G.R. No.

L-17797

November 29, 1963

ISABELO CARPIO, petitioner,

vs.
HON. HIGINIO MACADAEG, as presiding Judge of Branch X, Court of First Instance of Manila;
OSCAR C. ABAYA, Provincial Sheriff of Rizal and City Sheriff of Manila, respondents.
MAKALINTAL, J.:
Isabelo Carpio filed this petition for certiorari and prohibition to annul and stop implementation of
respondent Judge's orders of October 24 and November 25, 1960, directing the sale of five race
horses and goods previously attached upon motion of respondent Oscar Abaya. We issued a writ of
preliminary injunction to restrain the sale, with instructions to respondent Sheriff of Rizal to allow the
daily training of the said horses and their participation in races whenever they were included in the
racing programs.
On January 17, 1960 respondent Oscar Abaya filed a complaint against petitioner for the recovery of
various sums aggregating P25,000 (Civil Case No. 42450, C.F.I. Manila). Before summons was
served, and upon ex parte motion of respondent Abaya (Annex B), respondent Judge issued two
orders of attachment dated February 8 (Annex C-1) and February 10, 1960 (Annex C), pursuant to
which the Sheriff of Manila garnished goods consisting of hardware imported by petitioner, and the
Sheriff of Rizal seized petitioner's five racing horses named Mohamad, Mohamad's Pride, Magic
Spell, Nashua and Sirius. On February 12, 1960 petitioner filed an urgent petition to discharge the
orders of attachment (Annex 1). Acting thereon, respondent Judge, on March 11, 1960, set aside the
two orders of February 8 and 10, 1960 (Annex F).
Upon two motions of respondent Abaya (Annexes H and 1), respondent Judge, on March 29, 1960,
set aside his order of March 11, 1960 (Annex K). Though no new petition was filed for issuance of a
writ of attachment and no new order or alias writ of attachment was issued, respondent Sheriff of
Manila garnished the aforementioned goods and respondent Sheriff of Rizal attached the five racing
horses.
Upon petition of respondent Abaya (Annex L), respondent Judge issued an order directing the sale at
public auction of the five racing horses (Annex M). However, the sale was halted by petitioner's
putting up a bond of P4,000 and the horses were released to him by respondent Sheriff of Rizal.
Upon motion of respondent Abaya (Annex R), respondent Judge, on October 24, 1960, ordered the
increase of the bond to P10,000, and ordered respondent Sheriff of Rizal to proceed with the sale of
the horses should petitioner failed to file the additional bond of P6,000 (Annex S). Motions filed by
petitioner seeking reconsideration of the said order of October 24 were denied by respondent Judge
on November 25, 1960 (Annex X). So, respondent Sheriff of Rizal advertised the sale at public
auction of the five racing horses. Upon motion of respondent Abaya (Annex T), and despite the
opposition of petitioner(Annex U), respondent Judge, on the same day November 25 issued an
order authorizing the sale of the garnished goods (Annex Z).
Petitioner seeks annulment of the order of October 24, 1960 ordering him to file an additional bond of
P6,000; the order of November 25, 1960 denying his motion for reconsideration of the order of
October 24; and the order of the same date authorizing the sale of the garnished goods, on the
ground that in issuing them respondent Judge acted without jurisdiction and/or with grave abuse of
discretion.
Respondent Judge should not have issued the two writs of preliminary attachment (Annexes C and
C-1) on Abaya's simple allegation that the petitioner was about to dispose of his property, thereby
leaving no security for the satisfaction of any judgment.1 Mere removal or disposal of property, by
itself, is not ground for issuance of preliminary attachment, notwithstanding absence of any security

