Provisional Remedies July 30

Q. What kind of action or grounds contemplated under Section 1(d) of Rule 57?

A. When the defendant is guilty of committing fraud in contracting the debt or incurring the obligation, or in the performance thereof.

Q. What is meant in the phrase “fraud in contracting the debt”?

A. It means that the defendant in order to induce the other party in order to enter into that obligation, he used fraud.

Q. In the case of Philippine Bank of Communications vs. CA, is there a valid ground? What was the ground cited here?

A. PBCom here alleges that Villanueva violated the Trust Receipts Law.

Q. What was the action filed here?

A. It was specific performance. (it is actually collection of sum of money)

Q. What was the ground?

A. That there were letters of credit trust receipts executed by PBCom. (that violation of the Trust Receipts Law constitutes estafa, providing ground under paragraphs (b) and (d) of Sec. 1 Rule 57)

Q. What are the grounds cited in the motion for attachment?

A. In the motion for attachment, PBCom alleges that there was fraud in contracting the debt because there were collaterals that were…

Q. What was the basis of the attachment?

A. PBCom alleges that there were violations in the Trust Receipts Law that constitutes estafa and this was this ground for the issuance of the preliminary attachment.

Q. Was that a sufficient ground?

A. The Supreme Court held that this was not a sufficient ground.

Q. What not?

A. There being commission of estafa does not automatically mean that a writ preliminary attachment must be issued. It must be shown under Section 1(d) that the debtor contracted the debt induced by the introduction of fraud. A debt is fraudulently contracted if at the time of contracting it, the debtor has a preconceived plan or intention not to pay.

Q. So in this case, what was wrong with the application?

A. In this case, the application for the writ was wrong because there were no evidence to establish that the debt has no intention to pay the obligation. In fact, it was shown that the defendant already paid a portion of the obligation.

Q. In granting the writ of attachment, we consider the application, especially if it is ex parte. You will not yet consider the defense of the defendant. You only have to look as to the sufficiency of the allegations in the application. So what was wrong with the application?

A. The application for attachment merely contains general averments.

Q. What is required?

A. The law requires that in alleging fraud, one must specify facts which will establish fraud.

Q. What happened here was there was merely a reproduction of the provision without supplying specific details on how the fraud was committed. In your Civil Procedure, how do you allege fraud? You have to specifically state in details. You have to state the particulars on how the fraud was committed. So mere general averments will not suffice in an ordinary action, how much more in an application for preliminary attachment.

So with more reason that when you apply for a writ of preliminary attachment, you must specifically allege what constitutes fraud, how it was committed, and you must be able to show that fraud as contemplated under Rule 57.

So when can you say that there was fraud in contracting debt? Is it merely because you have induced the other party to enter into transaction through fraud? Or is it something to do with the intent of the party?

A. There must be intention on the part of the party.

Q. Meaning…

A. There must be intention on the part of the party incurring the obligation not to pay

Q. So when you say fraud in contracting the debt, you entered into a contract with the intent of not complying your end in the contract. So you simply wanted to get something from the other party without you doing your part. That is what is meant by fraud in contracting the debt.

So how about if the fraud or the falsities are in the collateral of the obligation? Will that be a sufficient ground?

A. No.

Q. Why not?

A. In the case of State Investment House vs. CA, the SC held that the mere decline of the value

of the collaterals does not constitute fraud in contracting the debt.

Q. What was the main action here?

A. A collection suit

Q. When did the collaterals come in?

A. The collaterals were provided by the surety, Pedro Valdez. The collaterals were comprised of shares of stock.

Q. Were there fraud or falsities in the collaterals?

A. The SC ruled with respect to the shares of stock pledged as security, the decline in their value does not mean that there was fraudulent intent on the part of the private respondents.

Q. How about the falsities in the deed of sale?

A. SC held that State Investment could not claim that they have been deceived of deluded by them because it knew that the issuer of the checks Pedro Valdez was not a buyer of the merchandise and personalities made in the ordinary course of business by P.O. Valdez, Inc. which he was president.

