and "d," Section 1, Rule 57 of the Revised Rules of Court. Petitioner further claimed that attachment was necessary since private respondents were disposing of their properties to its detriment as a creditor. Finally, petitioner offered to post a bond for the issuance of such writ of attachment.

The Motion was duly opposed by private respondents and, after the filing of a Reply thereto by petitioner, the lower court issued its August 11, 1993 Order for the issuance of a writ of preliminary attachment, conditioned upon the filing of an attachment bond. Following the denial of the Motion for Reconsideration filed by private respondent Filipinas Textile Mills, both private respondents filed separate petitions for certiorari before respondent Court assailing the order granting the writ of preliminary attachment.1wphi1.nt

Both petitions were granted, albeit on different grounds. In CA-G.R. SP No. 32762, respondent Court of Appeals ruled that the lower court was guilty of grave abuse of discretion in not conducting a hearing on the application for a writ of preliminary attachment and not requiring petitioner to substantiate its allegations of fraud, embezzlement or misappropriation. On the other hand, in CA-G.R. SP No. 32863, respondent Court of Appeals found that the grounds cited by petitioner in its Motion do not provide sufficient basis for the issuance of a writ of preliminary attachment, they being mere general averments. Respondent Court of appeals held that neither embezzlement, misappropriation nor incipient fraud may be presumed; they must be established in order for a writ of preliminary attachment to issue.

Hence, the instant consolidated5 petitions charging that respondent Court of Appeals erred in

"1. Holding that there was no sufficient basis for the issuance of the writ of preliminary attachment in spite of the allegations of fraud, embezzlement and misappropriation of the proceeds or goods entrusted to the private respondents;

2. Disregarding the fact that the failure of FTMI and Villanueva to remit the proceeds or return the goods entrusted, in violation of private respondents' fiduciary duty as entrustee, constitute embezzlement or misappropriation which is a valid ground for the issuance of a writ of preliminary attachment."6

We find no merit in the instant petitions.

To begin with, we are in accord with respondent Court of Appeals in CA-G.R. SP No. 32863 that the Motion for Attachment filed by petitioner and its supporting affidavit did not sufficiently establish the grounds relied upon in applying for the writ of preliminary attachment.

The Motion for Attachment of petitioner states that

1. The instant case is based on the failure of defendants as entrustee to pay or remit the proceeds of the goods entrusted by plaintiff to defendant as evidenced by the trust receipts (Annexes "B", "C" and "D" of the complaint), nor to return the goods entrusted thereto, in violation of their fiduciary duty as agent or entrustee;

2. Under Section 13 of P.D. 115, as amended, violation of the trust receipt law constitute(s) estafa (fraud and/or deceit) punishable under Article 315 par. 1[b] of the Revised Penal Code;

3. On account of the foregoing, there exist(s) valid ground for the issuance of a writ of preliminary attachment under Section 1 of Rule 57 of the Revised Rules of Court particularly under sub-paragraphs "b" and "d", i.e. for embezzlement or fraudulent misapplication or conversion of money (proceeds) or property (goods entrusted) by an agent (entrustee) in violation of his fiduciary duty as such, and against a party who has been guilty of

fraud in contracting or incurring the debt or obligation;

4. The issuance of a writ of preliminary attachment is likewise urgently necessary as there exist(s) no sufficient security for the satisfaction of any judgment that may be rendered against the defendants as the latter appears to have disposed of their properties to the detriment of the creditors like the herein plaintiff;

5. Herein plaintiff is willing to post a bond in the amount fixed by this Honorable Court as a condition to the issuance of a writ of preliminary attachment against the properties of the defendants.

Section 1 (b) and (d), Rule 57 of the then controlling Revised Rules of Court, provides, 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:

x x x x x x x x x

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his us 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;

x x x x x x x x x

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

While the Motion refers to the transaction complained of as involving trust receipts, the violation of the terms of which is qualified by law as constituting estafa, it does not follow that a writ of attachment can and should automatically issue. Petitioner cannot merely cite Section 1(b) and (d), Rule 57, of the Revised Rules of Court, as mere reproduction of the rules, without more, cannot serve as good ground for issuing a writ of attachment. An order of attachment cannot be issued on a general averment, such as one ceremoniously quoting from a pertinent rule.7

The supporting Affidavit is even less instructive. It merely states, as follows

I, DOMINGO S. AURE, of legal age, married, with address at No. 214-216 Juan Luna Street, Binondo,

Manila, after having been sworn in accordance with law, do hereby depose and say, THAT:

1. I am the Assistant Manager for Central Collection Units Acquired Assets Section of the plaintiff, Philippine Bank of Communications, and as such I have caused the preparation of the above motion for issuance of a writ of preliminary attachment;

2. I have read and understood its contents which are true and correct of my own knowledge;

3. There exist(s) sufficient cause of action against the defendants in the instant case;

4. The instant case is one of those mentioned in Section 1 of Rule 57 of the Revised Rules of Court wherein a writ of preliminary attachment may be issued against the defendants, particularly subparagraphs "b" and "d" of said section;

5. There is no other sufficient security for the claim sought to be enforced by the instant case and the amount due to herein plaintiff or the value of the property sought to be recovered is as much as the sum for which the order for attachment is granted, above all legal counterclaims.

Again, it lacks particulars upon which the court can discern whether or not a writ of attachment should issue.

Petitioner cannot insist that its allegation that private respondents failed to remit the proceeds of the sale of the entrusted goods nor to return the same is sufficient for attachment to issue. We note that petitioner anchors its application upon Section 1(d), Rule 57. This particular provision was adequately explained in Liberty Insurance Corporation v. Court of Appeals,8 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). (Emphasis ours)

We find an absence of factual allegations as to how the fraud alleged by petitioner was committed. As correctly held by respondent Court of Appeals, such fraudulent intent not to honor the admitted obligation cannot be inferred from the debtor's inability to pay or to comply with the obligations.9 On the other hand, as stressed, above, fraud may be gleaned from

a preconceived plan or intention not to pay. This does not appear to be so in the case at bar. In fact, it is alleged by private respondents that out of the total P419,613.96 covered by the subject trust receipts, the amount of P400,000.00 had already been paid, leaving only P19,613.96 as balance. Hence, regardless of the arguments regarding penalty and interest, it can hardly be said that private respondents harbored a preconceived plan or intention not to pay petitioner.

The Court of Appeals was correct, therefore, in its finding in CA-G.R. SP No. 32863 that neither petitioner's Motion or its supporting Affidavit provides sufficient basis for the issuance of the writ of attachment prayed for.

We also agree with respondent Court of Appeals in CA-G.R. SP No. 32762 that the lower court should have conducted a hearing and required private petitioner to substantiate its allegations of fraud, embezzlement and misappropriation.

To reiterate, petitioner's Motion for Attachment fails to meet the standard set in D.P. Lub Oil Marketing Center, Inc. v. Nicolas,10 in applications for attachment. In the said case, this Court cautioned

The petitioner's prayer for a writ of preliminary attachment hinges on the allegations in paragraph 16 of the complaint and paragraph 4 of the affidavit of Daniel Pe which are couched in general terms devoid of particulars of time, persons and places to support support such a serious assertion that "defendants are disposing of their properties in fraud of creditors." There is thus the necessity of giving to the 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. But no hearing was afforded to the private respondents the writ having been issued ex parte. 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.

As was frowned upon in D.P. Lub Oil Marketing Center, Inc.,11 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. As already mentioned, private respondents claimed that substantial payments were made on the proceeds of the trust receipts sued upon. They also refuted the allegations of fraud, embezzlement and misappropriation by averring that private respondent Filipinas Textile Mills could not have done these as it had ceased its operations starting in June of 1984 due to workers' strike. These are matters which should have been addressed in a preliminary hearing to guide the lower court to a judicious exercise of its discretion regarding the attachment prayed for. On this score, respondent Court of Appeals was correct in setting aside the issued writ of preliminary attachment.

Time and again, we have held that the rules on the issuance of a writ of attachment must be construed strictly against the applicants. This stringency is required because the remedy of attachment is harsh, extraordinary and summary in nature. If all the requisites for the granting of the writ are not present, then the court which issues it acts in excess of its jurisdiction.12

WHEREFORE, for the foregoing reasons, the instant petitions are DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762 are AFFIRMED. No pronouncement as to costs.1wphi1.nt

SO ORDERED.