for the satisfaction of any judgment against the defendant. The removal or disposal, to justify
preliminary attachment, must have been made with intent to defraud defendant's creditors.2
Respondent Judge in fact corrected himself. Acting on petitioner's motion to discharge attachment
and apparently believing the correctness of the grounds alleged therein,3 he set aside the orders of
attachment (Order of March 11, 1960, Annex F).
But reversing himself again, he set aside his order of March 11, 1960 (Annex K, dated March 29,
1960.4 This he did apparently on Abaya's contention that petitioner was about to remove or dispose of
his property in order to defraud his creditors, as examples of which disposals he pointed to the
alleged sale of the horses and of petitioner's office furniture (Abaya's motion for reconsideration dated
March 15, 1960, Annex H). These averments of fraudulent disposals were controverted by petitioner
who, in his opposition to Abaya's motions for reconsideration (Annex J), reiterated the defenses
against preliminary attachment which he had previously enumerated in his petition to discharge the
two orders of attachment. Thus the question of fraudulent disposal was put in issue; and respondent
Judge, before issuing the preliminary attachment anew, should have given the parties opportunity to
prove their respective claims or, at the very least, should have provided petitioner with the chance to
show that he had not been disposing of his property in fraud of creditors.5
But for much more than the above reason, respondent Judge should not have again ordered the
issuance of the writ of preliminary attachment since Abaya never made any affidavit as required by
Rule 59, Rules of Court, which states that:
SEC. 3. Order issued only when affidavit and bond filed An order of attachment shall be
granted when it is made to appear by the affidavit of the plaintiff, or of some other person
who personally knows the facts, that a sufficient cause of action exists, that the case is one
of those mentioned in section 1 hereof, that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to the plaintiff, or the value of
the property which he is entitled to recover the possession of, is as much as the sum for
which the order is granted above all legal counterclaims; which affidavit, and the bond
required by the next succeeding section, must be duly filed with the clerk or judge of the
court before the order issues.
For the purposes of issuance of preliminary attachment, the affidavit (Annex B-1) attached to Abaya's
motion therefor (Annex B), as we have said, is not sufficient, and it does not appear that he ever
executed another affidavit that complies with the above section. None appears attached either to his
motion for reconsideration dated March 15, 1960 (Annex H) or to his motion for reconsideration dated
March 16, 1960 (Annex I), upon which the order of attachment (Annex K) was based.
Having construed that the preliminary attachment should not have been ordered, we believe it is no
longer necessary to discuss the subsequent actuations of respondent Judge which were all based on
the erroneous assumption that his order of March 29, 1960 was valid (Annex K).
WHEREFORE, the order of March 29, 1960 and all succeeding orders of respondent Judge with
respect to said preliminary attachment, are hereby declared null and void; the attached properties are
ordered released; and the preliminary injunction issued by this Court is made permanent. Costs
against respondent Abaya.

SECOND DIVISION
[G.R. No. 76113. November 16, 1990.]
D.P. LUB OIL MARKETING CENTER, INC., Petitioner, v. RAUL NICOLAS, SOCORRO
VALERIE GUTIERREZ, and THE HONORABLE PONCIANO C. INOPIQUEZ (In his official
capacity as the Presiding Judge of Regional Trial Court of Manila, Branch
XIV), Respondents.

Assailed in this petition for certiorari under Rule 65 of the Revised Rules of Court In The
Philippines are the respondent trial courts orders, in Civil Case No. 86-35983, the first, dated
August 28, 1986, and the second, September 24, 1986, which denied the petitioner-plaintiffs
motion for reconsideration. The concluding portion of the August 28, 1986 order
reads:chanrob1es virtual 1aw library
x

With the dissolution of the writ of attachment and the withdrawal of the counterbond, the Court
deems it no longer necessary to discuss the plaintiffs Motion to Revive the Writ of Attachment.

Simeon M. Magdamit for Petitioner.

Artemio IL. Vendivil for Respondents.

WHEREFORE, premised upon the findings and observations above, the first motion is
GRANTED dissolving the writ of attachment and the counterbond withdrawn. The second
motion is denied.