Q. How about the checks which were issued?

A. As the checks were sold to the petitioner after the loan had been granted to private respondents, their issuance did not fraudulently induce the petitioner to grant the loan applied for. They were mere evidence of the private respondents’ standing loan to the petitioner or mere collaterals for the loan granted by the petitioner to the private respondents.

Q. How about the parcels of land?

A. With respect to the parcels of land which were mortgaged to the petitioner, the latter should also have declined to accept them as collateral if it believed they were worth less than their supposed value.

Q. In the case of Wee vs. Tankiansee, what was the allegation here as to ground for the writ of preliminary injunction?

A. Tee alleges that Tankiansee here as an officer and director of Wincorp allegedy connived with other defendants to defraud petitioner.

Q. Is that a sufficient ground?

A. The SC held that it is not a sufficient ground. The affidavit narrated only the alleged fraudulent transaction between Wincorp and Virata and/or Power Merge. As to the participation of the 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.

Q. So again, we go back to the general rule that to allege fraud, it must be with specific details. Now, what do you understand in “fraud in the performance thereof”.

A. It refers to the fraud after the contract or agreement have been entered.

Q. Before there is no fraud in the performance of the obligation. But right now, it is a ground. So better read the case of Metro Inc. vs. Lara’s Gifts. Let’s go to Section 1(e).

It also mentions fraud. What kind of fraud is contemplated here?

A. The fraud here is the removal or the disposal of the property with intent to defraud the creditors.

Q. Does it cover physical removal of properties?

A. Yes ma’am. However, the mere physical removal of the property is not enough for the issuance of attachment. It must have been made with the intent to defraud creditors.

Q. Is insolvency here a sufficient ground?

A. Insolvency is not a ground for issuance of writ of preliminary attachment when defendant has not been shown to have committed any act intended to defraud his creditors.

Q. Will this ground cover removal for repair?

A. It is not cover removal for repair as held in the case of Aboitiz vs. Cotabato Bus Company. Here, several buses, upon permission of the sheriff, were repaired, but they were substituted with five buses which were also in the same condition as the five repaired ones before the repair.

This cannot be the removal intended as ground for the issuance of a writ of attachment under section 1 (e), Rule 57, of the Rules of Court. The repair of the five buses was evidently motivated by a desire to serve the interest of the riding public, clearly not to defraud its creditors, as there is no showing that they were not put on the run after their repairs, as was the obvious purpose of their substitution to be placed in running condition.

Q. So what kind of removal is contemplated under Section 1(e)?

A. Here, a mere design to dispose the property and intent to carry it out is sufficient.

In the case of People’s Bank & Trust Co. vs. Syvels, intent to defraud may be and usually is inferred from the facts and circumstances of the case; it can rarely be proved by direct

evidence. It may be gleaned also from the statements and conduct of the debtor, and in this connection, the principle may be applied that every person is presumed to intend the natural consequences of his acts.

It is placing the property of the debtor out of reach of the creditor.

Q. How do you do that?

A. By the statements and conduct of the creditor as alleged by the affidavit of the applicant.

Q. In the case of Aboitiz, how did the SC defined the removal or disposal of property under Section 1(e)?

A. The disposition or removal of the property must be one that is difficult of detection or discovery.

Q. So the mere physical removal of the property is not sufficient if it lacks the element of intent of fraud. So in the case of Aboitiz, the removal is really for the purpose of repair. There was no sufficient allegation that there is intent to defraud the creditors. The removal of the property must be for the purpose to conceal the property.

How about the execution of mortgage?

A. In Adlawan vs. Torres, the execution of a mortgage in favor of another creditor is not conceived as one of the means of fraudulently disposing of one’s property. By mortgaging a piece of property, a debtor merely subjects it to a lien but ownership thereof is not parted with. Furthermore, the inability to pay one's creditors is not necessarily synonymous with fraudulent intent not to honor an obligation.

Q. So the removal here must be to transfer it to the name of another person. Now, in the case of People’s Bank & Trust Co. vs. Syvels, what was the main action?

A. The main case is an action for foreclosure of chattel mortgage.

Q. What was the ground for attachment?

A. That Syvels Inc. had disposed of all the articles covered by the chattel mortgage but had not remitted the proceeds to appellee bank. That Syvels stores were no longer operated and that they were disposing of their properties to defraud the bank.

