Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185734

July 3, 2013

ALFREDO C. LIM, JR., PETITIONER,

vs.
SPOUSES TITO S. LAZARO AND CARMEN T. LAZARO, RESPONDENTS.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the July 10, 2008 Decision2 and December 18,
2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100270, affirming the March 29,
2007 Order4 of the Regional Trial Court of Quezon City, Branch 223 (RTC), which lifted the writ of
preliminary attachment issued in favor of petitioner Alfredo C. Lim, Jr. (Lim, Jr.).
The Facts
On August 22, 2005, Lim, Jr. filed a complaint5 for sum of money with prayer for the issuance of a
writ of preliminary attachment before the RTC, seeking to recover from respondents-spouses Tito S.
Lazaro and Carmen T. Lazaro (Sps. Lazaro) the sum of P2,160,000.00, which represented the
amounts stated in several dishonored checks issued by the latter to the former, as well as interests,
attorneys fees, and costs. The RTC granted the writ of preliminary attachment application 6 and upon
the posting of the required P2,160,000.00 bond,7 issued the corresponding writ on October 14,
2005.8 In this accord, three (3) parcels of land situated in Bulacan, covered by Transfer Certificates
of Title (TCT) Nos. T-64940, T-64939, and T-86369 (subject TCTs), registered in the names of Sps.
Lazaro, were levied upon.9
In their Answer with Counterclaim,10 Sps. Lazaro averred, among others, that Lim, Jr. had no cause
of action against them since: (a) Colim Merchandise (Colim), and not Lim, Jr., was the payee of the
fifteen (15) Metrobank checks; and (b) the PNB and Real Bank checks were not drawn by them, but
by Virgilio Arcinas and Elizabeth Ramos, respectively. While they admit their indebtedness to Colim,
Sps. Lazaro alleged that the same had already been substantially reduced on account of previous
payments which were apparently misapplied. In this regard, they sought for an accounting and
reconciliation of records to determine the actual amount due. They likewise argued that no fraud
should be imputed against them as the aforesaid checks issued to Colim were merely intended as a
form of collateral.11 Hinged on the same grounds, Sps. Lazaro equally opposed the issuance of a writ
of preliminary attachment.12
Nonetheless, on September 22, 2006, the parties entered into a Compromise Agreement13 whereby
Sps. Lazaro agreed to pay Lim, Jr. the amount of P2,351,064.80 on an installment basis, following a
schedule of payments covering the period from September 2006 until October 2013, under the
following terms, among others: (a) that should the financial condition of Sps. Lazaro improve, the
monthly installments shall be increased in order to hasten the full payment of the entire
obligation;14 and (b) that Sps. Lazaros failure to pay any installment due or the dishonor of any of the
postdated checks delivered in payment thereof shall make the whole obligation immediately due and
demandable.

The aforesaid compromise agreement was approved by the RTC in its October 31, 2006
Decision15 and January 5, 2007 Amended Decision.16
Subsequently, Sps. Lazaro filed an Omnibus Motion,17 seeking to lift the writ of preliminary
attachment annotated on the subject TCTs, which the RTC granted on March 29, 2007. 18 It ruled that
a writ of preliminary attachment is a mere provisional or ancillary remedy, resorted to by a litigant to
protect and preserve certain rights and interests pending final judgment. Considering that the case
had already been considered closed and terminated by the rendition of the January 5, 2007
Amended Decision on the basis of the September 22, 2006 compromise agreement, the writ of
preliminary attachment should be lifted and quashed. Consequently, it ordered the Registry of Deeds
of Bulacan to cancel the writs annotation on the subject TCTs.
Lim, Jr. filed a motion for reconsideration19 which was, however, denied on July 26,
2007,20 prompting him to file a petition for certiorari 21 before the CA.
The CA Ruling
On July 10, 2008, the CA rendered the assailed decision, 22 finding no grave abuse of discretion on
the RTCs part. It observed that a writ of preliminary attachment may only be issued at the
commencement of the action or at any time before entry of judgment. Thus, since the principal
cause of action had already been declared closed and terminated by the RTC, the provisional or
ancillary remedy of preliminary attachment would have no leg to stand on, necessitating its
discharge.23
Aggrieved, Lim, Jr. moved for reconsideration24 which was likewise denied by the CA in its
December 18, 2008 Resolution.25
Hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the writ of preliminary attachment was properly lifted.
The Courts Ruling
The petition is meritorious.
By its nature, preliminary attachment, under Rule 57 of the Rules of Court (Rule 57), is an ancillary
remedy applied for not for its own sake but to enable the attaching party to realize upon the relief
sought and expected to be granted in the main or principal action; it is a measure auxiliary or
incidental to the main action. As such, it is available during its pendency which may be resorted to by
a litigant to preserve and protect certain rights and interests during the interim, awaiting the ultimate
effects of a final judgment in the case.26 In addition, attachment is also availed of in order to acquire
jurisdiction over the action by actual or constructive seizure of the property in those instances where
personal or substituted service of summons on the defendant cannot be effected. 27
In this relation, while the provisions of Rule 57 are silent on the length of time within which an
attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates
that the said lien continues until the debt is paid, or the sale is had under execution issued on the
judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same
manner provided by law.28

Applying these principles, the Court finds that the discharge of the writ of preliminary attachment
against the properties of Sps. Lazaro was improper.
Records indicate that while the parties have entered into a compromise agreement which had
already been approved by the RTC in its January 5, 2007 Amended Decision, the obligations
thereunder have yet to be fully complied with particularly, the payment of the total compromise
amount of P2,351,064.80. Hence, given that the foregoing debt remains unpaid, the attachment of
Sps. Lazaros properties should have continued to subsist.
In Chemphil Export & Import Corporation v. CA,29 the Court pronounced that a writ of attachment is
not extinguished by the execution of a compromise agreement between the parties, viz:
Did the compromise agreement between Antonio Garcia and the consortium discharge the latters
attachment lien over the disputed shares?
CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the
case, dies a natural death. Thus, when the consortium entered into a compromise agreement, which
resulted in the termination of their case, the disputed shares were released from garnishment.
We disagree. To subscribe to CEICs contentions would be to totally disregard the concept and
purpose of a preliminary attachment.
xxxx
The case at bench admits of peculiar character in the sense that it involves a compromise
agreement. Nonetheless, x x x. The parties to the compromise agreement should not be deprived of
the protection provided by an attachment lien especially in an instance where one reneges on his
obligations under the agreement, as in the case at bench, where Antonio Garcia failed to hold up his
own end of the deal, so to speak.
xxxx
If we were to rule otherwise, we would in effect create a back door by which a debtor can easily
escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor,
in order to buy time to dispose of his properties, would enter into a compromise agreement he has
no intention of honoring in the first place. The purpose of the provisional remedy of attachment
would thus be lost. It would become, in analogy, a declawed and toothless tiger. (Emphasis and
underscoring supplied; citations omitted)
In fine, the Court holds that the writ of preliminary attachment subject of this case should be restored
and its annotation revived in the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the
properties covered by the same as it were before the cancellation of the said writ. Lest it be
misunderstood, the lien or security obtained by an attachment even before judgment, is in the nature
of a vested interest which affords specific security for the satisfaction of the debt put in suit.30 Verily,
the lifting of the attachment lien would be tantamount to an abdication of Lim, Jr.s rights over Sps.
Lazaros properties which the Court, absent any justifiable ground therefor, cannot allow.
WHEREFORE, the petition is GRANTED. The July 10, 2008 Decision and the December 18, 2008
Resolution of the Court of Appeals in CA-G.R. SP No. 100270 are REVERSED and SET ASIDE,
and the March 29, 2007 Order of the Regional Trial Court of Quezon City, Branch 223 is

NULLIFIED. Accordingly, the trial court is directed to RESTORE the attachment lien over Transfer
Certificates of Title Nos. T-64940, T-64939, and T-86369, in favor of petitioner Alfredo C. Lim, Jr.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 190028

February 26, 2014

LETICIA P. LIGON, Petitioner,

vs.
THE REGIONAL TRIAL COURT, BRANCH 56 AT MAKATI CITY AND ITS PRESIDING JUDGE,
JUDGE REYNALDO M. LAIGO, SHERIFF IV LUCITO V. ALEJO, ATTY. SILVERIO GARING, MR.
LEONARDO J. TING, AND MR. BENITO G. TECHICO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 is the Decision2 dated October 30, 2009 of the Court
of Appeals (CA) in CA-G.R. SP No. 106175, finding no grave abuse of discretion on the part of the
Regional Trial Court of Makati City, Branch 56 (Makati City RTC) in issuing the following orders
(Assailed Orders) in Civil Case No. 03-186:
(a) the Order3 dated February 9, 2007 which directed the Register of Deeds of Muntinlupa
City, respondent Atty. Silverio Garing (Atty. Garing), to (1) register the Officer's
Final Deed of Sale issued by respondent SheriffLucito V. Alejo (Sheriff Alejo) on October 27,
2006 in favor of the highest bidder, respondent Leonardo J. Ting (Ting), (2) cancel Transfer
Certificate of Title (TCT) No. 8502/T44 in the name of Spouses Rosario and Saturnino
Baladjay (Sps. Baladjay), and (3) issue a new certificate of title in favor of Ting, free from any
liens and encumbrances;
(b) the Order4 dated March 20, 2007 which directed Atty. Garing to comply with the February
9, 2007 Order under pain of contempt of court; and
(c) the Order5 dated April 25, 2007 which reiterated the directive to Atty. Garing to issue a
new title in favor of Ting after the latters payment of capital gains, documentary and transfer
taxes, as required.
The Facts
On November 20, 2002, petitioner Leticia P. Ligon (Ligon) filed an amended complaint 6 before the
Regional Trial Court of Quezon City, Branch 101 (Quezon City RTC) for collection of sum of money

and damages, rescission of contract, and nullification of title with prayer for the issuance of a writ of
preliminary attachment, docketed as Civil Case No. Q-10-48145 (Quezon City Case), against Sps.
Baladjay, a certain Olivia Marasigan (Marasigan), Polished Arrow Holdings, Inc. (Polished Arrow),
and its incorporators,7 namely, Spouses Julius Gonzalo and Charaine Doreece Anne Fuentebella
(Sps. Fuentebella), Ma. Linda Mendoza (Mendoza), Barbara C. Clavo (Clavo), Bayani E. Arit, Jr.
(Arit, Jr.), and Peter M. Kairuz (Kairuz), as well as the latters spouses (individual defendants).
In her complaint, Ligon alleged, inter alia, that Rosario Baladjay (Rosario) enticed her to extend a
short-term loan in the amount of P3,000,000.00, payable in a months time and secured by an Allied
Bank post-dated check for the same amount.8 Ligon likewise claimed that Rosario, as further
enticement for the loan extension, represented that she and her husband Saturnino were in the
process of selling their property in Ayala Alabang Village, Muntinlupa City (subject property),
covered by a clean title, i.e., TCT No. 85029 in the name of Rosario Baladjay, married to Saturnino
Baladjay, and that the proceeds of the said sale could easily pay-off the loan.10Unfortunately, the
Allied Bank check was dishonored upon presentment and, despite assurances to replace it with
cash, Rosario failed to do so. Moreover, Ligon discovered that the subject property had already been
transferred to Polished Arrow, alleged to be a dummy corporation of Sps. Baladjay and the individual
defendants (defendants). As a result, TCT No. 8502 was cancelled and replaced on October 11,
2002 by TCT No. 927311 in the name of Polished Arrow. Thus, Ligon prayed that all defendants be
held solidarily liable to pay her the amount of P3,000,000.00, with interest due, as well
as P1,000,000.00 as attorneys fees and another P1,000,000.00 by way of moral and exemplary
damages. Asserting that the transfer of the subject property to Polished Arrow was made in fraud of
Sps. Baladjays creditors, Ligon also prayed that the said transfer be nullified, and that a writ of
preliminary attachment be issued in the interim against defendants assets, including the subject
property. Subsequently, an Amended Writ of Preliminary Attachment12 was issued on November 26,
2002, and annotated on the dorsal portion13 of TCT No. 9273 on December 3, 2002 (December 3,
2002 attachment annotation).
On February 18, 2003, a similar complaint for collection of sum of money, damages, and
cancellation of title with prayer for issuance of a writ of preliminary attachment was lodged before the
Makati City RTC, docketed as Civil Case No. 03-186 (Makati City Case), by Spouses Cecilia and Gil
Vicente (Sps. Vicente) against Sps. Baladjay, Polished Arrow, and other corporations. 14 In that case,
it was established that Sps. Baladjay solicited millions of pesos in investments from Sps. Vicente
using conduit companies that were controlled by Rosario, as President and Chairperson. During the
proceedings therein, a writ of preliminary attachment also against the subject property was issued
and annotated on the dorsal portion of TCT No. 9273 on March 12, 2003. Thereafter, but before the
Quezon City Case was concluded, the Makati City RTC rendered a Decision 15 dated December 9,
2004 (December 9, 2004 Decision), rescinding the transfer of the subject property from Sps.
Baladjay to Polished Arrow upon a finding that the same was made in fraud of
creditors.16 Consequently, the Makati City RTC directed the Register of Deeds of Muntinlupa City to:
(a) cancel TCT No. 9273 in the name of Polished Arrow; and (b) restore TCT No. 8502 "in its
previous condition" in the name of Rosario Baladjay, married to Saturnino Baladjay.
Meanwhile, in the pending Quezon City Case, Polished Arrow and the individual defendants (with
the exception of Marasigan) were successively dropped17 as party-defendants, after it was
established that they, by themselves directly or through other persons, had no more ownership,
interest, title, or claim over the subject property. The parties stipulated on the existence of the
December 9, 2004 Decision of the Makati City RTC, and the fact that the same was no longer
questioned by defendants Sps. Fuentebella, Arit, Jr., and Polished Arrow were made conditions for
their dropping as party-defendants in the case.18 In view of the foregoing, the Quezon City Case
proceeded only against Sps. Baladjay and Marasigan and, after due proceedings, the Quezon City
RTC rendered a Decision19 dated March 26, 2008 (March 26, 2008 Decision), directing Sps. Baladjay
to pay Ligon the amount ofP3,000,000.00 with interest, as well as attorneys fees and costs of suit.