G.R. No. 167741 July 12, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.

MAJ. GEN. CARLOS FLORES GARCIA, CLARITA DEPAKAKIBO

GARCIA, IAN CARL DEPAKAKIBO GARCIA, JUAN PAULO

DEPAKAKIBO GARCIA, TIMOTHY DEPAKAKIBO GARCIA

and THE SANDIGANBAYAN (FOURTH

DIVISION), Respondents.

D E C I S I O N

CORONA, J.:

This petition for certiorari1 assails the January 14, 2005 and

March 2, 2005 resolutions2 of the Fourth Division of the

Sandiganbayan in Civil Case No. 0193 entitled Republic of the

Philippines v. Maj. Gen. Carlos Flores Garcia, Clarita Depakakibo

Garcia, Ian Carl Depakakibo Garcia, Juan Paulo Depakakibo

Garcia and Timothy Mark Depakakibo Garcia.

Civil Case No. 0193 was a petition for forfeiture of unlawfully

acquired properties, with a verified urgent ex-parte application

for the issuance of a writ of preliminary attachment, filed by

the Republic of the Philippines against Maj. Gen. Carlos F.

Garcia, his wife3 and children4 in the Sandiganbayan on

October 27, 2004. In praying for the issuance of a writ of

preliminary attachment, the Republic maintained that, as a

sovereign political entity, it was exempt from filing the

required attachment bond.

On October 29, 2004, the Sandiganbayan issued a resolution

ordering the issuance of a writ of preliminary attachment

against the properties of the Garcias upon the filing by the

Republic of a P1 million attachment bond.5On November 2,

2004, the Republic posted the required attachment bond to

avoid any delay in the issuance of the writ as well as to

promptly protect and secure its claim.

On December 7, 2004, the Republic filed a motion for partial

reconsideration of the October 29, 2004 resolution claiming

that it was exempt from filing an attachment bond and praying

for the release thereof.

In a resolution dated January 14, 2005, the Sandiganbayan

ruled that there was nothing in the Rules of Court that

exempted the Republic from filing an attachment bond. It

reexamined Tolentino v. Carlos6 which was invoked by the

Republic to justify its claimed exemption. That case was

decided under the old Code of Civil Procedure enacted more

than a century ago.

The Sandiganbayan denied the Republics motion.

Reconsideration was also denied in a resolution dated March 2,

2005.

As already stated, these two resolutions (January 14, 2005 and

March 2, 2005) are the subject of the present petition.

Did the Sandiganbayan commit grave abuse of discretion when

it rejected the Republics claim of exemption from the filing of

an attachment bond? Yes.

Sections 3 and 4, Rule 57 of the Rules of Court provide:

Sec. 3. Affidavit and bond required. An order of attachment

shall be granted only when it appears by the affidavit of the

applicant, or of some other person who personally knows the

facts, that a sufficient cause of action exists, that the case is one

of those mentioned in section 1 hereof, that there is no other

sufficient security for the claim sought to be enforced by the

action, and that the amount due to 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.

Sec. 4. Condition of applicants 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. (emphasis supplied)

Under these provisions, before a writ of attachment may issue,

a bond must first be filed to answer for all costs which may be

adjudged to the adverse party and for the damages he may

sustain by reason of the attachment. However, this rule does

not cover the State. In Tolentino,7 this Court declared that the

State as represented by the government is exempt from filing

an attachment bond on the theory that it is always solvent.

2. Section 427 of the Code of Civil Procedure provides that

before the issuance of a writ of attachment, the applicant

therefor or any person in his name, should file a bond in favor

of the defendant for an amount not less than P400 nor more

than the amount of the claim, answerable for damages in case

it is shown that the attachment was obtained illegally or

without sufficient cause; but in the case at bar the one who

applied for and obtained the attachment is the

Commonwealth of the Philippines, as plaintiff, and under

the theory that the State is always solvent it was not bound

to post the required bond and the respondent judge did not

exceed his jurisdiction in exempting it from such

requirement. x x x8 (emphasis supplied)

In other words, the issuance of a writ of preliminary

attachment is conditioned on the filing of a bond unless the

applicant is the State. Where the State is the applicant, the

filing of the attachment bond is excused.9

The attachment bond is contingent on and answerable for all

costs which may be adjudged to the adverse party and all

damages which he may sustain by reason of the attachment

should the court finally rule that the applicant is not entitled to

the writ of attachment. Thus, it is a security for the payment of

the costs and damages to which the adverse party may be

entitled in case there is a subsequent finding that the applicant

is not entitled to the writ. The Republic of the Philippines need

not give this security as it is presumed to be always solvent

and able to meet its obligations.

The Sandiganbayan thus erred when it disregarded the

foregoing presumption and instead ruled that the Republic

should file an attachment bond. The error was not simply an

error of judgment but grave abuse of discretion.

There is grave abuse of discretion when an act is done contrary

to the Constitution, the law or jurisprudence.10Here, the

Sandiganbayans January 14, 2005 resolution was clearly

contrary to Tolentino.

Worse, the Sandiganbayan transgressed the Constitution and

arrogated upon itself a power that it did not by law possess. All

courts must take their bearings from the decisions and rulings

of this Court. Tolentino has not been superseded or reversed.

Thus, it is existing jurisprudence and continues to form an

important part of our legal system.11 Surprisingly, the

Sandiganbayan declared that Tolentino "need(ed) to be

carefully reexamined in the light of the changes that the rule on

attachment ha(d) undergone through the years."12 According

to the court a quo:

[Tolentino] was decided by the Supreme Court employing the

old Code of Civil Procedure (Act No. 190) which was enacted

by the Philippine Commission on August 7, 1901 or more than

a century ago.

That was then, this is now. The provisions of the old Code of

Civil Procedure governing attachment have been substantially

modified in the subsequent Rules of Court. In fact, Rule 57 of

the present 1997 Rules of Civil Procedure is an expanded

modification of the provisions of the old Code of Civil

Procedure governing attachment. Unlike the old Code of Civil

Procedure, the present 1997 Rules of Civil Procedure is

noticeably explicit in its requirement that the party applying

for an order of attachment should file a bond.

On this, Article VIII, Section 4(3) of the Constitution provides:

(3) Cases or matters heard by a division shall be decided or

resolved with the concurrence of majority of the Members who

actually took part in the deliberations on the issues in the case

and voted thereon, and in no case without the concurrence of

at least three of such Members. When the required number is

not obtained, the case shall be decided en banc; Provided,

that no doctrine or principle of law laid down by the court

in a decision rendered en banc or in division may be

modified or reversed except by the court sitting en banc.

(emphasis supplied)

The Constitution mandates that only this Court sitting en

banc may modify or reverse a doctrine or principle of law laid

down by the Court in a decision rendered en banc or in

division. Any court, the Sandiganbayan included, which

renders a decision in violation of this constitutional precept

exceeds its jurisdiction.

Therefore, the Sandiganbayan could not have validly

"reexamined," much less reversed, Tolentino. By doing

something it could not validly do, the Sandiganbayan

acted ultra vires and committed grave abuse of discretion.

The fact was, the revisions of the Rules of Court on attachment,

particularly those pertaining to the filing of an attachment

bond, did not quash Tolentino.

Tolentino applied Sec. 247 of Act No. 190 which provided:

Sec. 247. Obligation for damages in case of attachment.

Before the order is made, the party applying for it, or some

person on his behalf, must execute to the defendant an

obligation in an amount to be fixed by the judge, or justice

of the peace, and with sufficient surety to be approved by

him, which obligation shall be for a sum not less than two

hundred dollars, and not exceeding the amount claimed by the

plaintiff, that the plaintiff will pay all the costs which may be

adjudged to the defendant, and all damages which he may

sustain by reason of the attachment, if the same shall finally be

adjudged to have been wrongful or without sufficient cause.

(emphasis supplied)

Contrary to the pronouncement of the Sandiganbayan, Section

247 of Act No. 190 explicitly required the execution of an

attachment bond before a writ of preliminary attachment

could be issued.