Q. Was there sufficient allegation?

A. Yes, there were sufficient allegations.

Intent to defraud may be and usually is inferred from the facts and circumstances of the case; it can rarely be proved by direct evidence. It may be gleaned also from the statements and conduct of the debtor, and in this connection, the principle may be applied that every person is presumed to intend the natural consequences of his acts.

The act of debtor in taking his stock of goods from the rear of his store at night, is sufficient to support an attachment upon the ground of the fraudulent concealment of property for the purpose of delaying and defrauding creditors. The facts are sufficient in themselves to convince an ordinary man that the defendants were obviously trying to spirit away a portion of the stocks of Syvel's Incorporated in order to render ineffectual at least partially any judgment that may be rendered in favor of the plaintiff.

Q. So here, the actuations of the appellants are given consideration in the determination of fraud that the removal of property was made during nighttime that the stocks were taken from the rear of the store. Now, under Section 1(f), what kind of ground is contemplated here?

A. Section 1(f) is more on description of the defendant rather than the kind of main action. It must be a nonresident defendant not found

in the Philippines regardless of the kind of action.

Q. When you say that the party does not reside or cannot be found in the Philippines?

A. It refers to persons on whom summons may be served by publication.

Q. What do you mean by “persons on whom summons may be served by publication”?

A. These are persons, while summons may be served by publication, are not in the Philippines for which summons by publication cannot be effected when the action is in personam. Hence, there is need to convert the action to in rem or quasi in rem in order for the court to acquire jurisdiction.

Q. So what is difference between a party who does not reside and not found in the Philippines and that on whom summons may be served by publication?

Atty. Tiu starts to rant about this being a review of the BASICS in Civil Procedure.

Do they refer to the same person? This is found in Rule 14 of your Civil Procedure.

Section 14. Service upon defendant whose identity or whereabouts are unknown. — In any action where the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general circulation and in such places and for such time as the court may order. (16a)

Section 15. Extraterritorial service. — When the defendant does not reside and is not found in the Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or

claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 6; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer. (17a)

Section 16. Residents temporarily out of the Philippines. — When any action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under the preceding section. (18a)

Atty. Tiu: They do not refer to the same person.

A person who does not reside and is not found in the Philippines refers obviously to one who is a Non-Resident. He lives somewhere else.

If you say a person on whom summons is served by publication, it is not only against a person who is Non-Resident. Under Rule 14, pwede yung defendant whose identity or whereabouts are unknown. It need not be a non-resident defendant. In fact, summons may also be served to a person who is a resident but who is temporarily out of the Philippines.

A person who is not found in the Philippines does not have address in the Philippines.

Q. Is the allegation that the defendant is a non-resident sufficient for attachment?

Q. Can a foreign corporation be considered a non-resident defendant for the purpose of the issuance of the writ of attachment?

A. Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. We think it would be entirely out of line with this policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made especially of foreign corporations, but in addition with every requirement of law made of domestic corporations.

Corporations, as a rule, are less mobile than individuals. This is especially true of foreign corporations that are carrying on business by proper authority in these Islands. They possess, as a rule, great capital which is seeking lucrative and more or less permanent investment in young and developing countries like our Philippines.

In State Investment vs. Citibank, a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands." In other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines — and is consequently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country.

Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of domestic corporations," subsumes their being found and operating as corporations, hence, residing, in the country.

Atty. Tiu: Foreign corporations are juridical persons. Only natural persons are referred into as non-resident defendants. Hence, it will not apply to corporations. That simple.

Even if doing business in the Philippines, the rule as to non-resident defendant does not apply. More so, if it is doing business in the Philippines.

Q. As to Domestic Corporation, can it be considered a non-resident defendant?

A. No. They are considered resident defendants because they are registered in the SEC, and so they can easily be located.

Q. When you are a non-resident defendant, obviously you are not found in the Philippines. How do you serve summons?

A. Through publication

Q. Only through publication?

A. It may also be through Extraterritorial service.

Q. Where do you publish?

A. In the residence of the defendant.

Q. Take note that in extraterritorial service, it is not only limited to personal service and publication, but also in any other manner the court may deem sufficient. Can an action proceed against him considering that he is not found in the Philippines?