SYLLABUS

SO ORDERED. 1
1. COMMERCIAL LAW; CODE OF COMMERCE; ARTICLES 580 AND 584 THEREOF,
EXPRESSLY REPEALED BY SECTION 2 OF PD NO. 214. In resolving the first issue, we
affirm the conclusion of the respondent judge that, indeed, Articles 580 and 584 of the Code of
Commerce had been expressly repealed by the provisions of Presidential Decree (PD) No. 214
thereby rendering the former abrogated and of no more force and effect. Section 2 of PD No.
214, which is the repealing clause is crystal clear. No interpretation is necessary. It is plain, as
plain as ordinary and simple words can ever be, that Articles 580 and 584 of the Code of
Commerce were expressly referred to and repealed by Section 2 of PD 214. Ita lex scripta est.
2. REMEDIAL LAW; PROVISIONAL REMEDIES; ATTACHMENT; NATURE THEREOF;
GRANTED ONLY ON CONCRETE AND SPECIFIC GROUNDS. The issue as to whether or
not the case of Salas v. Adil is applicable is not important. The respondent judge acted in
accordance with the existing laws and prevailing jurisprudence. The rules on the issuance of a
writ of attachment must be construed strictly against the applicants. This stringency is required
because the remedy of attachment is harsh, extraordinary, and summary in nature. If all the
requisites for the granting of the writ are not present, then the court which issues it acts in
excess of its jurisdiction. (Gruenberg v. Court of Appeals, No. L- 45948, promulgated on
September 10, 1985, 138 SCRA 471) The petitioners prayer for a preliminary attachment
hinges on the allegations in paragraph 16 of the complaint and paragraph 4 of the affidavit of
Daniel Pe which are couched in general terms devoid of particulars of time, persons, and
places to support such a serious assertion that "defendants are disposing of their properties in
fraud of the creditors." There is thus the necessity of giving to the private respondents an
opportunity to ventilate their side in a hearing, in accordance with due process, in order to
determine the truthfulness of the allegations. But no hearing was afforded to the private
respondents the writ having been issued ex parte. A writ of attachment can only be granted on
concrete and specific grounds and not on general averments merely quoting the words of the
rules.
3. ID.; ID.; ID.; NO NEED TO POST A COUNTERBOND IF THE WRIT WAS IMPROPERLY
GRANTED. The respondent judge merely corrected himself by issuing the questioned
orders, thereby making his actions conform with the applicable laws and his findings of fact.
Since the writ of attachment was improperly granted, the respondent trial courts orders
discharging it were compelling and justified to rectify the initial error. Hence, there was no need
at all inceptively for the private respondents to post a counterbond. (Miranda v. Court of
Appeals, Et Al., G.R. No. 80030, promulgated on October 26, 1989, 6)

The said complaint contained a prayer for the issuance of a writ of preliminary attachment upon
the ground that the claim resulted from the non-payment of the purchase price of fuel oil used
for the ten vessels of the private respondents-defendants 3 and that pursuant to the provisions
of the Code of Commerce, Article 584 in relation to Article 580 (subpar. 8), the said vessels may
be attached. There was the added averment that the private respondents were about to dispose
of the said vessels in fraud of their creditors including the petitioner herein.
A writ of preliminary attachment was issued ex parte by a court order, 4 dated May 28, 1986,
upon the posting of a bond by the petitioner in the amount of P220,000.00. Armed with the writ,
the Sheriff of Manila on June 18, 1986, boarded the private respondents fishing vessel, "Star
Vangeline," and placed it under custodia legis.chanrobles law library
The following day, on June 19, 1986, an order 5 was issued by the respondent judge lifting the
attachment upon the posting of a counterbond in the amount of P220,000.00, upon motion of
the private respondents without waiving or abandoning their objections to the alleged grounds
for the issuance of the writ of attachment.
Thereafter, the private respondents filed a "Motion to Withdraw Counter-bond and to Dissolve
Writ of Attachment," 6 dated July 3, 1986. Despite opposition from the petitioner, the respondent
Judge issued the first of the disputed orders dated August 28, 1986, 7 which dissolved the writ
of attachment and allowed the private respondents withdrawal of their counterbond. The
petitioners subsequent motion for reconsideration 8 was also denied in the second assailed
order dated September 24, 1986. 9
The petitioner submits the following legal issues for resolution by the Court:chanrob1es virtual
1aw library
a) Has (sic) the provisions of Articles 580 and 584 of the Code of Commerce being (sic)
expressly repealed by the provisions of Presidential Decree 214 so as to render the same
abrogated and negated already?
b) Is the case of Salas v. Adil (90 SCRA 121) applicable in the instant case so as to justify the
Honorable Respondent Judge in ordering the withdrawal of the bond?

DECISION
SARMIENTO, J.:

The questioned orders stemmed from a complaint lodged by the petitioner, D.P. Lub Oil
Marketing Center, Inc., against private respondents Raul Nicolas and Socorro Valerie Gutierrez
for a sum of money and damages, docketed as Civil Case No. 86-35983, on May 23, 1986. 2

c) Has the Honorable Respondent Judge committed grave abuse of discretion tantamount to
lack of jurisdiction in issuing the questioned order? 10

The answer to the first question is affirmative.