The relevant provisions of Act No. 190 on attachment were

later substantially adopted as Sections 313 and 4, Rule 59 of the

1940 Rules of Court.

Sec. 3. Order issued only when affidavit and bond filed. An

order of attachment shall be granted only when it is made to

appear by the affidavit of the plaintiff, or of some other person

who personally knows the facts, 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 plaintiff, or the value of the

property which he is entitled to recover possession of, is as

much as the sum for which the order is granted above all legal

counterclaims; which affidavit, and the bond required by the

next succeeding section, must be duly filed with the clerk

or judge of the court before the order issues. (emphasis

supplied)

Sec. 4. Bond required from plaintiff. The party applying for the

order must give a bond executed to the defendant in an

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

claim, that the plaintiff will pay all the costs which may be

adjudged to the defendant and all damages which he may

sustain by reason of the attachment, if the court shall finally

adjudge that the plaintiff was not entitled thereto.

And with the promulgation of the 1964 Rules of Court, the

rules on attachment were renumbered as Rule 57, remaining

substantially the same:

Sec. 3. Affidavit and bond required. An order of attachment

shall be granted only when it appears by the affidavit of the

applicant, or of some other person who personally knows the

facts, that a sufficient cause of action exists, that the case is one

of those mentioned in section 1 hereof, that there is no other

sufficient security for the claim sought to be enforced by the

action, and that the amount due to applicant, or the value of the

property the possession of which he is entitled to recover, is as

much as the sum for which the order is granted above all legal

counterclaims. The affidavit, and the bond required by the

next succeeding section, must be duly filed with the clerk

or judge of the court before the order issues. (emphasis

supplied)

Sec. 4. Condition of applicants bond. The party applying for

the order must thereafter give a bond executed to the adverse

party in an amount to be fixed by the judge, not exceeding the

applicants claim, 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.

Clearly, the filing of an attachment bond before the issuance of

a writ of preliminary attachment was expressly required under

the relevant provisions of both the 1940 and 1964 Rules of

Court.

Commentaries on Sections 3 and 4 of the 1964 Rules of Court

uniformly cited Tolentino. They stated that the government is

exempt from filing an attachment bond14 and that the State

need not file an attachment bond.15

Where the Republic of the Philippines as a party to an action

asks for a writ of attachment against the properties of a

defendant, it need not furnish a bond. This is so because the

State is presumed to be solvent.16

When plaintiff is the Republic of the Philippines, it need not file

a bond when it applies for a preliminary attachment. This is on

the premise that the State is solvent.17

And then again, we note the significant fact that Sections 3 and

4, Rule 57 of the 1964 Rules of Court were substantially

incorporated as Sections 3 and 4, Rule 57 of the present (1997)

Rules of Court.18 There is thus no reason why the Republic

should be made to file an attachment bond.1avvphi1

In fact, in Spouses Badillo v. Hon. Tayag,19 a fairly recent case,

this Court declared that, when the State litigates, it is not

required to put up a bond for damages or even an appeal bond

because it is presumed to be solvent. In other words, the State

is not required to file a bond because it is capable of paying its

obligations.20

The pronouncement in Spouses Badillo applies in this case even

if Spouses Badillo involved the filing of a supersedeas bond. The

pronouncement that the State "is not required to put up a bond

for damages or even an appeal bond" is general enough to

encompass attachment bonds. Moreover, the purpose of an

attachment bond (to answer for all costs and damages which

the adverse party may sustain by reason of the attachment if

the court finally rules that the applicant is not entitled to the

writ) and a supersedeas bond (to answer for damages to the

winning party in case the appeal is found frivolous) is

essentially the same.1awphil.zw+

In filing forfeiture cases against erring public officials and

employees, the Office of the Ombudsman performs the States

sovereign functions of enforcing laws, guarding and protecting

the integrity of the public service and addressing the problem

of corruption in the bureaucracy.

The filing of an application for the issuance of a writ of

preliminary attachment is a necessary incident in forfeiture

cases. It is needed to protect the interest of the government

and to prevent the removal, concealment and disposition of

properties in the hands of unscrupulous public officers.

Otherwise, even if the government subsequently wins the case,

it will be left holding an empty bag.

Accordingly, the petition is hereby GRANTED. The January 14,

2005 and March 2, 2005 resolutions of the Sandiganbayan

are REVERSED and SET ASIDE. The Republic of the

Philippines is declared exempt from the payment or filing of an

attachment bond for the issuance of a writ of preliminary

attachment issued in Civil Case No. 0193. The Sandiganbayan is

hereby ordered to release the P1,000,000 bond posted by the

Republic of the Philippines to the Office of the Ombudsman.

SO ORDERED.

A.M. No. P-11-2986 June 13, 2012

(Formerly A.M. OCA IPI No. 10-3460-P)

SPOUSES RAINER TIU and JENNIFER TIU, Complainants,

vs.

VIRGILIO F. VILLAR, Sheriff IV, Regional Trial Court, Office

of the Clerk of Court, Pasay City, Respondent.

D E C I S I O N

MENDOZA, J.:

This is an administrative matter for Grave Misconduct, Grave

Abuse of Authority and Conduct Prejudicial to the Best Interest

of the Service filed against respondent Virgilio F. Villar, Sheriff

IV, Office of the Clerk of Court, Regional Trial Court, Pasay City

(Sheriff Villar), relating to the implementation of the Writ of

Preliminary Attachment in Civil Case No. R-PSY-10-02698-CV,

a case for Sum of Money and Damages, captioned as "Henry Sia

and Hankook Industrial Sales Co. v. Spouses Rainer Tiu and

Jennifer Calacday Tiu, et al."1

The factual antecedents are as follows:

On February 17, 2010, Henry Sia (Sia) and Hankook Industrial

Sales Co. filed a Complaint for Sum of Money and Damages with

prayer for Preliminary Attachment against Classique Concept

International Corporation(Classique), First Global Ventures,

Inc. (First Global) and herein complainants, spouses Rainer and

Jennifer Tiu(Spouses Tiu), before the Regional Trial Court,

Pasay City, Branch 115 (RTC). In its Order2 dated February 25,

2010, the RTC granted the prayer for the issuance of a writ of

preliminary attachment. Accordingly, on March 8, 2010, the

Writ of Preliminary Attachment addressed to Sheriff Carlos G.

Tadeo and Sheriff Virgilio Villar was issued. Preliminarily, on

March 17, 2010, Sheriff Villar served copies of the summons,

complaint and the writ of preliminary attachment to Spouses

Tiu in the office of First Global at Unit 1905 Raffles Corporate

Center, Emerald Avenue, Ortigas Center, Pasig City. The copies

were received by Grace Tan Bauco (Bauco), who introduced

herself as the companys General Manager and Caretaker, after

efforts to personally serve them to Spouses Tiu failed.

Thereafter, Sheriff Villar attached the personal properties

found in said address.

Unperturbed, Spouses Tiu moved to have the case against them

dismissed on the ground of improper venue.3

In its Order4 dated July 8, 2010, the RTC granted the motion

and ordered the release of the attached properties in favor of

Spouses Tiu. The decretal portion of the order reads:

WHEREFORE, under Rule 4, Sec. 2, in relation to Rule 16, Sec. 1

(c), because of improper venue, the defendants Motion to

Dismiss and Supplemental Motion to Dismiss are GRANTED,

and this case is DISMISSED.

The writ of preliminary attachment dated March 8, 2010

previously issued by this Court is set aside, and everything seized

thereby be immediately returned by the sheriff responsible to the

defendants. [Emphasis ours]

SO ORDERED.5

The motion for reconsideration filed by the group of Sia was

denied by the RTC in a subsequent order6 dated July 16, 2010.

The RTC reiterated its previous order to return the attached

items to Spouses Tiu. The fallo reads:

WHEREFORE, finding no cogent or legal reason to reverse or

modify the Order dated July 8, 2010, the plaintiffs Motion for

Reconsideration with Motion to Conduct Ocular Inspection is

DENIED.

Sheriff Virgilio Villar is directed to immediately return to

defendants the seized items.7

Acting on the RTCs directive, Sheriff Villar submitted his

Sheriffs Report with Urgent Prayer for Issuance of

Clarificatory Order.8 He wanted to be clarified on whether or

not he should wait for the trial courts order to attain finality

before returning the attached personal properties.

In the meantime, Sia filed his Notice of Appeal and Very Urgent

Motion to Stay Enforcement of Order to Return Seized

Properties while Spouses Tiu filed an Urgent Ex-Parte Motion

to Cite Sheriff Virgilio Villar in Contempt of Court.9

Not contented with the motion, Spouses Tiu also lodged the

present administrative complaint10 against Sheriff Villar for his

alleged questionable actions regarding the implementation of

the writ of attachment against them.