On September 25, 2008, the March 26, 2008 Decision of the Quezon City RTC became final and
executory.20However, when Ligon sought its execution, she discovered that the December 3, 2002
attachment annotation had been deleted from TCT No. 9273 when the subject property was sold by
way of public auction on September 9, 2005 to the highest bidder, respondent Ting, for the amount
of P9,000,000.00 during the execution proceedings in the Makati City Case, as evidenced by the
Officers Final Deed of Sale21 dated October 27, 2006 (Officers Final Deed of Sale) issued by Sheriff
Alejo. In this regard, Ligon learned that the Makati City RTC had issued its first assailed
Order22 dated February 9, 2007 (First Assailed Order), directing Atty. Garing, as the Register of
Deeds of Muntinlupa City, to: (a) register the Officers Final Deed of Sale on the official Record Book
of the Register of Deeds of Muntinlupa City; and (b) cancel TCT No. 8502 in the name of Sps.
Baladjay and issue a new title in the name of Ting, free from any liens and encumbrances.
Atty. Garing manifested23 before the Makati City RTC that it submitted the matter en consulta24 to the
Land Registration Authority (LRA) as he was uncertain whether the annotations on TCT No. 9273
should be carried over to TCT No. 8502. In response to the manifestation, the Makati City RTC
issued its second assailed Order25dated March 20, 2007 (Second Assailed Order), directing Atty.
Garing to comply with the First Assailed Order under pain of contempt. It explained that it could not
allow the LRA to carry over all annotations previously annotated on TCT No. 9273 in the name of
Polished Arrow as said course of action would run counter to its December 9, 2004 Decision which
specifically ordered the cancellation of said TCT and the restoration of TCT No. 8502 in its previous
condition. It further clarified that:26
[I]f there were liens or encumbrances annotated on TCT No. 8502 in the name of Rosario Baladjay
when the same was cancelled and TCT No. 9273 was issued by the Register of Deeds of
Muntinlupa City in favor of Polished Arrow Holdings, Inc. based on the Deed of Absolute Sale
executed between the former and the latter, only such liens or encumbrances will have to be carried
over to the new Transfer Certificate of Title that he (Atty. Garing) is mandated to immediately issue
in favor of Leonardo J. Ting even as the Order of the Court dated February 9, 2007 decreed that a
new TCT be issued in the name of Mr. Leonardo J. Ting, free from any encumbrance. On the other
hand, if TCT No. 8502 in the name of Rosario Baladjay was free from any liens or encumbrances
when the same was cancelled and TCT No. 9273 was issued by the Register of Deeds of
Muntinlupa City in favor of Polished Arrow Holdings, Inc. by virtue of that Deed of Absolute Sale
executed between Rosario Baladjay and Polished Arrow Holdings, Inc., it necessarily follows that the
new Transfer of Certificate of Title that the said Registrar of Deeds is duty bound to issue
immediately in favor of Leonardo Ting will also be freed from any liens and encumbrances, as simple
as that. (Emphases and underscoring supplied)
Based on the foregoing, it pronounced that it was Atty. Garings ministerial duty "to promptly cancel
TCT No. 8502/T-44 in the name of defendant-spouses Baladjay and to issue a new Transfer
Certificate of Title in the name of the highest bidder, Leonardo J. Ting." 27
Separately, Ting filed a motion before the Makati City RTC on account of Atty. Garings letter28 dated
March 26, 2006 requiring him to comply with certain documentary requirements and to pay the
appropriate capital gains, documentary stamp and transfer taxes before a new title could be issued
in his name. In its third assailed Order29dated April 25, 2007 (Third Assailed Order), the Makati City
RTC directed Ting to pay the aforesaid taxes and ordered Atty. Garing to immediately cancel TCT
No. 8502 and issue a new title in the formers name.
On June 7, 2007, Atty. Garing issued TCT No. 1975630 in the name of Ting, free from any liens and
encumbrances. Later, Ting sold31 the subject property to respondent Benito G. Techico (Techico),
resulting in the cancellation of TCT No. 19756 and the issuance of TCT No. 31001 32 in Techicos
name.

In view of the preceding circumstances, Ligon filed, inter alia, a certiorari petition33 against
respondent Presiding Judge Reynaldo Laigo (Judge Laigo), Sheriff Alejo, Atty. Garing, Ting, and
Techico (respondents), alleging, among others, that the Makati City RTC committed grave abuse of
discretion in issuing the Assailed Orders. In this relation, she prayed that the said orders be declared
null and void for having been issued in violation of her right to due process, and resulting in (a) the
deletion of the December 3, 2002 attachment annotation on TCT No. 9273 which evidences her prior
attachment lien over the subject property, and (b) the issuance of new titles in the names of Ting and
Techico.
Consolidated with Ligons certiorari petition is a complaint for indirect contempt34 against
respondents, whereby it was alleged that the latter unlawfully interfered with the court processes of
the Quezon City RTC, particularly by deleting the December 3, 2002 attachment annotation on TCT
No. 9273 which thereby prevented the execution of the Quezon City RTCs March 26, 2008
Decision.
The CA Ruling
In a Decision35 dated October 30, 2009, the CA dismissed Ligons certiorari petition, finding that the
Makati City RTC did not gravely abuse its discretion in issuing the Assailed Orders, adding further
that the same was tantamount to a collateral attack against the titles of both Ting and Techico, which
is prohibited under Section 4836of Presidential Decree No. (PD) 1529.37 Likewise, it dismissed the
indirect contempt charge for lack of sufficient basis, emphasizing that the Assailed Orders were
issued prior to the Quezon City RTCs Decision, meaning that the said issuances could not have
been issued in disregard of the latter decision.
Aggrieved, Ligon filed the present petition.
The Issues Before the Court
The Court resolves the following essential issues: (a) whether or not the CA erred in ruling that the
Makati City RTC did not gravely abuse its discretion in issuing the Assailed Orders; and (b) whether
or not Judge Laigo should be cited in contempt and penalized administratively.
The Courts Ruling
The petition is partly meritorious.
A. Issuance of the Assailed Orders vis--vis
Grave Abuse of Discretion.
Attachment is defined as a provisional remedy by which the property of an adverse party is taken
into legal custody, either at the commencement of an action or at any time thereafter, as a security
for the satisfaction of any judgment that may be recovered by the plaintiff or any proper party.38 Case
law instructs that an attachment is a proceeding in rem, and, hence, is against the particular
property, enforceable against the whole world. Accordingly, the attaching creditor acquires a specific
lien on the attached property which nothing can subsequently destroy except the very dissolution of
the attachment or levy itself. Such a proceeding, in effect, means that the property attached is an
indebted thing and a virtual condemnation of it to pay the owners debt. The lien continues until the
debt is paid, or sale is had under execution issued on the judgment, or until the judgment is satisfied,
or the attachment discharged or vacated in some manner provided by law.39 Thus, a prior

registration40 of an attachment lien creates a preference,41 such that when an attachment has been
duly levied upon a property, a purchaser thereof subsequent to the attachment takes the property
subject to the said attachment.42 As provided under PD 1529, said registration operates as a form of
constructive notice to all persons.43
Applying these principles to this case, the Court finds that the CA erred in holding that the RTC did
not gravely abuse its discretion in issuing the Assailed Orders as these issuances essentially
disregarded, inter alia, Ligons prior attachment lien over the subject property patently anathema to
the nature of attachment proceedings which is well-established in law and jurisprudence.44 In this
case, Ligon, in order to secure the satisfaction of a favorable judgment in the Quezon City Case,
applied for and was eventually able to secure a writ of preliminary attachment45 over the subject
property on November 25, 2002, which was later annotated on the dorsal portion 46of TCT No. 9273 in
the name of Polished Arrow on December 3, 2002. Notwithstanding the subsequent cancellation of
TCT No. 9273 due to the Makati City RTCs December 9, 2004 Decision rescinding the transfer of
the subject property from Sps. Baladjay to Polished Arrow upon a finding that the same was made in
fraud of creditors, Ligons attachment lien over the subject property continued to subsist since the
attachment she had earlier secured binds the property itself, and, hence, continues until the
judgment debt of Sps. Baladjay to Ligon as adjudged in the Quezon City Case is satisfied, or the
attachment discharged or vacated in some manner provided by law. The grave abuse of discretion
of the Makati City RTC lies with its directive to issue a new certificate of title in the name of Ting (i.e.,
TCT No. 19756),47 free from any liens and encumbrances. This course of action clearly negates the
efficacy of Ligons attachment lien and, also, defies the legal characterization of attachment
proceedings. It bears noting that Ligons claim, secured by the aforesaid attachment, is against Sps.
Baladjay whose ownership over the subject property had been effectively restored in view of the
RTCs rescission of the propertys previous sale to Polished Arrow. 48 Thus, Sps. Ligons attachment
lien against Sps. Baladjay as well as their successors-in-interest should have been preserved, and
the annotation thereof carried over to any subsequent certificate of title, 49 the most recent of which as
it appears on record is TCT No. 31001 in the name of Techico, without prejudice to the latters right
to protect his own ownership interest over the subject property.
That said, the Court now proceeds to resolve the second and final issue on indirect contempt.
B. Indirect Contempt Charges.
While the Court agrees with Ligons position on the issue of grave abuse of discretion, it holds an
opposite view anent its complaint for indirect contempt against Judge Laigo and/or the respondents
in this case.
Contempt of court has been defined as a willful disregard or disobedience of a public authority. In its
broad sense, contempt is a disregard of, or disobedience to, the rules or orders of a legislative or
judicial body or an interruption of its proceedings by disorderly behavior or insolent language in its
presence or so near thereto as to disturb its proceedings or to impair the respect due to such a body.
In its restricted and more usual sense, contempt comprehends a despising of the authority, justice,
or dignity of a court.50
Contempt of court is of two (2) kinds, namely: direct and indirect contempt. Indirect contempt or
constructive contempt is that which is committed out of the presence of the court. Any improper
conduct tending, directly or indirectly, to impede, obstruct, or degrade the administration of justice
would constitute indirect contempt.51
1wphi1

The indirect contempt charges in this case involve an invocation of paragraphs b, c, and d, Section
3, Rule 71 of the Rules of Court which read as follows:

Section 3. Indirect contempt to be punished after charge and hearing. After a charge in writing
has been filed, and an opportunity given to the respondent to comment thereon within such period
as may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the
following acts may be punished for indirect contempt:
xxxx
(b) Disobedience of or resistance to a lawful writ, x x x;
(c) Any abuse of or any unlawful interference with the processes or proceedings of a court
not constituting direct contempt under section 1 of this Rule;
(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the
administration of justice;
Examining the petition, the Court finds that Ligon failed to sufficiently show how the acts of each of
the respondents, or more specifically, Judge Laigo, constituted any of the acts punishable under the
foregoing section tending towards a wilful disregard or disobedience of a public authority. In issuing
the Assailed Orders, Judge Laigo merely performed his judicial functions pursuant to the December
9, 2004 Decision in the Makati City Case which had already attained finality. Thus, without Ligon's
proper substantiation, considering too that Judge Laigo's official acts are accorded with the
presumption of regularity,52 the Court is constrained to dismiss the indirect contempt charges in this
case.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated October 30, 2009 of the
Court of Appeals in CA-G.R. SP No. 106175 is REVERSED and SET ASIDE. Accordingly, the
Assailed Orders subject of this case are hereby declared NULL and VOID only insofar as they relate
to the issuance of Transfer Certificate of Title No. 19756 in the name of respondent Leonardo J. Ting
free from any liens and encumbrances. The Register of Deeds of Muntinlupa City is DIRECTED to
carry over and annotate on TCT No. 31001 in the name of respondent Benito G. Techico the original
attachment lien of petitioner Leticia P. Ligon as described in this Decision. The indirect contempt
charges are, however, DISMISSED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 192669

April 21, 2014

RAUL SABERON, JOAN F. SABERON and JACQUELINE SABERON, Petitioners,

vs.
OSCAR VENTANILLA, JR., and CARMEN GLORIA D. VENTANILLA, Respondents.
RESOLUTION

MENDOZA, J.:
For resolution of the Court is a motion for reconsideration of the Court's January 19, 2011
Resolution1 which denied the petition of Raul F. Saberon, Jr., Joan F. Saberon and Jacqueline F.
Saberon (Saberons). In effect, it affirmed the March 12, 2010 Decision 2 and the June 18, 2010
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 85520, holding that the June 21, 2005
Decision of the Regional Trial Court, Branch 80, Quezon City (RTC) in Civil Case No. 96-26486, was
correct in, among others, ordering the cancellation of Transfer Certificate of Title (TCT) Nos. 55396
and 55397 in the name of the Saberons and Samuel Marquez (Marquez).
This case is an offshoot of two (2) cases involving the same property, docketed as G.R. No. 82978
and G.R. No. 107282, which had been decided by the Court with finality on November 22, 1990 and
March 16, 1994, respectively.
Antecedent Facts
In the earlier cases, Manila Remnant Co., Inc. (MRCI) was the petitioner, being the owner of several
parcels of land situated in Quezon City, constituting the subdivision known as Capitol Homes
Subdivision Nos. I and II. On July 25, 1972, MRCI entered into a contract with A.U. Valencia & Co.
Inc. (AUVC) entitled "Confirmation of Land Development and Sales Contract," whereby for a
consideration, including sales commission and management fee, the latter was to develop the
aforesaid subdivision with authority to manage the sales thereof; execute contracts to sell to lot
buyers; and issue official receipts. At that time, the president of AUVC, was Artemio U. Valencia
(Valencia).
On March 3, 1970, MRCI and AUVC executed two (2) contracts to sell covering Lots 1 and 2 of
Block 17, in favor of Oscar C. Ventanilla, Jr. and Carmen Gloria D. Ventanilla (Ventanillas), for the
combined contract price ofP66,571.00 payable monthly for ten (10) years. The Ventanillas paid the
down payment as stipulated in the two (2) contracts.
On March 13, 1970, Valencia, holding out himself as president of MRCI, and without the knowledge
of the Ventanillas, resold the same property to Carlos Crisostomo (Crisostomo), without any
consideration. Valencia transmitted the fictitious contract with Crisostomo to MRCI while he kept the
contracts to sell with the Ventanillas in his private office files. All the amounts paid by the latter were
deposited in Valencias bank account and remitted to MRCI as payments of Crisostomo. The
Ventanillas continued to pay the monthly installment.
Thereafter, MRCI terminated its business relationship with AUVC on account of irregularities
discovered in its collection and remittances. Consequently, Valencia was removed as president by
the Board of Directors of MRCI. He then stopped transmitting the Ventanillas monthly installments
which at that time, already amounted toP17,925.40 for Lot 1 and P18,141.95 for Lot 2 (appearing in
MRCIs records as credited under the name of Crisostomo).
On June 8, 1973, AUVC sued MRCI to impugn the abrogation of their agency agreement before the
Court of First Instance, Branch 19, Manila (CFI Manila), which eventually ordered all lot buyers to
deposit their monthly amortizations with the court. On July 17, 1973, AUVC informed the Ventanillas
that it was still authorized by the trial court to collect the monthly amortizations and requested them
to continue remitting their payment, with the assurance that said payments would be deposited later
in court.

For AUVCs failure to forward its collections to the trial court as ordered, MRCI caused the
publication of a notice cancelling the contracts to sell of some lot buyers including those of
Crisostomo in whose name the payments of the Ventanillas had been credited.
It was not until March 1978 when the Ventanillas discovered Valencias deception. Believing that
they had already remitted the total amount of P73,122.35 for the two lots, the Ventanillas offered to
pay the balance to MRCI. To their shock, their names as lot buyers did not appear in MRCIs
records. Instead, MRCI showed them a copy of the contract to sell signed by Valencia, in favor of
Crisostomo. MRCI refused the Ventanillas offer to pay for the remainder of the contract price.
Aggrieved, the Ventanillas commenced an action for specific performance, annulment of deeds and
damages against MRCI, AUVC, and Crisostomo with the Court of First Instance, Branch 17-B,
Quezon City (CFI Quezon City) docketed as Civil Case No. 26411, where Crisostomo was declared
in default for his failure to file an answer.
On November 17, 1980, the CFI Quezon City rendered a decision declaring the contracts to sell in
favor of the Ventanillas as valid and subsisting, and annulling the contract to sell in favor of
Crisostomo. It ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas, free
from all liens and encumbrances. Damages and attorney's fees in the total amount of P210,000.00
were also awarded to the Ventanillas for which the MRCI, AUVC, and Crisostomo were held
solidarily liable. The CFI Quezon City ruled further that if for any reason the transfer of the lots could
not be effected, MRCI, AUVC and Crisostomo would be solidarily liable to the Ventanillas for the
reimbursement of the sum of P73,122.35, representing the amount they paid for the two (2) lots, and
the legal interest thereon from March 1970, plus the decreed damages and attorney's fees. Valencia
was also held liable to MRCI for moral and exemplary damages and attorney's fees.
On separate appeals filed by AUVC and MRCI, the CA sustained the CFI Quezon Citys decision in
toto.
The 1990 Case
MRCI then filed before this Court a petition for certiorari docketed as G.R. No. 82978, to review the
decision of the CA upholding the solidary liability of MRCI, AUVC and Crisostomo for the payment of
moral and exemplary damages and attorney's fees to the Ventanillas.
On November 22, 1990, this Court affirmed the decision of the CA and declared the judgment of the
CFI Quezon City immediately executory.
Encouraged by the seeming triumph of their cause, the Ventanillas moved for the issuance of a writ
of execution in Civil Case No. 26411. The writ was issued on May 3, 1991, and served upon MRCI
on May 9, 1991. A notice of levy was annotated in the titles of MRCI on May 31, 1991.
In a manifestation and motion, however, MRCI alleged that the subject properties could not longer
be delivered to the Ventanillas because they had already been sold to Samuel Marquez (Marquez)
on February 7, 1990, while its petition was pending before this Court. Nevertheless, MRCI offered to
reimburse the amount paid by the Ventanillas, including legal interest plus damages. MRCI also
prayed that its tender of payment be accepted and that all garnishments on their accounts lifted.
The Ventanillas accepted the amount of P210,000.00 as damages and attorneys fees but rejected
the reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They
contended that the alleged sale to Marquez was void, fraudulent, and in contempt of court and that
no claim of ownership over the properties in question had ever been made by Marquez.

On July 19, 1991, the CFI Quezon City ordered that the garnishment made by the Sheriff upon the
bank account of MRCI could be lifted only upon the deposit to the Court of the amount
of P500,000.00 in cash.
MRCI then moved for reconsideration praying that it be ordered to reimburse the Ventanillas in the
amount ofP263,074.10 and that the garnishment of its bank deposit be lifted. This plea was denied
twice by the trial court prompting MRCI to file another petition for certiorari with the CA, which ruled
that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate
execution of the judgment. Furthermore, it held that the cash bond fixed by the trial court for the
lifting of the garnishment was fair and reasonable because the value of the lot in question had
considerably increased.
The 1994 Case
From the CA, the case was elevated to this Court as G.R. No. 107282 where MRCI argued that the
sale of the properties to Marquez was valid because at the time of the sale, the issue of the validity
of the sale to the Ventanillas had not yet been resolved. Further, there was no specific injunction
against it re-selling the property. As a buyer in good faith, Marquez had a right to rely on the recitals
in the certificate of title. The subject matter of the controversy having been passed to an innocent
purchaser for value, the execution of the absolute deed of sale in favor of the Ventanillas could not
be ordered by the trial court.
The Ventanillas countered that the validity of the sale to them had already been established even
while the previous petition was still awaiting resolution. The petition only questioned the solidary
liability of MRCI to the Ventanillas. Hence, the portion of the decision ordering MRCI to execute an
absolute deed of sale in their favor had already become final and executory when MRCI failed to
appeal it to the Court. Thus, an order enjoining MRCI from reselling the property in litigation was
unnecessary. Besides, the unusual lack of interest, on the part of Marquez, to protect and assert his
right over the disputed property was, to the Ventanillas, a clear indication that the alleged sale to him
was merely a ploy of MRCI to evade the execution of the absolute deed of sale in their favor.
On March 16, 1994, the Court settled the controversy in this wise:
The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties.
Even in the previous petition, the recognition of that contract was not assigned as error of either the
trial court or appellate court. The fact that the MRCI did not question the legality of the award for
damages to the Ventanillas also shows that it even then already acknowledged the validity of the
contract to sell in favor of the private respondents.
On top of all this, there are other circumstances that cast suspicion on the validity, not to say the
very existence, of the contract with Marquez.
First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years
from the rendition of the judgment of the trial court upholding the sale to the Ventanillas.
Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for
the issuance of the writ of execution filed by the private respondents. It disclosed the contract only
after the writ of execution had been served upon it.
Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to
deliver the titles to the Ventanillas provided that their counterclaims against private respondents

were paid or offset first. There was no mention of the contract to sell with Marquez on February 7,
1990.
Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to
the subject property as an alleged purchaser in good faith.
At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot
prevail over the final and executory judgment ordering MRCI to execute an absolute deed of sale in
favor of the Ventanillas. No less importantly, the records do not show that Marquez has already paid
the supposed balance amounting toP616,000.00 of the original price of over P800,000.00.
(Emphasis supplied)
As it turned out, the execution of the judgment in favor of the Ventanillas was yet far from fruition.
Samuel Cleofe, Register of Deeds for Quezon City (ROD Cleofe) revealed to them, that on March
11, 1992, MRCI registered a deed of absolute sale to Marquez who eventually sold the same
property to the Saberons, which conveyance was registered in July 1992. ROD Cleofe opined that a
judicial order for the cancellation of the titles in the name of the Saberons was essential before he
complied with the writ of execution in Civil Case No. 26411. Apparently, the notice of levy, through
inadvertence, was not carried over to the title issued to Marquez, the same being a junior
encumbrance which was entered after the contract to sell to Marquez had already been annotated.
Civil Case No. Q-96-26486
Once again, the Ventanillas were constrained to go to court to seek the annulment of the deed of
sale executed between MRCI and Marquez as well as the deed of sale between Marquez and the
Saberons, as the fruits of void conveyances. The case was docketed as Civil Case No. Q-96-26486
with the Regional Trial Court, Branch 80, Quezon City (RTC).
During the trial, all the defendants, including Edgar Krohn Jr. (Krohn) as President of MRCI, and
Bede Tabalingcos (Tabalingcos) as its legal counsel, filed their respective answers, except Marquez
who was declared in default.
On June 21, 2005, the RTC rendered its decision, the dispositive portion of which reads:
Wherefore, premises considered, judgment is hereby rendered in favour of plaintiffs, the spouses
Oscar and Carmen Ventanilla, and against defendants MRCI, Krohn, Tabalingcos, Marquez and
Saberon, as follows:
(1) Declaring the Transfer Certificated of Title Nos. 55396 and 55397 in the name of Samuel
Marquez, and Transfer Certificates of Title Nos. 63140 and 63141 in the names of Raul, Jr.,
Joan and Jacqueline Saberon as null and void;
(2) Ordering defendant MRCI to receive payment of the balance of the purchase price to be
paid by the plaintiffs and to execute a Deed of Absolute Sale in favour of the plaintiffs, and in
case of failure thereof, ordering plaintiffs to consign the amount with this Court;
(3) Ordering the Register of Deeds to cancel the titles in the name of Marquez and the
Saberons, and to issue new certificates of title in the name of the spouses Ventanillas upon
registration of the Deed of Absolute Sale in favour of the plaintiffs or proof of their
consignment;