A. Yes. The remedy in order for the court to acquire jurisdiction to try the case is to convert the action into a proceeding in rem or quasi in rem by attaching the property of the defendant.

Thus, in order to acquire jurisdiction in actions in personam where defendant resides out of and is not found in the Philippines, it becomes a matter of course for the court to convert the action into a proceeding in rem or quasi in rem by attaching the defendant’s property.

Q. What is an action in personam? What is an action in rem?

Suppose the action in rem, are you saying that there need to be an attachment in order for the court to acquire jurisdiction?

A. No. Being in rem, the court has already acquired the res. When the case was filed, the court already acquired jurisdiction.

If this is an action in personam, which does not involve rights or ownership over a property, status of the person, then it is imperative that you acquire jurisdiction over the person of the defendant. Then the question is, what happens if that is a non-resident defendant, outside the territorial jurisdiction of the courts? That is when Section 1(f) applies.

Q. So what kind of action is contemplated in Section 1(f)?

A. It is an action in personam. So you do not answer “any action” because if it is in rem, then there’s no need to apply Section 1(f) as the court has already acquired jurisdiction.

Basicccckkkk….cough cough cough HAHAHAHAHA What have been doing in your Civil Procedure class? Why don’t you know the difference? That is a 5 unit subject. Obviously kelangan pa ng review blah blah blah

Q. In the case of Mabanag vs. Gallemore, what was the main action here?

A. It is a recovery for sum of money

Q. Who is the defendant?

A. Gallemore

Q. Where is he residing?

A. In Los Angeles, California. It was alleged that he has no property in the Philippines except an alleged debt owing him by a resident of Misamis Occidental.

Q. Was there sufficient basis to attach the credit of the defendant?

A. Yes

Q. So in this case, when the court attached the debt owed to the defendant, is that equivalent to the acquisition of jurisdiction over the person of the defendant?

A. Yes. The Court has acquired jurisdiction of the case by virtue of the attachment of the defendant’s credit. Those authorities and decisions, so plain and comprehensive as to make any discussion unnecessary, are in agreement that though no jurisdiction is obtained over the debtor’s person, the case may proceed to judgment if there is property in the custody of the court that can be applied to its satisfaction.

Q. Why is it that there is no acquisition of jurisdiction over the person of the defendant even though there is attachment of the property?

MONSTER MODE

A. In case of non-resident defendant, the service if summons is ONLY to comply with the requirement of DUE PROCESS but it does not confer jurisdiction over the person of the non-resident defendant.

Q. In the case of PCIB vs. Alejandro…Alejandro is what kind of defendant?

A. He is a resident defendant who is temporarily out of the Philippines.

Q. So what was alleged in the application for attachment?

A. PCI Bank alleged that respondent is not a resident of the Philippines.

Q. What is the main action here?

A. Collection for sum of money.

Q. Was the attachment granted?

A. Yes

Q. What was the ground for which it was issued?

A. It was on the representation that respondent is not a resident of the Philippines

Q. What other grounds?

A. Section 1 c and f

Q. Was the issuance of the attachment valid?

A. No ma’am, since he has a residence in Quezon City and an office in Makati City, the trial court, if only for the purpose of acquiring jurisdiction, could have served summons by substituted service on the said addresses, instead of attaching the property of the defendant.

Q. OK, the SC held that a person temporarily out of the Philippines which can be served summons by publication must first be served summons by substituted service before the publication shall be had. There is hierarchy of the service of summons. First, personal service, then substituted service, before publication. Since respondents has a residence, then substituted service should have been had before publication.

You don’t serve summons by publication simply because the defendant is out of the Philippines.

Now, Section 1(f) you have to remember that the attachment is simply to convert the action to action quasi in rem or conversely stated, it is only for a person, or a case to proceed against a defendant who is not found in the Philippines.

Only then you can serve summons by publication. Take note that the publication here should be done in the Philippines. That’s there can never be acquisition of jurisdiction over the person of a non-resident defendant.