First, Spouses Tui alleged that there was no proper service of

summons upon them by Sheriff Villar before the writ of

attachment was implemented. They claimed that Sheriff Villar

merely left a copy of the summons with one of their employees

in violation of the rule on personal service of summons to the

parties concerned as required by the Rules of Court. Second,

they averred that Sheriff Villar improperly implemented the

writ against them without prior coordination with the Sheriffs

Office of Pasig City. Third, they insinuated that Sheriff Villar

asked for money for the release of their seized properties.

Fourth, they charged that Sheriff Villar maliciously refused to

return their attached properties despite the RTCs clear

directive after the case against them was dismissed.

In his Comment,11 Sheriff Villar denied all the charges against

him. He denied the allegation of Spouses Tiu that there was no

valid service of summons for the writ of preliminary

attachment. He explained that he effected a substituted service

after several unsuccessful attempts to personally serve the

summons on them. He also added that he made the proper

coordination with the Sheriffs office of Pasig City before

implementing the writ of preliminary attachment against them.

He denied receiving P35,000.00 from their driver in exchange

for the release of the couples seized properties. He asserted

that he had no ill-motive against the return of the seized

properties to them and even sought clarification from the RTC.

Incidentally, the RTC, in its Order12 dated August 17, 2010,

gave due course to the Notice of Appeal and stated that by

virtue of Sias timely appeal it had no recourse but to elevate

the entire records of the case, including the issue of the return

of Spouses Tius attached properties, to the Court of Appeals.

The Office of the Court Administrator (OCA), in its

Report13 dated June 22, 2011, stated that the factual and

conflicting allegations of the parties must be threshed out in an

appropriate investigation considering the seriousness of the

charge being imputed against Sheriff Villar. Accordingly, the

OCA made the following recommendations:

RECOMMENDATION: We respectfully submit for the

consideration of the Honorable Court the recommendation that

the instant administrative complaint against Virgilio F. Villar,

Sheriff IV, Office of the Clerk of Court, Regional Trial Court,

Pasay City, be RE-DOCKETED as a regular administrative

matter and REFERRED to the Executive Judge of the Regional

Trial Court, Pasay City for investigation. The report and

recommendation relative to the investigation shall be

submitted within sixty (60) days from receipt of the records of

the administrative complaint.14

In its Resolution15 dated September 12, 2011, the Court

resolved to re-docket the administrative complaint into a

regular administrative matter and referred the same to the

Executive Judge of the Regional Trial Court, Pasay City for

investigation, report and recommendation.

In his Report and Recommendation16 dated February 8, 2012,

Executive Judge Edwin B. Ramizo (Judge

Ramizo) recommended the dismissal of the administrative

complaint against Sheriff Villar.

Judge Ramizo found that Sheriff Villar complied with the

instruction embodied in Administrative Circular No. 12

requiring a sheriff to notify in writing the sheriff of the place

where the execution of a writ is to take place. He likewise

found nothing irregular in the substituted service of summons

effected by Sheriff Villar as the same complied with the

requisites mandated by the Rules of Court. Furthermore, the

investigating judge saw no bad faith when Sheriff Villar failed

to return the attached properties after the dismissal of the case

and the issuance of the RTC order to release the seized

properties. According to him, Sheriff Villar merely retained the

properties because he was uncertain whether or not he should

wait for the finality of the order dismissing the case. Judge

Ramizo gave no weight to Spouses Tius allegation that Sheriff

Villar demanded money from them to regain possession of

their seized properties.

After a careful examination of the records, the Court agrees

with the recommendation of Judge Ramizo that the complaint

against Sheriff Villar be dismissed.

On the questioned substituted service of summons, the Court

concurs with the findings of the investigating judge that there

was a valid substituted service of summons. As a rule, personal

service of summons is preferred as against substituted service.

Thus, substituted service can only be resorted to by the

process server only if personal service cannot be made

promptly. Most importantly, the proof of substituted service of

summons must (a) indicate the impossibility of service of

summons within a reasonable time; (b) specify the efforts

exerted to locate the defendant; and (c) state that the

summons was served upon a person of sufficient age and

discretion who is residing in the address, or who is in charge of

the office or regular place of business, of the defendant. It is

likewise required that the pertinent facts proving these

circumstances be stated in the proof of service or in the

officers return.17

Based on the records, Sheriff Villar exhausted efforts to

personally serve the summons to Spouses Tiu as indicated in

his Sheriffs Return of Summons18 dated April 23, 2010. When

it was apparent that the summons could not be served

personally on the spouses, Sheriff Villar served the summons

through Bauco, their employee, at the office address of the

couples business, First Global and Classique. It was evident

that Bauco was competent and of sufficient age to receive the

summons on their behalf as she represented herself to be their

General Manager and Caretaker.

On the charge that Sheriff Villar did not comply with the

requirement of prior coordination as mandated in

Administrative Circular No. 12, Judge Ramizo found it baseless

and stated that the sheriff properly complied with the circular.

Administrative Circular No. 1219 lays down the guidelines and

procedure in the service and execution of court writs and

processes in the reorganized courts. In particular, paragraph 2

thereof states:

x x x x

2. All Clerks of Court of the Metropolitan Trial Court and

Municipal Trial Courts in Cities, and/or their deputy sheriffs

shall serve all court processes and execute all writs of their

respective courts within their territorial

jurisdiction; [Emphasis ours]

x x x x

Paragraph 5 of the same circular requires prior coordination

with the sheriff of the place where the execution of the writ

will take place, to wit:

5. No sheriff or deputy sheriff shall execute a court writ outside

his territorial jurisdiction without first notifying in

writing, and seeking the assistance of, the sheriff of the place

where the execution shall take place; [Emphasis ours]

In the case at bench, documentary evidence indeed discloses

that Sheriff Villar of Pasay City coordinated with the Sheriff of

Pasig City, in compliance with Administrative Circular No. 12,

before he implemented the writ of preliminary attachment. In

the Certification20 dated November 17, 2011, the Clerk of Court

of Pasig City attested to the fact that Sheriff Villar formally

coordinated with their office in connection with the

implementation of the writ of attachment. Attached to said

certification is a certified true copy of Sheriff Villars request

for coordination21dated March 12, 2010, on which the word

"received" was stamped by the Office of the Clerk of Court and

Ex-officio Sheriff, RTC-Pasig City.

As to Sheriff Villars failure to effect the immediate release of

the attached properties despite the RTCs order of release, the

Court finds the explanation of the respondent sheriff

acceptable enough as not to earn a sanction from the Court.

By law, sheriffs are obligated to maintain possession of the

seized properties absent any instruction to the contrary. In this

case, the writ of preliminary attachment authorizing the trial

court to legally hold the attached items was set aside by the

RTC Order dated July 8, 2010 specifically ordering Sheriff Villar

to immediately release the seized items to Spouses Tiu.

Pertinently, Rule 57, Section 19 of the Rules of Civil Procedure

provides:

SEC. 19. Disposition of attached property where judgment is for

party against whom attachment was issued.Ifjudgment 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

officers hands, shall be delivered to the party against whom

attachment was issued, and the order of attachment

discharged.

The instruction of the trial court was clear and simple. Sheriff

Villar was to return the seized properties to Spouses Tiu. He

should have followed the courts order immediately. He had no

discretion to wait for the finality of the courts order of

dismissal before discharging the order of attachment.

Nevertheless, Sheriff Villar showed no deliberate defiance of,

or disobedience to, the courts order of release. Records show

that he took the proper step under the circumstances. He filed

with the trial court his Sheriffs Report with Urgent Prayer for

the Issuance of a Clarificatory Order. The Court perceives

nothing amiss in consulting the judge before taking action on a

matter of which he is not an expert.

As to the allegation of grave misconduct for supposedly

asking P35,000.00 to facilitate the return of the attached items,

the records bear out that it was a baseless charge. In

administrative proceedings, the complainant bears the onus of

establishing, by substantial evidence, the averments of his

complaint.22 Other than the bare allegations of Spouses Tiu, no

evidence showing that Sheriff Villar surreptitiously demanded

money from them for the release of their attached properties

was adduced. Mere suspicion without proof cannot be the basis

of conviction.23

WHEREFORE, the complaint against Virgilio F. Villar, Sheriff

IV, Office of the Clerk of Court, Regional Trial Court, Pasay City,

is hereby DISMISSED.