(4) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay plaintiffs, jointly and
severally, the sums of:
a. P100,000.00, as moral damages; and
b. P50,000.00, as attorneys fees.
(5) Ordering defendant MRCI, Krohn, Tabalingcos and Marquez to pay defendants Saberon,
jointly and severally, the sum of P7,118,155.88 representing the value of the properties in
dispute and the value of the improvements introduced by defendants Saberon; and
(6) Ordering the defendants to pay the costs of the suit.
Defendants counterclaims are hereby dismissed for lack of merit.
Separate appeals were instituted by MRCI and Tabalingcos, on one hand, and the Saberons, on the
other. The former contended that no fraudulent act could be attributed to them for the sale of the
property to the title of Marquez, considering that ROD Cleofe was the one who inadvertently omitted
the carrying over of the notice of levy to Marquez who consequently secured a clean title to the lot.
MRCI Tabalingcos further claimed that the sale to Marquez was effected while the previous case
was still pending, at a time when they had every liberty to believe in the legality of their position.
Meanwhile, the Saberons relied on one central argumentthat they were purchasers in good faith,
having relied on the correctness of the certificates of title covering the lots in question; and therefore,
holders of a valid and indefeasible title.
In the assailed decision, the CA made its conclusion hinged on the following findings:
When MRCI executed a Contract to Sell in favor of Marquez in February 1990, it was in the throes of
an appeal from the Decision in Civil Case No. 26411 where its very first Contracts to Sell to the
Ventanillas were upheld over those of Crisostomo. The Marquez Contract to Sell was in fact the third
in a row, and registered a year later, on May 21, 1991, appears as the first recorded entry in MRCIs
titles. The notice of levy in Civil Case No. 26411 came ten days later, on May 31, 1991. Then, in
February 1992, MRCI executed a deed of absolute sale to Marquez and when the new titles were
issued in Marquez name, the notice of levy was not carried over. A few months later, these titles
were cancelled by virtue of a deed of sale to the Saberons and, on the same day, TCT 63140 and
63141 were issued clean to them.
According to the CA, the arguments espoused by MRCI and Tabalingcos were untenable. The said
parties were found guilty of bad faith for selling the lots to Marquez at a time when litigation as to the
validity of the first sale to the Ventanillas was still pending. In other words, MRCI was sufficiently
aware of the Court decision confirming its failure to supervise and control the affairs of its authorized
agent, AUVC, which led to the explicit pronouncement that the first sale to the Ventanillas was valid.
This should have served as a warning to MRCI that it could no longer deal with the property in
deference to the Courts ruling and affirmation of the trial courts order to execute the deed of sale in
favor of the Ventanillas. Obviously, MRCI took no heed of this caveat. The titles had been
transferred yet again to the Saberons, who claimed to be purchasers in good faith. Unfortunately,
there was an exception to the general rule. The CA cited AFP Mutual Benefit Association Inc. v.
Santiago,4 where the Court ruled that with respect to involuntary liens, an entry of a notice of levy
and attachment in the primary entry or day book of the Registry of Deeds was considered as
sufficient notice to all persons that the land was already subject to attachment. Resultantly,
attachment was duly perfected and bound the land.

The Present Petition

Aggrieved by this CA ruling, the Saberons filed the present petition. They claimed that in 1992, a
certain Tiks Bautista offered the lots to Raul Saberon, who, after being given photocopies of the titles
to the land, inquired with the Registry of Deeds for Quezon City (ROD-QC) to verify the authenticity
of the same. He found no encumbrances or annotations on the said titles, other than restrictions for
construction and negotiation. As agreed upon, he paid Marquez the amount of Two Million One
Hundred Thousand Pesos (P2,100,000.00) as purchase price for the lots. Upon payment of the real
property taxes, a certification was issued by the Office of the City Treasurer for the purpose of
transferring the title over the property.
Thereafter, Marquez executed the Deed of Absolute Sale in favor of the Saberons. The ROD-QC
then issued TCT Nos. 63140 and 63141 in their names.
Unknown to the Saberons, the former owner of the properties had entered into contracts to sell with
the Ventanillas, way back in 1970. It was only upon receipt of the summons in the case filed by the
Ventanillas with the RTC that they learned of the present controversy.
With the RTC and the CA rulings against their title over the properties, the Saberons now come to
the Court with their vehement insistence that they were purchasers in good faith and for value.
Before purchasing the lots, they exercised due diligence and found no encumbrance or annotations
on the titles. At the same time, the Ventanillas also failed to rebut the presumption of their good faith
as there was no showing that they confederated with MRCI and its officers to deprive the Ventanillas
of their right over the subject properties.
According to the Saberons, the CA likewise erred in ruling that there was no constructive notice of
the levy made upon the subject lands. They claimed that the appellate court could not solely rely on
AFP Mutual Benefit Association Inc. v. Santiago.5 Instead, they urged the Court to interpret
Sections 52 and 42 of Presidential Decree (P.D.) No. 1529 which cover the effects of registration
and the manner thereof; and to examine Section 54 which shows that, in addition to the filing of the
instrument creating, transferring or claiming interest in registered land less than ownership, a brief
memorandum of such shall be made by the Register of Deeds on the certificate of title and signed by
him. Hence, the ruling in AFP, that an entry of a notice of levy and attachment in the primary entry or
day book of the Registry of Deeds was sufficient notice to all persons that the land was already
subject to such attachment, would be rendered as a superfluity in light of the mandatory character of
the said provision.
The Saberons further pointed that the claim of the Ventanillas over the subject properties never
ripened into ownership as they failed to consign the balance on the purchase price stipulated on the
contracts to sell, thus preventing the obligatory force of the contract from taking effect.
On October 4, 2010, the Court required the Ventanillas to file their comment to the petition. 6 On
January 19, 2011, the Court resolved to deny the Saberons petition for failure to sufficiently show
any reversible error in the assailed judgment by the CA. 7 In its June 15, 2011 Resolution,8 the Court
required the Ventanillas to comment on the motion for reconsideration filed by the Saberons.
Resolution of the Court
At first glance, it would seem that the case involves convoluted issues brought about by the number
of times the Ventanillas were impelled by circumstances to seek judicial action. Nonetheless, the
antecedents would readily reveal that the essential facts are not disputed: 1) that the subject

properties have indeed been the objects of various transfers effected by MRCI leading to the current
controversy between the Saberons and the Ventanillas; and 2) that prior to the sale to the Saberons,
a notice of levy as an encumbrance was already in existence.
Sections 51 and 52 of P.D. No. 1529 explain the purpose and effects of registering both voluntary
and involuntary instruments, to wit:
Section 51. Conveyance and other dealings by registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws.
He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient
in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to
convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate
only as a contract between the parties and as evidence of authority to the Register of Deeds to make
registration.
The act of registration shall be the operative act to convey or affect the land insofar as third persons
are concerned, and in all cases under this Decree, the registration shall be made in the office of the
Register of Deeds for the province or city where the land lies.
Section 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or
entered in the office of the Register of Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time of such registering, filing or entering.
These provisions encapsulate the rule that documents, like the certificates of title do not effect a
conveyance of or encumbrances on a parcel of land. Registration is the operative act that conveys
ownership or affects the land insofar as third persons are concerned. By virtue of registration, a
constructive notice to the whole world of such voluntary or involuntary instrument or court writ or
processes, is thereby created.
The question of utmost relevance to this case, then, is this: whether or not the registration of the
notice of levy had produced constructive notice that would bind third persons despite the failure of
the ROD-QC to annotate the same in the certificates of title?
In answering these questions, the Court is beckoned to rule on two conflicting rights over the subject
properties: the right of the Ventanillas to acquire the title to the registered land from the moment of
inscription of the notice of levy on the day book (or entry book), on one hand; and the right of the
Saberons to rely on what appears on the certificate of title for purposes of voluntary dealings with the
same parcel of land, on the other.
The Saberons maintain that they had no notice of any defect, irregularity or encumbrance in the titles
of the property they purchased. In its decision, however, the RTC pointed out that their suspicion
should have been aroused by the circumstance that Marquez, who was not engaged in the buy-andsell business and had the property for only a few months, would offer the same for sale. Although
the RTC found that the Saberons may not be considered as innocent purchasers for value because
of this circumstance, it, nonetheless, ruled that they, who might well be unwilling victims of the
fraudulent scheme employed by MRCI and Marquez, were entitled to actual and compensatory
damages.
To this latter finding, the Court agrees. The Saberons could not be said to have authored the
entanglement they found themselves in. No fault can be attributed to them for relying on the face of
the title presented by Marquez. This is bolstered by the fact that the RTC decision shows no

categorical finding that the Saberons purchase of the lots from Marquez was tainted with bad faith.
That the Saberons should have harbored doubts against Marquez is too high a standard to impose
on a buyer of titled land. This is in consonance to the rule that the one who deals with property
registered under the Torrens system is charged with notice only of such burdens and claims as are
annotated on the title.9 "All persons dealing with property covered by Torrens certificate of title are
not required to explore further than what the Torrens title upon its face indicates in quest for any
hidden defect or inchoate right that may subsequently defeat his right thereto." 10 These rules remain
as essential features of the Torrens system. The present case does not entail a modification or
overturning of these principles.
Be that as it may, no fault can likewise be imputed to the Ventanillas.
In ultimately ruling for the Ventanillas, the courts a quo focused on the superiority of their notice of
levy and the constructive notice against the whole world which it had produced and which effectively
bound third persons including the Saberons.
It has already been established in the two previous cases decided by the Court that the contracts to
sell executed in favor of the Ventanillas are valid and subsisting. Clearly, it has been acknowledged,
even by MRCI, as can be seen in the latters own choice to only question their solidary liability in the
1990 case and its failure to assign the same as an error in the 1994 case. In the same vein, the
issue on Marquezs title had already been passed upon and settled in the 1994 case. That he
purchased the lots prior to the annotation of the notice of levy in MRCIs title was of no moment. In
fact, the Court explicitly declared that MRCIs transaction with Marquez "cannot prevail over the final
and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the
Ventanillas."
These favorable findings prompted the Ventanillas to register the notice of levy on the properties.
The records show that on the strength of a final and executory decision by the Court, they
successfully obtained a writ of execution from the RTC and a notice of levy was then entered, albeit
on the primary entry book only. The contract to sell to Marquez was registered on May 21, 1991,
while the notice of levy was issued ten (10) days later, or on May 31, 1991. In February 1992, MRCI
executed the Deed of Sale with Marquez, under whose name the clean titles, sans the notice of levy,
were issued. A year later, or on March 11, 1992, MRCI registered the deed of sale to Marquez who
later sold the same property to the Saberons.
This complex situation could have been avoided if it were not for the failure of ROD Cleofe to carry
over the notice of levy to Marquezs title, serving as a senior encumbrance that might have
dissuaded the Saberons from purchasing the properties.
The Court agrees with the position of the RTC in rejecting ROD Cleofes theory.
Distinctions between a contract to sell and a contract of sale are well-established in urisprudence. In
a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in
a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the
vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor
loses ownership over the property and cannot recover it until and unless the contract is resolved or
rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price.
In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title from becoming
effective.11
1wphi 1