Despite the service of summons by publication, what only served is the right to due process.

Q. How the writ of attachment issued?

A. (1) Ex parte; and (2) Upon motion with notice and hearing

Q. Who may issue the writ?

A. The Court in which the case is pending.

Q. What kind of courts are talking out here?

A. It could be the MTC, RTC, Family Court or the CA or the SC. The CA and SC can issue writ attachment anywhere in the Philippines.

Q. What may be attached?

A. So much of the property in the Philippines of the party against whom it is issued and the same is not exempt from execution, as may be sufficient to satisfy the applicant’s demand.

Q. So you have to attach all properties?

A. Only those sufficient to satisfy the applicant’s demand.

Q. Can courts in Manila issue writ to courts in Davao?

A. The last sentence of Section 2 provides that several writes may be issued at the same time to the sheriffs of the courts of different judicial regions.

The writ of attachment may be issued anywhere in the Philippines. It can be effective even to places outside the territorial jurisdiction of the court. The court may issue the writ of attachment and course through the sheriff of another court.

Q. Can it be defeated upon issuance?

A. When the defeated party makes a deposit or gives a bond in an amount equal to that fixed in the order, which may be amount sufficient to satisfy the applicant’s demand or value of the property to be attached as stated by the applicant, exclusive of costs.

Q. When may the court issue several writs?

A. Writs may be issued at the commencement of the action

Q. In the case of Sievert vs. CA, what was the ruling of the SC?

A. The judge may not issue the WPI before the summons was served.

There is no question that a writ of preliminary attachment may be applied for a plaintiff "at the commencement of the action or at any time thereafter" in the cases enumerated in Section 1 of Rule 57 of the Revised Rules of Court.

The critical time which must be identified is, rather, when the trial court acquires authority under law to act coercively against the defendant or his property in a proceeding in attachment. We believe and so hold that critical time is the time of the vesting of jurisdiction in the court over the person of the defendant in the main case.

Q. So what is the basic ruling in the 1998 case of Sievert?

A. The critical time which must be identified is when the trial court acquires authority under law to act coercively against the defendant or his property in a proceeding in attachment. There is requirement that service of summons before the issuance of the writ of attachment.

Q. Under this ruling, there must first be service of summons. Now in the 1991 case of Davao Light vs. CA, is there the same ruling?

A. No. In Davao Light, the SC held that provisional remedies of preliminary attachment, preliminary injunction, receivership, or replevin may be validly and properly applied for and granted even before the defendants is summoned or is heard from.

However, it was likewise ruled that the writ cannot bind and affect the defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when the proper officer commences implementation of the writ of attachment, service of summons should be simultaneously made.

Q. Take note that in the case of Sievert, the application for injunction was made separately from the complaint. Ordinarily, when you apply for a writ of preliminary attachment, you already incorporate it with the complaint.

What happened in Sievert is, there was a complaint, and there was a separate application for the issuance of the writ of preliminary attachment.

In the case of Davao Light, there was a complaint for collection of sum of money with an ex parte application for a writ of attachment. Meaning to say, the writ of attachment was already incorporated in the complaint.

So in the case of Aboitiz (Davao Light?), what was the justification given by the Court in saying that the court may now act on the application for attachment despite the non-service of summons on the defendant?

A. Rule 57 speaks of grant of remedy “at the commencement of the action or at any time thereafter”. The phrase “at the commencement of the action” obviously refers to the date of the filing of the complaint, which, as pointed out, is the date that marks the commencement of the action, and the reference plainly is to a time before summons is served on the defendant, or even before summons issues.

Atty Tiu: The reason is that by mere filing of the complaint, the court already acquire jurisdiction over the case. It has now the power to act on any application, including the application for writ of attachment, ex parte application. Kaya nga ex parte eh, kay wala pa sa eksena yung defendant.

Now, the question is, can you enforce the writ of attachment prior the service of summons upon the defendant?

When you speak of issuance of writ of attachment, the court may do that ex parte or prior the service of summons. But if you talk about enforcement, then that is the time that you are required to serve the summons. The sheriff cannot just take the property without notice. Simply put, there must be observance of due process. And you can only do that by service of summons.