SO ORDERED.

G.R. No. L-7717 April 27, 1956

G.B., INC., ETC., petitioner,

vs.

THE HONORABLE JUDGE CONRADO V. SANCHEZ, ET

AL., respondents.

Zafra, Lara, De Leon and Veneracion for petitioner.

Juan T. Chuidian for respondents.

PARAS, C.J.:

Petitioner herein G.B. Inc. is the Trustee of Juan Luna

Subdivision Inc. Allison Gibbs is the President of the petitioner

and manager of Juan Luna Subdivision, Inc. Before December

31, 1953, herein respondent Juan T. Chuidian and Allison Gibbs

were partners of the law firm "Gibbs, Gibbs, Chuidian and

Quasha", the retaining counsel of Juan Luna Subdivision, Inc.

On June 18, 1948, a loan of P40,000 was granted by Juan Luna

Subdivision, Inc. to respondent Chuidian, and an "Agreement to

sell" was executed on that date whereby respondent Chuidian

acknowledge the receipt of said amount for which he agreed

and promised to transfer within 60 days to Juan Luna

Subdivision, Inc. the land which he bought from one Florence

Shuster the loan thus obtained. On June 19, 1948, respondent

Chuidian addressed a letter to Juan Luna Subdivision, Inc.

indicating his intention to secure a loan from the Rehabilitation

Finance Corporation with which to pay his debt to Juan Luna

Subdivision, Inc. On May 5, 1953, in his letter to Juan Luna

Subdivision, Inc. respondent Chuidian acknowledged his

indebtedness of P53,817.72, representing balance of principal

and interest. Instead of conveying the land bought from

Florence Shuster to Juan Luna Subdivision, Inc. respondent

Chuidian sold the same to Elenita Hernandez for P25,000 in

order to pay his wife's gambling death. On December 1, 1953,

Allison Gibbs and respondent Chuidian ceased to be law

partners. On March 4, 1954, the petitioner filed a complaint

against respondent Chuidian in the Court of First Instance of

Manila, Civil Case No. 22183, for the collection of his

indebtedness based on his "Agreement to Sell". At the

commencement of the action, the petitioner asked for the

issuance ex-parte of a writ of preliminary attachment which as

granted by the court upon the filing by the petitioner of a bond

of P57,000. On March 12, 1954, respondent Chuidian filed a

"Motion to Discharge Attachment" based on the ground that

said attachment was improperly issued, to which the petitioner

filed an opposition on March 16, 1954. On March 31, 1954, the

petition filed an urgent motion praying that respondent

Chuidian's "Motion to Discharge Attachment" be denied or that

it be granted after the filing of a counter bound or that the

hearing of said "Motion to Discharge Attachment" be held after

respondent Chuidian shall have filed an answer to the

complaint. The respondent Judge of the Court of First Instance

of Manila denied petitioner's urgent motion and set the hearing

of the "Motion to Discharge Attachment" on April 3, 1954. Such

hearing was held on April 3 and 6, 1954. When the hearing in

the afternoon of April 6 and was about to end, counsel for

petitioner requested that the latter be given a chance to

present an absent witness, which the court denied on the

ground that it had previously warned the parties that will

witnesses should be presented on said date.

On April 22, 1954, the respondent Judge issued an order

granting respondent Chuidian's "Motion to Discharge

Attachment" under section 13 of Rule 59 of the Rules of Court.

A motion for reconsideration having been denied, the

petitioner filed the present petition for certiorari with

preliminary injunction. On May 4, 1954, this Court issued the

preliminary injunction prayed for, restraining the respondent

Judge and the sheriff of the City of Manila from enforcing the

order of April 22, 1945, discharging the writ of attachment.

The grounds advanced by the petitioner for the issuance of the

writ of attachment were (a) respondent Chuidian converted to

his own use the land which he bought in a fiduciary capacity

for Juan Luna Subdivision, Inc.; (b) that respondent Chuidian is

guilty of fraud in contracting his indebtedness and incurring

the obligations upon which the action is brought; and (c) that

respondent Chuidian has removed or disposed of his property

or is about to do so with intent to defraud his creditor. the

petitioner also points out that in addition to the grounds set

forth in the motion for the issuance of an ex parte writ of

preliminary attachment, other grounds contained in the

allegations of the complaint were made a part of said ex

parte motion by reference. Attached to the "Motion to

Discharge Attachment" filed by the respondent Chuidian, was

an affidavit contradicting the grounds alleged by the petitioner.

Respondent Chuidian herein stresses the fact that while the

writ of attachment was obtained by petitioner ex parte, its

discharge was ordered by the respondent Judge after extended

hearings and the submission of memoranda.

Stripped of non-essentials, the petitioner argues that

respondent Chuidian converted to his own use the land which

he brought in the fiduciary for Juan Luna Subdivision, Inc., or at

least is guilty of fraud in contracting his indebtedness and

incurring the obligation upon which the action in Civil Case No.

22138 is brought reliance being placed on the "Agreement to

Sell" executed by respondent Chuidian on June 18, 1948, and

the letter written by him to Juan Luna Subdivision, Inc., on June

19, 1948, herein above already referred to. Respondent

Chuidian in his testimony during the hearing of his "Motion to

Discharge Attachment" alleged that said "Agreement to Sell"

did not express the true intentions of the parties; that all the

papers relied upon by the petitioner were mere formalities to

avoid criticisms of the monitory stockholders of Juan Luna

Subdivision, Inc., conceived by Allison Gibbs; that the real and

true intention of the parties was that the money would be

advanced by Allison Gibbs to respondent Chuidian and the

former would pay the Juan Luna Subdivision, Inc.

Petitioner also alleges that if it had been allowed to present its

absent witness, Elenita Hernandez, the following facts would

have been proven: (1) that Chuidian's wife's indebtedness to

Elenita Hernandez was contracted before the "Agreement to

Sell"; (2) that such indebtedness has been outstanding for

some time before such date (June 18, 1948); and (3) that the

"Agreement to Sell" dated June 18, 1948 and letter on June 19,

1948, were executed with the preconceived intention of not

complying with them. It is therefore obvious that, in order to

determine whether or not respondent Chuidian converted to

his own use the land which he bought in a fiduciary capacity

for the Juan Luna Subdivision, Inc., or was guilty of fraud in

contracting his debt and incurring the obligations upon which

the action is brought, considering that respondent Chuidian

has alleged that the "Agreement to Sell" executed by him and

other papers relief upon by the petitioner, did not express the

real intentions of the parties; and considering that the grounds

invoked by the petitioner for the issuance of the writ

attachment form the very basis of its complaint in Civil Case

No. 22138,a trial of the merits, after answer shall have been

filed by respondent Chuidian, was necessary. In this case the

hearings of the "Motion to Discharge" were held before the

issues have been joined (respondent Chuidian not having as

yet filed his answer to the complaint), and the order of the

respondent Judge discharging the attachment would have the

effect of deciding or prejudging the main action. "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." (4 Am. Jur.,

Sec. 635, 934.) The petitioner's case is rather strengthened by

the fact that it was not given an opportunity to present an

absent material witness, in the person of Elenita Hernandez.

In holding that there was no fraud on the part of respondent

Chuidian, the respondent Judge held as follows: "It must be

borne in mind that defendant did not pocket the money no

money passed hands with that conveyance to Elenita

Hernandez. The conveyance was in the form of a dacion en

pago. Defendant was practically driven to the wall the family

name must be reserved. If defendant received actually that

sum of P25,000 consideration for the conveyance, perhaps

there may yet be reason for branding defendant as a fraud. But

such was not the case.' It is evident, however, that the fact that

respondent Chuidian did not pocked the money paid for the

conveyance by Elenita Hernandez, is immaterial, inasmuch as

the petitioner was deprived of the same amount of P25,000,

assuming that under its complaint respondent Chuidian was in

fact indebted to the petitioner in the manner stated in said

complaint.