It is undeniable, therefore, that no title was transferred to Marquez upon the annotation of the
contract to sell on MRCIs title. As correctly found by the trial court, the contract to sell cannot be
substituted by the Deed of Absolute Sale as a "mere conclusion" of the previous contract since the
owners of the properties under the two instruments are different. 12
Considering that the deed of sale in favor of Marquez was of later registration, the notice of levy
should have been carried over to the title as a senior encumbrance.
Corollary to this is the rule that a levy of a judgment debtor creates a lien, which nothing can
subsequently destroy except the very dissolution of the attachment of the levy itself. 13 Prior
registration of the lien creates a preference, since the act of registration is the operative act to
convey and affect the land.14 Jurisprudence dictates that the said lien continues until the debt is paid,
or the sale is had under an execution issued on the judgment or until the judgment is satisfied, or the
attachment is discharged or vacated in the same manner provided by law. Under no law, not even
P.D. No. 1529, is it stated that an attachment shall be discharged upon sale of the property other
than under execution.15
Additionally, Section 59 of P.D. No. 1529 provides that, "[i]f, at the time of the transfer, subsisting
encumbrances or annotations appear in the registration book, they shall be carried over and stated
in the new certificate or certificates, except so far as they may be simultaneously released or
discharged." This provision undoubtedly speaks of the ministerial duty on the part of the Register of
Deeds to carry over existing encumbrances to the certificates of title.
From the foregoing, ROD Cleofes theory that a deed of sale, as a mere conclusion of a contract to
sell, turns into a senior encumbrance which may surpass a notice of levy, has no leg to stand on. It
was, in fact, properly rejected by the courts a quo. Verily, the controversy at hand arose not from the
Ventanillas fault, but from ROD Cleofes misplaced understanding of his duty under the law.
Surely, the Ventanillas had every right to presume that the Register of Deeds would carry over the
notice of levy to subsequent titles covering the subject properties. The notice was registered
precisely to bind the properties and to serve as caution to third persons who might potentially deal
with the property under the custody of the law. In DBP v. Acting Register of Deeds of Nueva
Ecija,16 the Court ruled that entry alone produced the effect of registration, whether the transaction
entered was a voluntary or involuntary one, so long as the registrant had complied with all that was
required of him for purposes of entry and annotation, and nothing more remained to be done but a
duty incumbent solely on the Register of Deeds.
While the Court is not unmindful that a buyer is charged with notice only of such burdens and claims
as are annotated on the title, the RTC and the CA are both correct in applying the rule as to the
effects of involuntary registration. In cases of voluntary registration of documents, an innocent
purchaser for value of registered land becomes the registered owner, and, in contemplation of law
the holder of a certificate of title, the moment he presents and files a duly notarized and valid deed of
sale and the same is entered in the day book and at the same time he surrenders or presents the
owner's duplicate certificate of title covering the land sold and pays the registration fees, because
what remains to be done lies not within his power to perform. The Register of Deeds is duty bound to
perform it.17 In cases of involuntary registration, an entry thereof in the day book is a sufficient notice
to all persons even if the owner's duplicate certificate of title is not presented to the register of deeds.
Therefore, in the registration of an attachment, levy upon execution, notice of lis pendens, and the
like, the entry thereof in the day book is a sufficient notice to all persons of such adverse claim. 18
This rule was reiterated in the more recent case of Armed Forces and Police Mutual Benefit
Association, Inc., v. Santiago,19 as relied upon by the CA. In AFP, the Notice of Levy was presented

for registration in the Registry of Deeds of Pasig City. The Notice was entered in the Primary Entry
Book, but was not annotated on the TCT because the original copy of the said title on file in the
Registry of Deeds was not available at that time. Six (6) days after the presentation of the Notice of
Levy, the Deed of Absolute Sale involving the same parcel of land was presented for registration and
likewise entered. The deed of sale was examined by the same employee who examined the notice
of levy, but she failed to notice that the title subject of the sale was the same title which was the
subject of the notice of levy earlier presented. Unaware of the previous presentation of the notice of
levy, the Register of Deeds issued a certificate of title in the name of the vendee on the basis of the
deed of sale. The Register of Deeds in AFP immediately requested the vendee to surrender the
documents in light of the mistake discovered so that he could take appropriate rectification or
correction. Settling the issue on whether the notice of levy could be annotated in the certificate of
title, the Court ruled in the affirmative on the ground that the preference created by the levy on
attachment was not diminished by the subsequent registration of the prior sale. Superiority and
preference in rights were given to the registration of the levy on attachment; although the notice of
attachment had not been noted on the certificate of title, its notation in the book of entry of the
Register of Deeds produced all the effects which the law gave to its registration or inscription, to wit:
Under the rule of notice, it is presumed that the purchaser has examined every instrument of
record affecting the title. Such presumption is irrebuttable. He is charged with notice of every fact
shown by the record and is presumed to know every fact shown by the record and to know every
fact which an examination of the record would have disclosed. This presumption cannot be
overcome by proof of innocence or good faith. Otherwise, the very purpose and object of the law
requiring a record would be destroyed. Such presumption cannot be defeated by proof of want of
knowledge of what the record contains any more than one may be permitted to show that he was
ignorant of the provisions of the law. The rule that all persons must take notice of the facts which the
public record contains is a rule of law. The rule must be absolute; any variation would lead to
endless confusion and useless litigation. For these reasons, a declaration from the court that
respondent was in bad faith is not necessary in order that the notice of levy on attachment may be
annotated on TCT No. PT-94912.
The fact that the notice of levy on attachment was not annotated on the original title on file in the
Registry of Deeds, which resulted in its non-annotation on the title TCT No. PT-94912, should not
prejudice petitioner. As long as the requisites required by law in order to effect attachment are
complied with and the appropriate fees duly paid, attachment is duly perfected. The attachment
already binds the land. This is because what remains to be done lies not within the petitioners
power to perform but is a duty incumbent solely on the Register of Deeds. (Emphasis supplied)
In the case at bench, the notice of levy covering the subject property was annotated in the entry
book of the ROD QC prior to the issuance of a TCT in the name of the Saberons. Clearly, the
Ventanillas levy was placed on record prior to the sale. This shows the superiority and preference in
rights of the Ventanillas over the property as against the Saberons. In AFP, the Court upheld the
registration of the levy on attachment in the primary entry book as a senior encumbrance despite the
mistake of the ROD, the Court must, a fortiori, sustain the notice of levy registered by the Ventanillas
notwithstanding the nonfeasance of ROD Cleofe. Again, the prevailing rule is that there is effective
registration once the registrant has fulfilled all that is needed of him for purposes of entry and
annotation, so that what is left to be accomplished lies solely on the Register of Deeds. 20
Suffice it to say, no bad faith can be ascribed to the parties alike. Nevertheless, the equal footing of
the parties necessarily tilts in favor of the superiority of the Ventanillas notice of levy, as discussed.
The Court also sees no reason to dwell in the contention that the rights or interests of the Ventanillas
in the subject properties never ripened into ownership. It bears stressing that the previous decisions

discussed herein already sealed the validity of the contract to sell issued to the Ventanillas decades
ago. As found by the RTC, it was MRCIs obstinate refusal to accept their tender of payment, not to
mention the devious transfer of the property, which caused the decade-long delay of the execution of
the deed of sale in their favor. This is a finding that the Court, which is not a trier of facts, will have to
respect.
In the same vein, the attribution of laches against the Ventanillas is flawed. Their failure to learn
about the structures being built on the subject lands and the payment of real property taxes by the
Saberons is not sufficient justification to withhold the declaration of their ownership over it. Against a
different factual milieu, laches may be said to have set it but not so in this case. While the
Ventanillas may have been unaware that improvements were being erected over the lots, this
obliviousness can, by no means, be treated as a lack of vigilance on their part. It bears stressing that
the Ventanillas are now of advanced age and retired as university professors. Considering the length
of litigation which they had to endure in order to assert their right over the property which they have
painstakingly paid for decades ago, to hold now that they have been remiss in the protection of their
rights would be the height of impropriety, if not injustice. To exact from them an obligation to visit the
land in litigation every so often, lest they be held to have slept on their rights, is iniquitous and
unreasonable. All told, the Ventanillas remain as innocent victims of deception.
The Court deems it significant to note that the amount of P7,118,115.88 awarded to the Saberons by
the RTC is to be satisfied by MRCI, Krohn, Tabalingcos, and Marquez, who have not been
impleaded as parties to the present petition, thus, rendering the said award final and executory. The
said amount, however, is separate and distinct from those provided under Article 44821 in relation to
Article 54622 of the Civil Code. In the petition, the Saberons invoked the said provisions, claiming that
they are entitled to reimbursement of all the expenses incurred in the introduction of improvements
on the subject lands amounting to P23,058,822.79.
The Court finds the Saberons to be builders in good faith.
No less than the court a quo observed that "no actual evidence that the Saberons connived with the
MRCI and Marquez to have the titles registered in their names to the prejudice of the (Ventanillas)"
and that what was obvious was that "the Saberons dealt with clean certificates of titles." Also quite
telling on this point is the finding that MRCI, Krohn, Tabalingcos, and Marquez are liable to the
Saberons. The RTC reasoned out in the following wise:
This Court is not convinced, however that defendants Saberon took part in the fraudulent scheme
employed by the other defendants against the plaintiffs. Although they may not be considered as
innocent purchasers for value shown in the discussion above, this Court is not ready to conclude
that the Saberons joined the other defendants in their efforts to frustrate plaintiffs rights over the
disputed properties. On the contrary, they may be considered victims of the same fraudulent
employed by defendants MRCI and Marquez, and thus can rightfully claim damages from the same.23
Consequently, Article 448 in relation to Article 546 of the Civil Code will apply. The provisions
respectively read:
1wp hi1

Article 448. The owner of the land on which anything has been built, sow or planted in good faith,
shall have the right to appropriate, as his own the works, sowing, or planting, after payment of the
indemnity provided for in Article 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land and if its value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the

building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case disagreement, the court shall fix the terms thereof.
Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor in
good faith may retain the thing until he has been reimbursed therefore.
Useful expenses shall be refunded only to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of refunding the
amount of the expenses or of paying the increase in value which the thing may have acquired by
reason thereof.
Thus, the two options available to the Ventanillas: 1) they may exercise the right to appropriate after
payment of indemnity representing the value of the improvements introduced and the necessary and
useful expenses defrayed on the subject lots; or 2) they may forego payment of the said indemnity
and instead, oblige the Saberons to pay the price of the land.
Should the Ventanillas elect to appropriate the improvements, the trial court is ordered to determine
the value of the improvements and the necessary and useful expenses after hearing and reception
of evidence. Should the Ventanillas, however, pursue the option to oblige the Saberons to pay the
"price of the land," the trial court is ordered to determine said price to be paid to the V entanillas.
WHEREFORE, the Motion for Reconsideration is PARTIALLY GRANTED. The appealed March 12,
2010 Decision and the June 18, 2010 Resolution of the Court of Appeals in CA-G.R. CV No. 85520
are AFFIRMED with modification in that the Ventanillas are given a period of sixty ( 60) days from
finality of this Resolution to decide whether to pay the Saberons the value of the improvements and
the necessary and useful expenses defrayed on the 2 lots or to oblige the Saberons to pay them the
"price" of said lots. Depending on the option exercised by the Ventanillas, the case is hereby
remanded to the court of origin for further proceedings as to the determination of reimbursement due
to the petitioners or of the "price" of the subject lots due to the Ventanillas.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 124642