The petitioner assails the conclusion of the trial court, averring in its petition:chanrobles virtual
lawlibrary

The second and third issues may be consolidated thus:chanrob1es virtual 1aw library
WAS THE PETITIONER ENTITLED TO A WRIT OF PRELIMINARY ATTACHMENT IN THE
FIRST PLACE?
The answer to this second question is negative.
In resolving the first issue, we affirm the conclusion of the respondent judge that, indeed,
Articles 580 and 584 of the Code of Commerce had been expressly repealed by the provisions
of Presidential Decree (PD) No. 214 thereby rendering the former abrogated and of no more
force and effect. The pertinent provisions are quoted as follows:chanrobles law library
Articles 580(8) and 584 of the Code of Commerce:chanrob1es virtual 1aw library
ARTICLE 580. In all judicial sales of vessels for the payment of creditors, the said creditors
shall have preference in the order stated:chanrob1es virtual 1aw library
x
x
x
8. The part of the price which has not been paid the last vendor, the credits pending for the
payment of materials and work in the construction of the vessel, when it has not navigated, and
those arising from the repair and equipment of the vessel and from its provisioning with victuals
and fuel during its last voyage.
In order that the credits provided for in this subdivision may enjoy the preference they must
appear by contracts recorded in the registry of vessels, or if they were contracted for the vessel
while on a voyage and said vessel has not returned to the port of her registry, they must be
made under the authority required for such cases and entered in the certificate of registry of the
said vessel.
x

ARTICLE 584. The vessels subject to the liability for the credits mentioned in Article 580 may
be attached and judicially sold in the manner prescribed in Article 579, in the port in which they
are at the instance of any of the creditors; but if they should be loaded and ready to sail, the
attachment cannot take place except for debts contracted for the preparation and provisioning
of the vessels for the same voyage, and even then the attachment shall be dissolved if any
person interested in her sailing should give bond for the return of the vessel within the period
fixed in the certificate of navigation, and binding himself to pay the debt in so far as it may be
legal, should the vessel be delayed in her return even if it were caused by some fortuitous
event. 11
x
x
x
Section 2 of PD No. 214, which is the repealing clause is crystal clear.
SEC. 2. The provisions of Commonwealth Act Numbered Six hundred and six, as amended by
Republic Act Numbered Nine hundred and thirteen; the Code of Commerce, particularly Articles
580 and 584 thereof; and all other Acts, executive orders and regulations inconsistent herewith
are hereby repealed or modified accordingly. 12 (Emphasis ours.)
x

A mere application on the basic rule of statutory construction would reveal to us that only those
inconsistent with the provisions of Presidential Decree 214 are repealed or modified
accordingly. We respectfully submit that the intention of Presidential Decree 214 is not to
abrogate or negate Articles 580 and 584 of the Code of Commerce. Otherwise it could have
clearly and categorically stated so. 13
x

The petitioner submits that the conflicting provisions can co-exist together and that it was not
the intention of PD 214 to render nugatory Articles 580 and 584 of the Code of Commerce since
they are not inconsistent with the former. It concludes that the respondent judge had committed
grave abuse of discretion tantamount to lack of jurisdiction in issuing the questioned orders. 14
The submission is not meritorious. No interpretation is necessary. It is plain, as plain as ordinary
and simple words can ever be, that Articles 580 and 584 of the Code of Commerce were
expressly referred to and repealed by Section 2 of PD 214. Ita lex scripta est.
On the second issue, the petitioner advances the argument that the case of Salas v. Adil is not
applicable to the case at bar. 15
The issue as to whether or not Salas is applicable is not important. The respondent judge acted
in accordance with the existing laws and prevailing jurisprudence. The rules on the issuance of
a writ of attachment must be construed strictly against the applicants. This stringency is
required because the remedy of attachment is harsh, extraordinary, and summary in nature. If
all the requisites for the granting of the writ are not present, then the court which issues it acts
in excess of its jurisdiction. 16
The petitioners prayer for a preliminary attachment hinges on the allegations in paragraph 16
of the complaint 17 and paragraph 4 of the affidavit 18 of Daniel Pe which are couched in
general terms devoid of particulars of time, persons, and places to support such a serious
assertion that "defendants are disposing of their properties in fraud of the creditors." There is
thus the necessity of giving to the private respondents an opportunity to ventilate their side in a
hearing, in accordance with due process, in order to determine the truthfulness of the
allegations. But no hearing was afforded to the private respondents the writ having been issued
ex parte. A writ of attachment can only be granted on concrete and specific grounds and not on
general averments merely quoting the words of the rules. 19
The respondent judge merely corrected himself by issuing the questioned orders, thereby
making his actions conform with the applicable laws and his findings of fact. Since the writ of
attachment was improperly granted, the respondent trial courts orders discharging it were
compelling and justified to rectify the initial error. Hence, there was no need at all inceptively for
the private respondents to post a counterbond. 20
WHEREFORE, the petition is DISMISSED with costs against the
petitioner.chanrobles.com:cralaw:red
SO ORDERED.