We are, therefore, of the opinion that, from what has been said,

in a view of the return of the sheriff showing financial

instability on the part of respondent Chuidian, the most that

the respondent Judge could have done in his favor to which

the petitioner has expressed its agreement was to discharge

the attachment in question upon the filing upon respondent

Chuidian of a counter bond in the sum of P57,000, under

section 12 of Rule 59 of the Rules of Court. This would have

accomplished respondent Chuidian's purpose of preserving his

property and family name, at the same time giving the

petitioner security for any judgment that it may obtain against

him. We are constrained to hold the respondent Judge acted

with grave abuse of discretion.

Wherefore, the order of the respondent Judge dated April 22,

1954, is hereby set aside, and the writ of preliminary

attachment issued on March 4, 1954 maintained.

So ordered with costs against respondent Juan T. Chuidian.

G.R. NO. 123638 June 15, 2005

INSULAR SAVINGS BANK, Petitioner,

vs.

COURT OF APPEALS, JUDGE OMAR U. AMIN, in his capacity

as Presiding Judge of Branch 135 of the Regional Trial

Court of Makati, and FAR EAST BANK AND TRUST

COMPANY, Respondents.

D E C I S I O N

GARCIA, J.:

Thru this appeal via a petition for review on certiorari under

Rule 45 of the Rules of Court, petitioner Insular Savings

Bank seeks to set aside the D E C I S I O N1 dated October 9,

1995 of the Court of Appeals in CA-G.R. SP No. 34876 and

its resolution dated January 24, 1996,2 denying petitioners

motion for reconsideration.

The assailed decision of October 9, 1995 cleared the Regional

Trial Court (RTC) at Makati, Branch 135, of committing, as

petitioner alleged, grave abuse of discretion in denying

petitioners motion to discharge attachment by counter-bond

in Civil Case No. 92-145, while the equally assailed resolution

of January 24, 1996 denied petitioners motion for

reconsideration.

The undisputed facts are summarized in the appellate courts

decision3 under review, as follows:

"On December 11, 1991, respondent Bank [Far East Bank and

Trust Company] instituted Arbitration Case No. 91-069 against

petitioner [Insular Savings Bank] before the Arbitration

Committee of the Philippine Clearing House Corporation

[PCHC]. The dispute between the parties involved three

[unfunded] checks with a total value ofP25,200,000.00. The

checks were drawn against respondent Bank and were

presented by petitioner for clearing. As respondent Bank

returned the checks beyond the reglementary period, [but

after petitioners account with PCHC was credited with the

amount of P25,200,000.00] petitioner refused to refund the

money to respondent Bank. While the dispute was pending

arbitration, on January 17, 1992, respondent Bank

instituted Civil Case No. 92-145 in the Regional Trial Court of

Makati and prayed for the issuance of a writ of preliminary

attachment. On January 22, 1992, Branch 133 of the Regional

Trial Court of Makati issued an Order granting the application

for preliminary attachment upon posting by respondent Bank

of an attachment bond in the amount of P6,000,000.00. On

January 27, 1992, Branch 133 of the Regional Trial Court of

Makati issued a writ of preliminary attachment for the amount

of P25,200,000.00. During the hearing on February 11, 1992

before the Arbitration Committee of the Philippine Clearing

House Corporation, petitioner and respondent Bank agreed to

temporarily divide between them the disputed amount

of P25,200,000.00 while the dispute has not yet been resolved.

As a result, the sum ofP12,600,000.00 is in the possession of

respondent Bank. On March 9, 1994, petitioner filed a motion

to discharge attachment by counter-bond in the amount

of P12,600,000.00. On June 13, 1994, respondent Judge

issued the first assailed order denying the motion. On June

27, 1994, petitioner filed a motion for reconsideration

which was denied in the second assailed order dated July

20, 1994" (Emphasis and words in bracket added).

From the order denying its motion to discharge attachment by

counter-bond, petitioner went to the Court of Appeals on a

petition for certiorari thereat docketed as CA-G.R. SP No.

34876, ascribing on the trial court the commission of grave

abuse of discretion amounting to lack of jurisdiction.

While acknowledging that "[R]espondent Judge may have erred

in his Order of June 13, 1994 that the counter-bond should be in

the amount of P27,237,700.00", in that he erroneously factored

in, in arriving at such amount, unliquidated claim items, such

as actual and exemplary damages, legal interest, attorneys fees

and expenses of litigation, the CA, in the herein

assailed decision dated October 9, 1995, nonetheless denied

due course to and dismissed the petition. For, according to the

appellate court, the RTCs order may be defended by, among

others, the provision of Section 12 of Rule 57 of the Rules of

Court, infra. The CA added that, assuming that the RTC erred

on the matter of computing the amount of the discharging

counter-bond, its error does not amount to grave abuse of

discretion.

With its motion for reconsideration having been similarly

denied, petitioner is now with us, faulting the appellate court,

as follows:

"I. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE

PRINCIPAL AMOUNT CLAIMED BY RESPONDENT BANK

SHOULD BE THE BASIS FOR COMPUTING THE AMOUNT OF

THE COUNTER-BOND, FOR THE PRELIMINARY ATTACHMENT

WAS ISSUED FOR THE SAID AMOUNT ONLY.

"II. THE COURT OF APPEALS ERRED IN NOT RULING THAT

THE ARGUMENT THAT THE AMOUNT OF THE COUNTER-

BOND SHOULD BE BASED ON THE VALUE OF THE PROPERTY

ATTACHED CANNOT BE RAISED FOR THE FIRST TIME IN THE

COURT OF APPEALS.

"III. THE COURT OF APPEALS ERRED IN RULING THAT THE

AMOUNT OF THE COUNTER-BOND SHOULD BE BASED ON

THE VALUE OF THE PROPERTY ATTACHED EVEN IF IT WILL

RESULT IN MAKING THE AMOUNT OF THE COUNTER-BOND

EXCEED THE AMOUNT FOR WHICH PRELIMINARY

ATTACHMENT WAS ISSUED."

Simply put, the issue is whether or not the CA erred in not

ruling that the trial court committed grave abuse of discretion

in denying petitioners motion to discharge attachment by

counter-bond in the amount ofP12,600,000.00.

Says the trial court in its Order of June 13, 1994:

"xxx (T)he counter-bond posted by [petitioner] Insular Savings

Bank should include the unsecured portion of [respondents]

claim of P12,600,000.00 as agreed by means of arbitration

between [respondent] and [petitioner]; Actual damages at 25%

percent per annum of unsecured amount of claim from October

21, 1991 in the amount of P7,827,500.00; Legal interest of 12%

percent per annum from October 21, 1991 in the amount

ofP3,805,200.00; Exemplary damages in the amount

of P2,000,000.00; and attorneys fees and expenses of litigation

in the amount of P1,000,000.00 with a total amount

of P27,237,700.00 (Adlawan vs. Tomol, 184 SCRA 31 (1990)".

Petitioner, on the other hand, argues that the starting point in

computing the amount of counter-bond is the amount of the

respondents demand or claim only, in this

case P25,200,000.00, excluding contingent expenses and

unliquidated amount of damages. And since there was a mutual

agreement between the parties to temporarily, but equally,

divide between themselves the said amount pending and

subject to the final outcome of the arbitration, the amount

of P12,600,000.00 should, so petitioner argues, be the basis for

computing the amount of the counter-bond.

The Court rules for the petitioner.

The then pertinent provision of Rule 57 (Preliminary

Attachment) of the Rules of Court under which the appellate

court issued its assailed decision and resolution, provides as

follows:

"SEC. 12. Discharge of attachment upon giving counter-bond.

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

party whose property has been attached, . . . may upon

reasonable notice to the applicant, apply to the judge who

granted the order or to the judge of the court which the action

is pending, for an order discharging the attachment wholly or

in part on the security given. The judge shall, after hearing,

order the discharge of the attachment if a cash deposit is made,

or a counter-bond executed to the attaching creditor is filed, on

behalf of the adverse party, with the clerk or judge of the court

where the application is made in an amount equal to the

value of the property attached as determined by the judge,

to secure the payment of any judgment that the attaching

creditor may recover in the action. x x x . 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"4 (Emphasis supplied).4

As may be noted, the amount of the counter-attachment bond

is, under the terms of the aforequoted Section 12, to be

measured against the value of the attached property, as

determined by the judge to secure the payment of any

judgment that the attaching creditor may recover in the action.