February 23, 2004

ALFREDO CHING and ENCARNACION CHING, petitioners

vs.
THE HON. COURT OF APPEALS and ALLIED BANKING CORPORATION, respondents.
DECISION
CALLEJO, SR., J.:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the Decision 1 of the
Court of Appeals (CA) dated November 27, 1995 in CA-G.R. SP No. 33585, as well as the
Resolution2 on April 2, 1996 denying the petitioners motion for reconsideration. The impugned
decision granted the private respondents petition for certiorari and set aside the Orders of the trial
court dated December 15, 19933 and February 17, 19944 nullifying the attachment of 100,000 shares
of stocks of the Citycorp Investment Philippines under the name of petitioner Alfredo Ching.
The following facts are undisputed:
On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan
of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue of this loan, the PBMCI,
through its Executive Vice-President Alfredo Ching, executed a promissory note for the said amount
promising to pay on December 22, 1978 at an interest rate of 14% per annum. 5 As added security for
the said loan, on September 28, 1978, Alfredo Ching, together with Emilio Taedo and Chung Kiat
Hua, executed a continuing guaranty with the ABC binding themselves to jointly and severally
guarantee the payment of all the PBMCI obligations owing the ABC to the extent
of P38,000,000.00.6 The loan was subsequently renewed on various dates, the last renewal having
been made on December 4, 1980.7
Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the amount
of P13,000,000.00 payable in eighteen months at 16% interest per annum. As in the previous loan,
the PBMCI, through Alfredo Ching, executed a promissory note to evidence the loan maturing on
June 29, 1981.8 This was renewed once for a period of one month.9
The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the ABC filed a
complaint for sum of money with prayer for a writ of preliminary attachment against the PBMCI to
collect the P12,612,972.88 exclusive of interests, penalties and other bank charges. Impleaded as
co-defendants in the complaint were Alfredo Ching, Emilio Taedo and Chung Kiat Hua in their
capacity as sureties of the PBMCI.
The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila, Branch
XVIII.10 In its application for a writ of preliminary attachment, the ABC averred that the "defendants
are guilty of fraud in incurring the obligations upon which the present action is brought 11 in that they
falsely represented themselves to be in a financial position to pay their obligation upon maturity
thereof."12 Its supporting affidavit stated, inter alia, that the "[d]efendants have removed or disposed
of their properties, or [are] ABOUT to do so, with intent to defraud their creditors." 13
On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying the ABCs
application for a writ of preliminary attachment. The trial court decreed that the grounds alleged in
the application and that of its supporting affidavit "are all conclusions of fact and of law" which do not
warrant the issuance of the writ prayed for.14 On motion for reconsideration, however, the trial court,
in an Order dated September 14, 1981, reconsidered its previous order and granted the ABCs
application for a writ of preliminary attachment on a bond of P12,700,000. The order, in relevant part,
stated:
With respect to the second ground relied upon for the grant of the writ of preliminary attachment exparte, which is the alleged disposal of properties by the defendants with intent to defraud creditors
as provided in Sec. 1(e) of Rule 57 of the Rules of Court, the affidavits can only barely justify the
issuance of said writ as against the defendant Alfredo Ching who has allegedly bound himself jointly
and severally to pay plaintiff the defendant corporations obligation to the plaintiff as a surety thereof.

WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching
requiring the sheriff of this Court to attach all the properties of said Alfredo Ching not
exceeding P12,612,972.82 in value, which are within the jurisdiction of this Court and not exempt
from execution upon, the filing by plaintiff of a bond duly approved by this Court in the sum of Twelve
Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the defendant
Alfredo Ching to secure the payment by plaintiff to him of all the costs which may be adjudged in his
favor and all damages he may sustain by reason of the attachment if the court shall finally adjudge
that the plaintiff was not entitled thereto.
SO ORDERED.15
Upon the ABCs posting of the requisite bond, the trial court issued a writ of preliminary attachment.
Subsequently, summonses were served on the defendants,16 save Chung Kiat Hua who could not be
found.
Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for suspension of
payments with the Securities and Exchange Commission (SEC), docketed as SEC Case No. 2250,
at the same time seeking the PBMCIs rehabilitation.17
On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including its assets and
liabilities, under rehabilitation receivership, and ordered that "all actions for claims listed in Schedule
"A" of the petition pending before any court or tribunal are hereby suspended in whatever stage the
same may be until further orders from the Commission." 18 The ABC was among the PBMCIs
creditors named in the said schedule.
Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion to Dismiss
and/or motion to suspend the proceedings in Civil Case No. 142729 invoking the PBMCIs pending
application for suspension of payments (which Ching co-signed) and over which the SEC had
already assumed jurisdiction.19 On February 4, 1983, the ABC filed its Opposition thereto.20
In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the
100,000 common shares of Citycorp stocks in the name of Alfredo Ching. 21
Thereafter, in an Order dated September 16, 1983, the trial court partially granted the
aforementioned motion by suspending the proceedings only with respect to the PBMCI. It denied
Chings motion to dismiss the complaint/or suspend the proceedings and pointed out that P.D. No.
1758 only concerns the activities of corporations, partnerships and associations and was never
intended to regulate and/or control activities of individuals. Thus, it directed the individual defendants
to file their answers.22
Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend Proceedings on
the same ground of the pendency of SEC Case No. 2250. This motion met the opposition from the
ABC.23
On January 20, 1984, Taedo filed his Answer with counterclaim and cross-claim.24 Ching eventually
filed his Answer on July 12, 1984.25
On October 25, 1984, long after submitting their answers, Ching filed an Omnibus Motion, 26 again
praying for the dismissal of the complaint or suspension of the proceedings on the ground of the July
9, 1982 Injunctive Order issued in SEC Case No. 2250. He averred that as a surety of the PBMCI,
he must also necessarily benefit from the defenses of his principal. The ABC opposed Chings
omnibus motion.

Emilio Y. Taedo, thereafter, filed his own Omnibus Motion27 praying for the dismissal of the
complaint, arguing that the ABC had "abandoned and waived" its right to proceed against the
continuing guaranty by its act of resorting to preliminary attachment.
On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary attachment
bond fromP12,700,000 to P6,350,000.28 Alfredo Ching opposed the motion,29 but on April 2, 1987,
the court issued an Order setting the incident for further hearing on May 28, 1987 at 8:30 a.m. for the
parties to adduce evidence on the actual value of the properties of Alfredo Ching levied on by the
sheriff.30
On March 2, 1988, the trial court issued an Order granting the motion of the ABC and rendered the
attachment bond of P6,350,000.31
On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a
Motion to Set Aside the levy on attachment. She alleged inter alia that the 100,000 shares of stocks
levied on by the sheriff were acquired by her and her husband during their marriage out of conjugal
funds after the Citycorp Investment Philippines was established in 1974. Furthermore, the
indebtedness covered by the continuing guaranty/comprehensive suretyship contract executed by
petitioner Alfredo Ching for the account of PBMCI did not redound to the benefit of the conjugal
partnership. She, likewise, alleged that being the wife of Alfredo Ching, she was a third-party
claimant entitled to file a motion for the release of the properties. 32 She attached therewith a copy of
her marriage contract with Alfredo Ching.33
The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge
records, contending that:
2.1 The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus,
she has no personality to file any motion before this Honorable Court;
2.2 Said supposed movant did not file any Motion for Intervention pursuant to Section 2, Rule
12 of the Rules of Court;
2.3 Said Motion cannot even be construed to be in the nature of a Third-Party Claim
conformably with Sec. 14, Rule 57 of the Rules of Court.
3. Furthermore, assuming in gracia argumenti that the supposed movant has the required
personality, her Motion cannot be acted upon by this Honorable Court as the above-entitled case is
still in the archives and the proceedings thereon still remains suspended. And there is no previous
Motion to revive the same.34
The ABC also alleged that the motion was barred by prescription or by laches because the shares of
stocks were in custodia legis.
During the hearing of the motion, Encarnacion T. Ching adduced in evidence her marriage contract
to Alfredo Ching to prove that they were married on January 8, 1960; 35 the articles of incorporation of
Citycorp Investment Philippines dated May 14, 1979; 36 and, the General Information Sheet of the
corporation showing that petitioner Alfredo Ching was a member of the Board of Directors of the said
corporation and was one of its top twenty stockholders.
On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to expunge
records.

Acting on the aforementioned motion, the trial court issued on December 15, 1993 an Order 37 lifting
the writ of preliminary attachment on the shares of stocks and ordering the sheriff to return the said
stocks to the petitioners. The dispositive portion reads:
WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is
hereby granted. Let the writ of preliminary attachment subject matter of said motion, be quashed and
lifted with respect to the attached 100,000 common shares of stock of Citycorp Investment
Philippines in the name of the defendant Alfredo Ching, the said shares of stock to be returned to
him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon on
July 26, 1983, or by whoever may be presently in possession thereof.
SO ORDERED.38
The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order but denied
the same on February 17, 1994. The petitioner bank forthwith filed a petition for certiorari with the
CA, docketed as CA-G.R. SP No. 33585, for the nullification of the said order of the court,
contending that:
1. The respondent Judge exceeded his authority thereby acted without jurisdiction in taking
cognizance of, and granting a "Motion" filed by a complete stranger to the case.
2. The respondent Judge committed a grave abuse of discretion in lifting the writ of
preliminary attachment without any basis in fact and in law, and contrary to established
jurisprudence on the matter.39
On November 27, 1995, the CA rendered judgment granting the petition and setting aside the
assailed orders of the trial court, thus:
WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the questioned
orders (dated December 15, 1993 and February 17, 1994) for being null and void.
SO ORDERED.40
The CA sustained the contention of the private respondent and set aside the assailed orders.
According to the CA, the RTC deprived the private respondent of its right to file a bond under
Section 14, Rule 57 of the Rules of Court. The petitioner Encarnacion T. Ching was not a party in the
trial court; hence, she had no right of action to have the levy annulled with a motion for that purpose.
Her remedy in such case was to file a separate action against the private respondent to nullify the
levy on the 100,000 Citycorp shares of stocks. The court stated that even assuming that
Encarnacion T. Ching had the right to file the said motion, the same was barred by laches.
Citing Wong v. Intermediate Appellate Court,41 the CA ruled that the presumption in Article 160 of the
New Civil Code shall not apply where, as in this case, the petitioner-spouses failed to prove the
source of the money used to acquire the shares of stock. It held that the levied shares of stocks
belonged to Alfredo Ching, as evidenced by the fact that the said shares were registered in the
corporate books of Citycorp solely under his name. Thus, according to the appellate court, the RTC
committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the
assailed orders. The petitioners motion for reconsideration was denied by the CA in a Resolution
dated April 2, 1996.

The petitioner-spouses filed the instant petition for review on certiorari, asserting that the RTC did
not commit any grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the
assailed orders in their favor; hence, the CA erred in reversing the same. They aver that the source
of funds in the acquisition of the levied shares of stocks is not the controlling factor when invoking
the presumption of the conjugal nature of stocks under Art. 160, 42 and that such presumption
subsists even if the property is registered only in the name of one of the spouses, in this case,
petitioner Alfredo Ching.43 According to the petitioners, the suretyship obligation was not contracted
in the pursuit of the petitioner-husbands profession or business.44 And, contrary to the ruling of the
CA, where conjugal assets are attached in a collection suit on an obligation contracted by the
husband, the wife should exhaust her motion to quash in the main case and not file a separate
suit.45 Furthermore, the petitioners contend that under Art. 125 of the Family Code, the petitionerhusbands gratuitous suretyship is null and void ab initio,46 and that the share of one of the spouses
in the conjugal partnership remains inchoate until the dissolution and liquidation of the partnership. 47
In its comment on the petition, the private respondent asserts that the CA correctly granted its
petition for certiorari nullifying the assailed order. It contends that the CA correctly relied on the ruling
of this Court in Wong v. Intermediate Appellate Court. Citing Cobb-Perez v. Lantin and G-Tractors,
Inc. v. Court of Appeals, the private respondent alleges that the continuing guaranty and suretyship
executed by petitioner Alfredo Ching in pursuit of his profession or business. Furthermore, according
to the private respondent, the right of the petitioner-wife to a share in the conjugal partnership
property is merely inchoate before the dissolution of the partnership; as such, she had no right to file
the said motion to quash the levy on attachment of the shares of stocks.
The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file the motion
to quash the levy on attachment on the 100,000 shares of stocks in the Citycorp Investment
Philippines; (b) whether or not the RTC committed a grave abuse of its discretion amounting to
excess or lack of jurisdiction in issuing the assailed orders.
On the first issue, we agree with the petitioners that the petitioner-wife had the right to file the said
motion, although she was not a party in Civil Case No. 142729. 48
In Ong v. Tating,49 we held that the sheriff may attach only those properties of the defendant against
whom a writ of attachment has been issued by the court. When the sheriff erroneously levies on
attachment and seizes the property of a third person in which the said defendant holds no right or
interest, the superior authority of the court which has authorized the execution may be invoked by
the aggrieved third person in the same case. Upon application of the third person, the court shall
order a summary hearing for the purpose of determining whether the sheriff has acted rightly or
wrongly in the performance of his duties in the execution of the writ of attachment, more specifically
if he has indeed levied on attachment and taken hold of property not belonging to the plaintiff. If so,
the court may then order the sheriff to release the property from the erroneous levy and to return the
same to the third person. In resolving the motion of the third party, the court does not and cannot
pass upon the question of the title to the property with any character of finality. It can treat the matter
only insofar as may be necessary to decide if the sheriff has acted correctly or not. If the claimants
proof does not persuade the court of the validity of the title, or right of possession thereto, the claim
will be denied by the court. The aggrieved third party may also avail himself of the remedy of
"terceria" by executing an affidavit of his title or right of possession over the property levied on
attachment and serving the same to the office making the levy and the adverse party. Such party
may also file an action to nullify the levy with damages resulting from the unlawful levy and seizure,
which should be a totally separate and distinct action from the former case. The above-mentioned
remedies are cumulative and any one of them may be resorted to by one third-party claimant without
availing of the other remedies.50