SECOND DIVISION

G.R. No. 74696 November 11, 1987

JOSE D. CALDERON, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, GEORGE SCHULZE, JR., ANTONIO C.
AMOR, MANUEL A. MOZO, and VICTOR M. NALUZ, respondents.
G. R. No. 73916 November 11, 1987
FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, GEORGE SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO and
VICTOR M. NALUZ, respondents.

On November 17, 1977, private respondents filed a counterbond, whereupon the trial court issued an order directing
the sheriff to return all real and personal properties already levied upon and to lift the notices of garnishment issued
in connection with the said attachment (Annex B, p. 42, Rollo).
After trial, the trial court dismissed the complaint, holding Calderon and his surety First integrated Bonding and
Insurance Co., Inc., jointly and severally liable to pay the damages prayed for by the private respondents.
Said decision was affirmed on appeal, although slightly modified in the sense that the award of moral and exemplary
damages in favor of private respondents Schulze and Amor was reduced. The dispositive portion of the judgment of
affirmance and modification reads:
WHEREFORE, the judgment of the lower court is modified as follows:

PARAS, J.:

To defendant-appellee George Schulze:

P650,000.00 as moral damages and
P200,000.00 as exemplary damages.

For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No. 01420, which affirmed the
Regional Trial Court's decision 2 appealed from holding the plaintiff Jose D. Calderon (petitioner herein) and his
bondsman the Integrated Bonding and Insurance Company, Inc., jointly and severally liable to pay defendants
(private respondents herein), damages caused by the filing by Calderon of the allegedly unwarranted suit and the
wrongful and malicious attachment of private respondents' properties.

To defendant-appellee Antonio C. Amor:

P150,000.00 as moral damages and
P30,000.00 as exemplary damages,

The facts of the case are briefly as follows:

On November 2, 1976, petitioner Calderon purchased from the private respondents the following: the Luzon
Brokerage Corporation (LBC for brevity) and its five (5) affiliate companies, namely, Luzon Air Freight, Inc., Luzon
Port Terminals Services, Inc., Luzon (GS) Warehousing Corporation, GS Industrial Management Corporation, and
GS Luzon Trucking Corporation. Twenty one (21) days thereafter or on November 23, 1976, the Bureau of Customs
suspended the operations of LBC for failure to pay the amount of P1,475,840.00 representing customs taxes and
duties incurred prior to the execution of the sale. In order to lift the suspension Calderon paid the sum of
P606,430.00 to the Bureau of Customs.
On October 27, 1977, Calderon filed a complaint against private respondents to recover said amount of
P1,475,840.00, with damages by reason of breach of warranty. In the same complaint, the petitioner prayed for a
preliminary attachment, alleging: that private respondents had deliberately and willfully concealed from his
knowledge such staggering liability of the LBC for the purpose of misleading him into buying the six aforesaid
companies; and that private respondent Schulze is about to depart from the Philippines in order to defraud his
creditors.
To support the petition for preliminary attachment, the petitioner posted a surety bond of P1,475,840.00. On October
28, 1977, the trial court issued a writ of preliminary attachment, whereupon properties of the private respondents
were attached and their bank deposits were garnished.
On November 10, 1977, petitioner Calderon filed an amended complaint, alleging that while the liabilities of LBC are
reflected in its books, the aforesaid amount was fraudulently withdrawn and misappropriated by private respondent
Schulze. (pp. 7-18, Rollo)
On the other hand, private respondents claimed: that the amount of P1,475,840.00 due to the Bureau of Customs
represents the duties and taxes payable out of the advanced payments made by LBC's client, Philippine Refining
Company (PRC, for brevity) in August, September and October, 1976, and in the first and second weeks of
November 1976, after Calderon himself had taken control of the management of LBC (Exhibit A); that these deposit
payments were properly recorded in the books of the corporation and existing as part of the corporate funds; that
from the first week of June, 1976 up to October 30, 1976, private respondent Schulze fully disclose and explained to
Calderon that these customer's advanced deposit payments (including those of the PRC) are to be paid to the
Bureau of Customs when their corresponding customs taxes and duties become due; that during this phase of the
negotiation, Calderon and his representatives inspected and studied the corporate books and records at will and
learned the daily operations and management of LBC; that the petitioner did not pay out of his own pocket but out of
the LBC funds the said amount of P606,430,30 demanded by the Bureau of Customs, as evidenced by a manager's
check No. FEBTC 25092 (Exhibits 9, 10, 11 & 38) and another facility negotiated with the Insular Bank of Asia and
America (Exhibit K-2); and that private respondents are setting up a counterclaim for actual, moral and exemplary
damages as well as attorney's fees, as a consequence of the filing of the baseless suit and the wrongful and
malicious attachment of their properties, (pp. 217-221, Rollo)