Albeit not explicitly stated in the same section and without

necessarily diminishing the sound discretion of the issuing

judge on matters of bond approval, there can be no serious

objection, in turn, to the proposition that the attached property

- and logically the counter-bond necessary to discharge the lien

on such property - should as much as possible correspond in

value to, or approximately match the attaching creditors

principal claim. Else, excessive attachment, which ought to be

avoided at all times, shall ensue. As we held in Asuncion vs.

Court of Appeals:5

"We, however, find the counter-attachment bond in the

amount of P301,935.41 required of the private respondent by

the trial court as rather excessive under the circumstances.

Considering that the principal amounts claimed by the

petitioner . . . total only P185,685.00, and that he had posted a

bond of only P80,000.00 for the issuance of the writ of

preliminary attachment, we deem it reasonable to lower the

amount of the counter-attachment bond to be posted by the

private respondent . . . to the sum of P185,685.00."

The following excerpts from Herrera, REMEDIAL LAW, Vol. VII,

1997 ed., p. 61, citing retired Justice Jose Y. Feria, drive home

the same point articulated in Asuncion:

"The sheriff is required to attach only so much of the property

of the party against whom the order is issued as may be

sufficient to satisfy the applicants demand, the amount of

which is stated in the order, unless a deposit is made or a

counter-bond is given equal to said amount. However, if the

value of the property to be attached is less than the amount of

the demand, the amount of the applicants bond may be equal

to the value of said property, and the amount of the adverse

partys deposit or counter-bond may be equal to the

applicants bond. The writ of preliminary attachment is issued

upon approval of the requisite bond". (Emphasis

supplied).1avvphi1.net

Turning to the case at bar, the records show that the principal

claim of respondent, as plaintiff a quo, is in the amount

of P25,200,000.00,6 representing the three (3) unfunded

checks drawn against, and presented for clearing to,

respondent bank. Jurisprudence teaches that a writ of

attachment cannot be issued for moral and exemplary

damages, and other unliquidated or contingent claim.7

The order of attachment dated January 22, 1992 fixed the bond

to be posted by respondent, as applicant, atP6,000,000.00. The

writ of attachment issued on January 27, 1992, in turn,

expressly indicated that petitioner is justly indebted to

respondent in the amount of P25,200,000.00.8 On February 11,

1992, before the Arbitration Committee of the Philippine

Clearing House Corporation, petitioner and respondent,

however, agreed to equally divide between themselves, albeit

on a temporary basis, the disputed amount of P25,200,000.00,

subject to the outcome of the arbitration proceedings. Thus,

the release by petitioner of the amount of P12,600,000.00 to

respondent. On March 7, 1994, petitioner filed a motion to

discharge attachment by counter-bond in the amount

of P12,600,000.009 which, to petitioner, is the extent that

respondent may actually be prejudiced in the event its basic

complaint for recovery of money against petitioner prospers.

As things stood, therefore, respondents principal claim against

petitioner immediately prior to the filing of the motion to

discharge attachment has effectively been pruned down

to P12,600,000.00. The trial court was fully aware of this

reality. Accordingly, it should have allowed a total discharge of

the attachment on a counter-bond based on the reduced claim

of respondent. If a portion of the claim is already secured, we

see no justifiable reason why such portion should still be

subject of counter-bond. It may be that a counter-bond is

intended to secure the payment of any judgment that the

attaching party may recover in the main action. Simple

common sense, if not consideration of fair play, however,

dictates that a part of a possible judgment that has veritably

been preemptively satisfied or secured need not be covered by

the counter-bond.

With the view we take of this case, the trial court, in requiring

petitioner to post a counter-bond in the amount

ofP27,237,700.00,

obviously glossed over one certain fundamental. We refer to

the fact that the attachment respondent applied for and the

corresponding writ issued was only for the amount of P25.2

Million. Respondent, it bears to stress, did not pray for

attachment on its other claims, contingent and unliquidated as

they were. Then, too, the attaching writ rightly excluded such

claims. While the records do not indicate, let alone provide a

clear answer as to the actual value of the property levied upon,

it may reasonably be assumed that it is equal to respondents

principal claim. Be that as it may, it was simply unjust for the

trial court to base the amount of the counter-bond on a figure

beyond the P25,200,000.00 threshold, as later reduced

to P12,600,200.00.

The trial court, therefore, committed grave abuse of discretion

when it denied petitioners motion to discharge attachment by

counter-bond in the amount of P12,600,000.00, an amount

more than double the attachment bond required of, and given

by, respondent. As a necessary consequence, the Court of

Appeals committed reversible error when it dismissed

petitioners recourse thereto in CA-G.R. SP No. 34876.

It bears to stress, as a final consideration, that the certiorari

proceedings before the appellate court and the denial of the

motion to discharge attachment subject of such proceedings,

transpired under the old rules on preliminary attachment

which has since been revised.10 And unlike the former Section

12 of Rule 57 of the Rules of Court where the value of the

property attached shall be the defining measure in the

computation of the discharging counter-attachment bond, the

present less stringent Section 12 of Rule 57 provides that the

court shall order the discharge of attachment if the movant

"makes a cash deposit, or files a counter-bond . . . in an amount

equal to that fixed by the court in the order of attachment,

exclusive of costs." Not being in the nature of a penal statute,

the Rules of Court cannot be given retroactive effect.11

This disposition should be taken in the light of then Section 12,

Rule 57 of the Rules of Court.

WHEREFORE, the instant petition is GRANTED. Accordingly,

the assailed decision and resolution of the Courts of Appeals

are hereby REVERSED and SET ASIDE, along with the orders

dated June 13, 1994 and July 20, 1994 of the Regional Trial

Court at Makati, Branch 135, in Civil Case No. 92-145 insofar

they denied petitioners motion to discharge attachment by

counter-bond in the amount of P12,600,000.00, and a new one

entered GRANTINGsuch motion upon the reposting of the

same counter-bond.

SO ORDERED.

G.R. No. 171750 January 25, 2012

UNITED PULP AND PAPER CO., INC., Petitioner,

vs.

ACROPOLIS CENTRAL GUARANTY

CORPORATION, Respondent.

D E C I S I O N

MENDOZA, J.:

This is a petition for review under Rule 45 praying for the

annulment of the November 17, 2005 Decision1 and the March

2, 2006 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP

No. 89135 entitled Acropolis Central Guaranty Corporation

(formerly known as the Philippine Pryce Assurance Corp.) v.

Hon. Oscar B. Pimentel, as Presiding Judge, RTC of Makati City,

Branch 148 (RTC), and United Pulp and Paper Co., Inc.

The Facts

On May 14, 2002, United Pulp and Paper Co., Inc. (UPPC) filed a

civil case for collection of the amount ofP42,844,353.14 against

Unibox Packaging Corporation (Unibox) and Vicente Ortega

(Ortega) before the Regional Trial Court of Makati, Branch 148

(RTC).3 UPPC also prayed for a Writ of Preliminary Attachment

against the properties of Unibox and Ortega for the reason that

the latter were on the verge of insolvency and were

transferring assets in fraud of creditors.4 On August 29, 2002,

the RTC issued the Writ of Attachment5 after UPPC posted a

bond in the same amount of its claim. By virtue of the said writ,

several properties and assets of Unibox and Ortega were

attached.6

On October 10, 2002, Unibox and Ortega filed their Motion for

the Discharge of Attachment,7 praying that they be allowed to

file a counter-bond in the amount of P42,844,353.14 and that

the writ of preliminary attachment be discharged after the

filing of such bond. Although this was opposed by UPPC, the

RTC, in its Order dated October 25, 2002, granted the said

motion for the discharge of the writ of attachment subject to

the condition that Unibox and Ortega file a counter-

bond.8 Thus, on November 21, 2002, respondent Acropolis

Central Guaranty Corporation (Acropolis) issued the

Defendants Bond for Dissolution of Attachment9 in the amount

ofP42,844,353.14 in favor of Unibox.

Not satisfied with the counter-bond issued by Acropolis, UPPC

filed its Manifestation and Motion to Discharge the Counter-

Bond10 dated November 27, 2002, claiming that Acropolis was

among those insurance companies whose licenses were set to

be cancelled due to their failure to put up the minimum

amount of capitalization required by law. For that reason,

UPPC prayed for the discharge of the counter-bond and the

reinstatement of the attachment. In its December 10, 2002

Order,11 the RTC denied UPPCs Motion to Discharge Counter-

Bond and, instead, approved and admitted the counter-bond

posted by Acropolis. Accordingly, it ordered the sheriff to cause

the lifting of the attachment on the properties of Unibox and

Ortega.