In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the 100,000
shares of stocks in the name of petitioner-husband claiming that the said shares of stocks were
conjugal in nature; hence, not liable for the account of her husband under his continuing guaranty
and suretyship agreement with the PBMCI. The petitioner-wife had the right to file the motion for said
relief.
On the second issue, we find and so hold that the CA erred in setting aside and reversing the orders
of the RTC. The private respondent, the petitioner in the CA, was burdened to prove that the RTC
committed a grave abuse of its discretion amounting to excess or lack of jurisdiction. The tribunal
acts without jurisdiction if it does not have the legal purpose to determine the case; there is excess
of jurisdiction where the tribunal, being clothed with the power to determine the case, oversteps its
authority as determined by law. There is grave abuse of discretion where the tribunal acts in a
capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent
to lack of jurisdiction.51
It was incumbent upon the private respondent to adduce a sufficiently strong demonstration that the
RTC acted whimsically in total disregard of evidence material to, and even decide of, the controversy
before certiorari will lie. A special civil action for certiorari is a remedy designed for the correction of
errors of jurisdiction and not errors of judgment. When a court exercises its jurisdiction, an error
committed while so engaged does not deprive it of its jurisdiction being exercised when the error is
committed.52
After a comprehensive review of the records of the RTC and of the CA, we find and so hold that the
RTC did not commit any grave abuse of its discretion amounting to excess or lack of jurisdiction in
issuing the assailed orders.
Article 160 of the New Civil Code provides that all the properties acquired during the marriage are
presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the
husband, or to the wife. InTan v. Court of Appeals,53 we held that it is not even necessary to prove
that the properties were acquired with funds of the partnership. As long as the properties were
acquired by the parties during the marriage, they are presumed to be conjugal in nature. In fact,
even when the manner in which the properties were acquired does not appear, the presumption will
still apply, and the properties will still be considered conjugal. The presumption of the conjugal
nature of the properties acquired during the marriage subsists in the absence of clear, satisfactory
and convincing evidence to overcome the same.54
In this case, the evidence adduced by the petitioners in the RTC is that the 100,000 shares of stocks
in the Citycorp Investment Philippines were issued to and registered in its corporate books in the
name of the petitioner-husband when the said corporation was incorporated on May 14, 1979. This
was done during the subsistence of the marriage of the petitioner-spouses. The shares of stocks
are, thus, presumed to be the conjugal partnership property of the petitioners. The private
respondent failed to adduce evidence that the petitioner-husband acquired the stocks with his
exclusive money.55 The barefaced fact that the shares of stocks were registered in the corporate
books of Citycorp Investment Philippines solely in the name of the petitioner-husband does not
constitute proof that the petitioner-husband, not the conjugal partnership, owned the same.56 The
private respondents reliance on the rulings of this Court in Maramba v. Lozano 57 and Associated
Insurance & Surety Co., Inc. v. Banzon58 is misplaced. In the Maramba case, we held that where
there is no showing as to when the property was acquired, the fact that the title is in the wifes name
alone is determinative of the ownership of the property. The principle was reiterated in the
Associated Insurance case where the uncontroverted evidence showed that the shares of stocks
were acquired during the marriage of the petitioners.

Instead of fortifying the contention of the respondents, the ruling of this Court in Wong v.
Intermediate Appellate Court59 buttresses the case for the petitioners. In that case, we ruled that he
who claims that property acquired by the spouses during their marriage is not conjugal partnership
property but belongs to one of them as his personal property is burdened to prove the source of the
money utilized to purchase the same. In this case, the private respondent claimed that the petitionerhusband acquired the shares of stocks from the Citycorp Investment Philippines in his own name as
the owner thereof. It was, thus, the burden of the private respondent to prove that the source of the
money utilized in the acquisition of the shares of stocks was that of the petitioner-husband alone. As
held by the trial court, the private respondent failed to adduce evidence to prove this assertion.
The CA, likewise, erred in holding that by executing a continuing guaranty and suretyship agreement
with the private respondent for the payment of the PBMCI loans, the petitioner-husband was in the
exercise of his profession, pursuing a legitimate business. The appellate court erred in concluding
that the conjugal partnership is liable for the said account of PBMCI under Article 161(1) of the New
Civil Code.
Article 161(1) of the New Civil Code (now Article 121[2 and 3] 60 of the Family Code of the
Philippines) provides:
Art. 161. The conjugal partnership shall be liable for:
(1) All debts and obligations contracted by the husband for the benefit of the conjugal partnership,
and those contracted by the wife, also for the same purpose, in the cases where she may legally
bind the partnership.
The petitioner-husband signed the continuing guaranty and suretyship agreement as security for the
payment of the loan obtained by the PBMCI from the private respondent in the amount
of P38,000,000. In Ayala Investment and Development Corp. v. Court of Appeals,61 this Court ruled
"that the signing as surety is certainly not an exercise of an industry or profession. It is not
embarking in a business. No matter how often an executive acted on or was persuaded to act as
surety for his own employer, this should not be taken to mean that he thereby embarked in the
business of suretyship or guaranty."
For the conjugal partnership to be liable for a liability that should appertain to the husband alone,
there must be a showing that some advantages accrued to the spouses. Certainly, to make a
conjugal partnership responsible for a liability that should appertain alone to one of the spouses is to
frustrate the objective of the New Civil Code to show the utmost concern for the solidarity and well
being of the family as a unit. The husband, therefore, is denied the power to assume unnecessary
and unwarranted risks to the financial stability of the conjugal partnership. 62
In this case, the private respondent failed to prove that the conjugal partnership of the petitioners
was benefited by the petitioner-husbands act of executing a continuing guaranty and suretyship
agreement with the private respondent for and in behalf of PBMCI. The contract of loan was
between the private respondent and the PBMCI, solely for the benefit of the latter. No presumption
can be inferred from the fact that when the petitioner-husband entered into an accommodation
agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private
respondent was burdened to establish that such benefit redounded to the conjugal partnership. 63
It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI
and was one of its top twenty stockholders, and that the shares of stocks of the petitioner-husband
and his family would appreciate if the PBMCI could be rehabilitated through the loans obtained; that
the petitioner-husbands career would be enhanced should PBMCI survive because of the infusion of

fresh capital. However, these are not the benefits contemplated by Article 161 of the New Civil Code.
The benefits must be those directly resulting from the loan. They cannot merely be a by-product or a
spin-off of the loan itself.64
This is different from the situation where the husband borrows money or receives services to be
used for his own business or profession. In the Ayala case, we ruled that it is such a contract that is
one within the term "obligation for the benefit of the conjugal partnership." Thus:
(A) If the husband himself is the principal obligor in the contract, i.e., he directly received the money
and services to be used in or for his own business or his own profession, that contract falls within the
term " obligations for the benefit of the conjugal partnership." Here, no actual benefit may be
proved. It is enough that the benefit to the family is apparent at the time of the signing of the
contract. From the very nature of the contract of loan or services, the family stands to benefit from
the loan facility or services to be rendered to the business or profession of the husband. It is
immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where
the husband contracts obligations on behalf of the family business, the law presumes, and rightly so,
that such obligation will redound to the benefit of the conjugal partnership. 65
The Court held in the same case that the rulings of the Court in Cobb-Perez and G-Tractors, Inc. are
not controlling because the husband, in those cases, contracted the obligation for his own business.
In this case, the petitioner-husband acted merely as a surety for the loan contracted by the PBMCI
from the private respondent.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the
Court of Appeals are SET ASIDE AND REVERSED. The assailed orders of the RTC are
AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 168289

March 22, 2010

THE MUNICIPALITY OF HAGONOY, BULACAN, represented by the HON. FELIX V. OPLE,

Municipal Mayor, and FELIX V. OPLE, in his personal capacity, Petitioners,
vs.
HON. SIMEON P. DUMDUM, JR., in his capacity as the Presiding Judge of the REGIONAL
TRIAL COURT, BRANCH 7, CEBU CITY; HON. CLERK OF COURT & EX-OFFICIO SHERIFF of
the REGIONAL TRIAL COURT of CEBU CITY; HON. CLERK OF COURT & EX-OFFICIO
SHERIFF of the REGIONAL TRIAL COURT of BULACAN and his DEPUTIES; and EMILY ROSE
GO KO LIM CHAO, doing business under the name and style KD SURPLUS, Respondents.
DECISION
PERALTA, J.:

This is a Joint Petition1 under Rule 45 of the Rules of Court brought by the Municipality of Hagonoy,
Bulacan and its former chief executive, Mayor Felix V. Ople in his official and personal capacity, from
the January 31, 2005 Decision2 and the May 23, 2005 Resolution3 of the Court of Appeals in CAG.R. SP No. 81888. The assailed decision affirmed the October 20, 2003 Order4 issued by the
Regional Trial Court of Cebu City, Branch 7 in Civil Case No. CEB-28587 denying petitioners motion
to dismiss and motion to discharge/dissolve the writ of preliminary attachment previously issued in
the case. The assailed resolution denied reconsideration.
The case stems from a Complaint5 filed by herein private respondent Emily Rose Go Ko Lim Chao
against herein petitioners, the Municipality of Hagonoy, Bulacan and its chief executive, Felix V.
Ople (Ople) for collection of a sum of money and damages. It was alleged that sometime in the
middle of the year 2000, respondent, doing business as KD Surplus and as such engaged in buying
and selling surplus trucks, heavy equipment, machinery, spare parts and related supplies, was
contacted by petitioner Ople. Respondent had entered into an agreement with petitioner municipality
through Ople for the delivery of motor vehicles, which supposedly were needed to carry out certain
developmental undertakings in the municipality. Respondent claimed that because of Oples earnest
representation that funds had already been allocated for the project, she agreed to deliver from her
principal place of business in Cebu City twenty-one motor vehicles whose value
totaled P5,820,000.00. To prove this, she attached to the complaint copies of the bills of lading
showing that the items were consigned, delivered to and received by petitioner municipality on
different dates.6 However, despite having made several deliveries, Ople allegedly did not heed
respondents claim for payment. As of the filing of the complaint, the total obligation of petitioner had
already totaled P10,026,060.13 exclusive of penalties and damages. Thus, respondent prayed for
full payment of the said amount, with interest at not less than 2% per month, plus P500,000.00 as
damages for business losses, P500,000.00 as exemplary damages, attorneys fees of P100,000.00
and the costs of the suit.
On February 13, 2003, the trial court issued an Order 7 granting respondents prayer for a writ of
preliminary attachment conditioned upon the posting of a bond equivalent to the amount of the claim.
On March 20, 2003, the trial court issued the Writ of Preliminary Attachment8 directing the sheriff "to
attach the estate, real and personal properties" of petitioners.
Instead of addressing private respondents allegations, petitioners filed a Motion to Dismiss 9 on the
ground that the claim on which the action had been brought was unenforceable under the statute of
frauds, pointing out that there was no written contract or document that would evince the supposed
agreement they entered into with respondent. They averred that contracts of this nature, before
being undertaken by the municipality, would ordinarily be subject to several preconditions such as a
public bidding and prior approval of the municipal council which, in this case, did not obtain. From
this, petitioners impress upon us the notion that no contract was ever entered into by the local
government with respondent.10 To address the claim that respondent had made the deliveries under
the agreement, they advanced that the bills of lading attached to the complaint were hardly
probative, inasmuch as these documents had been accomplished and handled exclusively by
respondent herself as well as by her employees and agents.11
Petitioners also filed a Motion to Dissolve and/or Discharge the Writ of Preliminary Attachment
Already Issued,12invoking immunity of the state from suit, unenforceability of the contract, and failure
to substantiate the allegation of fraud.13
On October 20, 2003, the trial court issued an Order 14 denying the two motions. Petitioners moved
for reconsideration, but they were denied in an Order 15 dated December 29, 2003.

Believing that the trial court had committed grave abuse of discretion in issuing the two orders,
petitioners elevated the matter to the Court of Appeals via a petition for certiorari under Rule 65. In it,
they faulted the trial court for not dismissing the complaint despite the fact that the alleged contract
was unenforceable under the statute of frauds, as well as for ordering the filing of an answer and in
effect allowing private respondent to prove that she did make several deliveries of the subject motor
vehicles. Additionally, it was likewise asserted that the trial court committed grave abuse of
discretion in not discharging/dissolving the writ of preliminary attachment, as prayed for in the
motion, and in effect disregarding the rule that the local government is immune from suit.
On January 31, 2005, following assessment of the parties arguments, the Court of Appeals, finding
no merit in the petition, upheld private respondents claim and affirmed the trial courts
order.16 Petitioners moved for reconsideration, but the same was likewise denied for lack of merit
and for being a mere scrap of paper for having been filed by an unauthorized counsel. 17 Hence, this
petition.
In their present recourse, which raises no matter different from those passed upon by the Court of
Appeals, petitioners ascribe error to the Court of Appeals for dismissing their challenge against the
trial courts October 20 and December 29, 2003 Orders. Again, they reason that the complaint
should have been dismissed at the first instance based on unenforceability and that the motion to
dissolve/discharge the preliminary attachment should have been granted. 18
Commenting on the petition, private respondent notes that with respect to the Court of Appeals
denial of thecertiorari petition, the same was rightly done, as the fact of delivery may be properly and
adequately addressed at the trial of the case on the merits; and that the dissolution of the writ of
preliminary attachment was not proper under the premises inasmuch as the application for the writ
sufficiently alleged fraud on the part of petitioners. In the same breath, respondent laments that the
denial of petitioners motion for reconsideration was rightly done by the Court of Appeals, because it
raised no new matter that had not yet been addressed.19
After the filing of the parties respective memoranda, the case was deemed submitted for decision.
We now rule on the petition.
To begin with, the Statute of Frauds found in paragraph (2), Article 1403 of the Civil Code, 20 requires
for enforceability certain contracts enumerated therein to be evidenced by some note or
memorandum. The term "Statute of Frauds" is descriptive of statutes that require certain classes of
contracts to be in writing; and that do not deprive the parties of the right to contract with respect to
the matters therein involved, but merely regulate the formalities of the contract necessary to render it
enforceable.21
In other words, the Statute of Frauds only lays down the method by which the enumerated contracts
may be proved. But it does not declare them invalid because they are not reduced to writing
inasmuch as, by law, contracts are obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.22 The object is to prevent fraud and
perjury in the enforcement of obligations depending, for evidence thereof, on the unassisted memory
of witnesses by requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged.23 The effect of noncompliance with this requirement is simply that
no action can be enforced under the given contracts. 24 If an action is nevertheless filed in court, it
shall warrant a dismissal under Section 1(i),25 Rule 16 of the Rules of Court, unless there has been,
among others, total or partial performance of the obligation on the part of either party.26

It has been private respondents consistent stand, since the inception of the instant case that she
has entered into a contract with petitioners. As far as she is concerned, she has already performed
her part of the obligation under the agreement by undertaking the delivery of the 21 motor vehicles
contracted for by Ople in the name of petitioner municipality. This claim is well substantiated at
least for the initial purpose of setting out a valid cause of action against petitioners by copies of
the bills of lading attached to the complaint, naming petitioner municipality as consignee of the
shipment. Petitioners have not at any time expressly denied this allegation and, hence, the same is
binding on the trial court for the purpose of ruling on the motion to dismiss. In other words, since
there exists an indication by way of allegation that there has been performance of the obligation on
the part of respondent, the case is excluded from the coverage of the rule on dismissals based on
unenforceability under the statute of frauds, and either party may then enforce its claims against the
other.
No other principle in remedial law is more settled than that when a motion to dismiss is filed, the
material allegations of the complaint are deemed to be hypothetically admitted. 27 This hypothetical
admission, according to Viewmaster Construction Corporation v. Roxas 28 and Navoa v. Court of
Appeals,29 extends not only to the relevant and material facts well pleaded in the complaint, but also
to inferences that may be fairly deduced from them. Thus, where it appears that the allegations in
the complaint furnish sufficient basis on which the complaint can be maintained, the same should not
be dismissed regardless of the defenses that may be raised by the defendants. 30 Stated differently,
where the motion to dismiss is predicated on grounds that are not indubitable, the better policy is to
deny the motion without prejudice to taking such measures as may be proper to assure that the ends
of justice may be served.31
It is interesting to note at this point that in their bid to have the case dismissed, petitioners theorize
that there could not have been a contract by which the municipality agreed to be bound, because it
was not shown that there had been compliance with the required bidding or that the municipal
council had approved the contract. The argument is flawed. By invoking unenforceability under the
Statute of Frauds, petitioners are in effect acknowledging the existence of a contract between them
and private respondent only, the said contract cannot be enforced by action for being noncompliant with the legal requisite that it be reduced into writing. Suffice it to say that while this
assertion might be a viable defense against respondents claim, it is principally a matter of evidence
that may be properly ventilated at the trial of the case on the merits.
Verily, no grave abuse of discretion has been committed by the trial court in denying petitioners
motion to dismiss this case. The Court of Appeals is thus correct in affirming the same.
We now address the question of whether there is a valid reason to deny petitioners motion to
discharge the writ of preliminary attachment.
Petitioners, advocating a negative stance on this issue, posit that as a municipal corporation, the
Municipality of Hagonoy is immune from suit, and that its properties are by law exempt from
execution and garnishment. Hence, they submit that not only was there an error committed by the
trial court in denying their motion to dissolve the writ of preliminary attachment; they also advance
that it should not have been issued in the first place. Nevertheless, they believe that respondent has
not been able to substantiate her allegations of fraud necessary for the issuance of the writ. 32
Private respondent, for her part, counters that, contrary to petitioners claim, she has amply
discussed the basis for the issuance of the writ of preliminary attachment in her affidavit; and that
petitioners claim of immunity from suit is negated by Section 22 of the Local Government Code,
which vests municipal corporations with the power to sue and be sued. Further, she contends that
the arguments offered by petitioners against the writ of preliminary attachment clearly touch on

matters that when ruled upon in the hearing for the motion to discharge, would amount to a trial of
the case on the merits.33
The general rule spelled out in Section 3, Article XVI of the Constitution is that the state and its
political subdivisions may not be sued without their consent. Otherwise put, they are open to suit but
only when they consent to it. Consent is implied when the government enters into a business
contract, as it then descends to the level of the other contracting party; or it may be embodied in a
general or special law 34 such as that found in Book I, Title I, Chapter 2, Section 22 of the Local
Government Code of 1991, which vests local government units with certain corporate powers one
of them is the power to sue and be sued.
Be that as it may, a difference lies between suability and liability. As held in City of Caloocan v.
Allarde,35 where the suability of the state is conceded and by which liability is ascertained judicially,
the state is at liberty to determine for itself whether to satisfy the judgment or not. Execution may not
issue upon such judgment, because statutes waiving non-suability do not authorize the seizure of
property to satisfy judgments recovered from the action. These statutes only convey an implication
that the legislature will recognize such judgment as final and make provisions for its full satisfaction.
Thus, where consent to be sued is given by general or special law, the implication thereof is limited
only to the resultant verdict on the action before execution of the judgment. 36
Traders Royal Bank v. Intermediate Appellate Court,37 citing Commissioner of Public Highways v.
San Diego,38 is instructive on this point. In that case which involved a suit on a contract entered into
by an entity supervised by the Office of the President, the Court held that while the said entity
opened itself to suit by entering into the subject contract with a private entity; still, the trial court was
in error in ordering the garnishment of its funds, which were public in nature and, hence, beyond the
reach of garnishment and attachment proceedings. Accordingly, the Court ordered that the writ of
preliminary attachment issued in that case be lifted, and that the parties be allowed to prove their
respective claims at the trial on the merits. There, the Court highlighted the reason for the rule, to
wit:
The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimants action "only up to the completion of proceedings
anterior to the stage of execution" and that the power of the Courts ends when the judgment is
rendered, since government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious considerations of public policy.
Disbursements of public funds must be covered by the corresponding appropriations as required by
law. The functions and public services rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and specific objects. x x x 39
With this in mind, the Court holds that the writ of preliminary attachment must be dissolved and,
indeed, it must not have been issued in the very first place. While there is merit in private
respondents position that she, by affidavit, was able to substantiate the allegation of fraud in the
same way that the fraud attributable to petitioners was sufficiently alleged in the complaint and,
hence, the issuance of the writ would have been justified. Still, the writ of attachment in this case
would only prove to be useless and unnecessary under the premises, since the property of the
municipality may not, in the event that respondents claim is validated, be subjected to writs of
execution and garnishment unless, of course, there has been a corresponding appropriation
provided by law.40
1avvphi1

Anent the other issues raised by petitioners relative to the denial of their motion to dissolve the writ
of attachment, i.e., unenforceability of the contract and the veracity of private respondents allegation
of fraud, suffice it to say that these pertain to the merits of the main action. Hence, these issues are

not to be taken up in resolving the motion to discharge, lest we run the risk of deciding or prejudging
the main case and force a trial on the merits at this stage of the proceedings. 41
There is one final concern raised by petitioners relative to the denial of their motion for
reconsideration. They complain that it was an error for the Court of Appeals to have denied the
motion on the ground that the same was filed by an unauthorized counsel and, hence, must be
treated as a mere scrap of paper.42
It can be derived from the records that petitioner Ople, in his personal capacity, filed his Rule 65
petition with the Court of Appeals through the representation of the law firm Chan Robles &
Associates. Later on, municipal legal officer Joselito Reyes, counsel for petitioner Ople, in his official
capacity and for petitioner municipality, filed with the Court of Appeals a Manifestation with Entry of
Appearance43 to the effect that he, as counsel, was "adopting all the pleadings filed for and in behalf
of [Oples personal representation] relative to this case." 44
It appears, however, that after the issuance of the Court of Appeals decision, only Oples personal
representation signed the motion for reconsideration. There is no showing that the municipal legal
officer made the same manifestation, as he previously did upon the filing of the petition.45 From this,
the Court of Appeals concluded that it was as if petitioner municipality and petitioner Ople, in his
official capacity, had never moved for reconsideration of the assailed decision, and adverts to the
ruling in Ramos v. Court of Appeals46 and Municipality of Pililla, Rizal v. Court of Appeals47 that only
under well-defined exceptions may a private counsel be engaged in lawsuits involving a municipality,
none of which exceptions obtains in this case.48
The Court of Appeals is mistaken. As can be seen from the manner in which the Manifestation with
Entry of Appearance is worded, it is clear that petitioner municipalitys legal officer was intent on
adopting, for both the municipality and Mayor Ople, not only the certiorari petition filed with the Court
of Appeals, but also all other pleadings that may be filed thereafter by Oples personal
representation, including the motion for reconsideration subject of this case. In any event, however,
the said motion for reconsideration would warrant a denial, because there seems to be no matter
raised therein that has not yet been previously addressed in the assailed decision of the Court of
Appeals as well as in the proceedings below, and that would have otherwise warranted a different
treatment of the issues involved.
WHEREFORE, the Petition is GRANTED IN PART. The January 31, 2005 Decision of the Court of
Appeals in CA-G.R. SP No. 81888 is AFFIRMED insofar as it affirmed the October 20, 2003
Decision of the Regional Trial Court of Cebu City, Branch 7 denying petitioners motion to dismiss in
Civil Case No. CEB-28587. The assailed decision is REVERSED insofar as it affirmed the said trial
courts denial of petitioners motion to discharge the writ of preliminary attachment issued in that
case. Accordingly, the August 4, 2003 Writ of Preliminary Attachment issued in Civil Case No. CEB28587 is ordered lifted.
SO ORDERED.