On September 29, 2003, Unibox, Ortega and UPPC executed a

compromise agreement,12 wherein Unibox and Ortega

acknowledged their obligation to UPPC in the amount

of P35,089,544.00 as of August 31, 2003, inclusive of the

principal and the accrued interest, and bound themselves to

pay the said amount in accordance with a schedule of

payments agreed upon by the parties. Consequently, the RTC

promulgated its Judgment13 dated October 2, 2003 approving

the compromise agreement.

For failure of Unibox and Ortega to pay the required amounts

for the months of May and June 2004 despite demand by UPPC,

the latter filed its Motion for Execution14 to satisfy the

remaining unpaid balance. In the July 30, 2004 Order,15 the

RTC acted favorably on the said motion and, on August 4, 2004,

it issued the requested Writ of Execution.16

The sheriff then proceeded to enforce the Writ of Execution. It

was discovered, however, that Unibox had already ceased its

business operation and all of its assets had been foreclosed by

its creditor bank. Moreover, the responses of the selected

banks which were served with notices of garnishment

indicated that Unibox and Ortega no longer had funds available

for garnishment. The sheriff also proceeded to the residence of

Ortega to serve the writ but he was denied entry to the

premises. Despite his efforts, the sheriff reported in his

November 4, 2008 Partial Return17 that there was no

satisfaction of the remaining unpaid balance by Unibox and

Ortega.

On the basis of the said return, UPPC filed its Motion to Order

Surety to Pay Amount of Counter-Bond18 directed at Acropolis.

On November 30, 2004, the RTC issued its Order19 granting the

motion and ordering Acropolis to comply with the terms of its

counter-bond and pay UPPC the unpaid balance of the

judgment in the amount ofP27,048,568.78 with interest of

12% per annum from default.

Thereafter, on December 13, 2004, Acropolis filed its

Manifestation and Very Urgent Motion for

Reconsideration,20 arguing that it could not be made to pay the

amount of the counter-bond because it did not receive a

demand for payment from UPPC. Furthermore, it reasoned that

its obligation had been discharged by virtue of the novation of

its obligation pursuant to the compromise agreement executed

by UPPC, Unibox and Ortega. The motion, which was set for

hearing on December 17, 2004, was received by the RTC and

UPPC only on December 20, 2004.21 In the Order dated

February 22, 2005, the RTC denied the motion for

reconsideration for lack of merit and for having been filed

three days after the date set for the hearing on the said

motion.22

Aggrieved, Acropolis filed a petition for certiorari before the

CA with a prayer for the issuance of a Temporary Restraining

Order and Writ of Preliminary Injunction.23 On November 17,

2005, the CA rendered its Decision24granting the petition,

reversing the February 22, 2005 Order of the RTC, and

absolving and relieving Acropolis of its liability to honor and

pay the amount of its counter-attachment bond. In arriving at

said disposition, the CA stated that, firstly, Acropolis was able

to comply with the three-day notice rule because the motion it

filed was sent by registered mail on December 13, 2004, four

days prior to the hearing set for December 17,

2004;25 secondly, UPPC failed to comply with the following

requirements for recovery of a judgment creditor from the

surety on the counter-bond in accordance with Section 17,

Rule 57 of the Rules of Court, to wit: (1) demand made by

creditor on the surety, (2) notice to surety and (3) summary

hearing as to his liability for the judgment under the counter-

bond;26 and, thirdly, the failure of UPPC to include Acropolis in

the compromise agreement was fatal to its case.27

UPPC then filed a motion for reconsideration but it was denied

by the CA in its Resolution dated March 1, 2006.28

Hence, this petition.

The Issues

For the allowance of its petition, UPPC raises the following

GROUNDS

I.

The Court of Appeals erred in not holding respondent liable on

its counter-attachment bond which it posted before the trial

court inasmuch as:

A. The requisites for recovering upon the respondent-surety

were clearly complied with by petitioner and the trial court,

inasmuch as prior demand and notice in writing was made

upon respondent, by personal service, of petitioners motion to

order respondent surety to pay the amount of its counter-

attachment bond, and a hearing thereon was held for the

purpose of determining the liability of the respondent-surety.

B. The terms of respondents counter-attachment bond are

clear, and unequivocally provide that respondent as surety

shall jointly and solidarily bind itself with defendants to secure

and pay any judgment that petitioner may recover in the

action. Hence, such being the terms of the bond, in accordance

with fair insurance practices, respondent cannot, and should

not be allowed to, evade its liability to pay on its counter-

attachment bond posted by it before the trial court.

II.

The Court of Appeals erred in holding that the trial court

gravely abused its discretion in denying respondents

manifestation and motion for reconsideration considering that

the said motion failed to comply with the three (3)-day notice

rule under Section 4, Rule 15 of the Rules of Court, and that it

had lacked substantial merit to warrant a reversal of the trial

courts previous order.29

Simply put, the issues to be dealt with in this case are as

follows:

(1) Whether UPPC failed to make the required demand and

notice upon Acropolis; and

(2) Whether the execution of the compromise agreement

between UPPC and Unibox and Ortega was tantamount to a

novation which had the effect of releasing Acropolis from its

obligation under the counter-attachment bond.

The Courts Ruling

UPPC complied with the twin requirements of notice and

demand

On the recovery upon the counter-bond, the Court finds merit

in the arguments of the petitioner.

UPPC argues that it complied with the requirement of

demanding payment from Acropolis by notifying it, in writing

and by personal service, of the hearing held on UPPCs Motion

to Order Respondent-Surety to Pay the Bond.30Moreover, it

points out that the terms of the counter-attachment bond are

clear in that Acropolis, as surety, shall jointly and solidarily

bind itself with Unibox and Ortega to secure the payment of

any judgment that UPPC may recover in the action.31

Section 17, Rule 57 of the Rules of Court sets forth the

procedure for the recovery from a surety on a counter-bond:

Sec. 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 on the same action.

From a reading of the abovequoted provision, it is evident that

a surety on a counter-bond given to secure the payment of a

judgment becomes liable for the payment of the amount due

upon: (1) demand made upon the surety; and (2) notice and

summary hearing on the same action. After a careful scrutiny

of the records of the case, the Court is of the view that UPPC

indeed complied with these twin requirements.

This Court has consistently held that the filing of a complaint

constitutes a judicial demand.32 Accordingly, the filing by UPPC

of the Motion to Order Surety to Pay Amount of Counter-Bond

was already a demand upon Acropolis, as surety, for the

payment of the amount due, pursuant to the terms of the bond.

In said bond, Acropolis bound itself in the sum

of P 42,844,353.14 to secure the payment of any judgment that

UPPC might recover against Unibox and Ortega.33

Furthermore, an examination of the records reveals that the

motion was filed by UPPC on November 11, 2004 and was set

for hearing on November 19, 2004.34 Acropolis was duly

notified of the hearing and it was personally served a copy of

the motion on November 11, 2004,35 contrary to its claim that

it did not receive a copy of the motion.

On November 19, 2004, the case was reset for hearing on

November 30, 2004. The minutes of the hearing on both dates

show that only the counsel for UPPC was present. Thus,

Acropolis was given the opportunity to defend itself. That it

chose to ignore its day in court is no longer the fault of the RTC

and of UPPC. It cannot now invoke the alleged lack of notice

and hearing when, undeniably, both requirements were met by

UPPC.

No novation despite compromise agreement; Acropolis still liable

under the terms of the counter-bond

UPPC argues that the undertaking of Acropolis is to secure any

judgment rendered by the RTC in its favor. It points out that

because of the posting of the counter-bond by Acropolis and

the dissolution of the writ of preliminary attachment against

Unibox and Ortega, UPPC lost its security against the latter two

who had gone bankrupt.36 It cites the cases of Guerrero v. Court

of Appeals37 and Martinez v. Cavives38 to support its position

that the execution of a compromise agreement between the

parties and the subsequent rendition of a judgment based on

the said compromise agreement does not release the surety

from its obligation nor does it novate the obligation.39

Acropolis, on the other hand, contends that it was not a party

to the compromise agreement. Neither was it aware of the

execution of such an agreement which contains an

a