An other dispositions in the judgment appealed from, including the dismissal of the amended complainant are
hereby affirmed in toto. SO ORDERED.
In his petition, petitioner Calderon asserts, among other things, that the court below erred:
I
IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS CLAIMS.
II
IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN WRONGFULLY AND
MALICIOUSLY SUED OUT.
III
IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR ACTUAL DAMAGES
BUT MORAL AND EX-EXEMPLARY DAMAGES AS WELL.
On the other hand, petitioner Insurance Company raises the following issues:
I
WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR DAMAGES ON ITS
CONTRACTED SURETYSHIP NOTWITHSTANDING THE DISSOLUTION OF THE WRIT
OF PRELIMINARY ATTACHMENT, AS A CON. SEQUENCE OF THE FILING OF THE
DEFENDANT'S COUNTER- BOND, WHEREBY LEVIED PROPERTIES WERE ORDERED
BY THE COURT RETURNED TO PRIVATE RESPONDENTS AND THE NOTICES OF
GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED LIFTED.
II
WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE RESPONDENTS OF A
COUNTER-BOND TO DISCHARGE THE WRIT OF PRELIMINARY ATTACHMENT
CONSTITUTE A WAIVER ON ANY DEFECT IN THE ISSUANCE OF THE ATTACHMENT
WRIT.
III
WHETHER OR NOT A SURETY IS A GUARANTOR OF THE EXISTENCE OF A GOOD
CAUSE OF ACTION IN THE COMPLAINT.
The petition is devoid of merit.
Whether or not the amount of P1,475,840.00 was duly disclosed as an outstanding liability of LBC or was
misappropriated by private respondent Schulze is purely a factual issue. That Calderon was clearly in bad faith
when he asked for the attachment is indicated by the fact that he failed to appear in court to support his charge of
misappropriation by Schulze, and in effect, preventing his being cross-examined, no document on the charges was
presented by him.
What the Appellate Court found in this regard need not be further elaborated upon. The Appellate Court ruled:

... The record shows that appellant Calderon failed to produce any evidence in support of his sworn charge
that appellee Schulze had deliberately and willfully concealed the liabilities of Luzon Brokerage Corporation.
Neither did appellant Calderon prove his sworn charges that appellee Schulze had maliciously and
fraudulently withdrawn and misappropriated the amount of Pl,475,840.00 and that an the defendants had
maliciously and fraudulently concealed and withheld from him this alleged liability of Luzon Brokerage
Corporation in breach of the contract-warranty that said corporation had no obligations or liabilities except
those appearing in the books and records of the said corporation. Indeed, appellant Calderon never
appeared in the trial court to substantiate the charges in his verified complaints and in his affidavit to support
his petition for the issuance of a writ of attachment. He distanced himself from the appellees and avoided
cross-examination regarding his sworn allegations. ...
... But even though appellant Calderon failed to prove his serious charges of fraud, malice and bad faith, the
appellees took it upon themselves to show that they did not conceal or withhold from appellant's knowledge
the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage Corporation and that they did not
withdraw and misappropriate the deposits made by Philippine Refining Co., Inc. with Luzon Brokerage
Corporation.
The books and records of Luzon Brokerage Corporation on which the Financial Statement of Luzon
Brokerage Corporation, as of October 31, 1976 was prepared by the auditing firm retained by appellant
Calderon himself (Exhibit 1), disclose that the liabilities of Luzon Brokerage Corporation in the total amount
of P4,574,498.32 appear under the heading 'Customers Deposit' (Exhibit 1-A) this amount includes the
deposit of Philippine Refining Co., Inc. in the sum of Pl,475,840.00.
But appellant Calderon contends that this financial statement was dated February 4, 1977 (see Exhibit 1-C).
There is nothing commendable in this argument because the bases of the financial statement were the
books, records and documents of Luzon Brokerage Corporation for the period ending October 31, 1976,
which were all turned over to and examined by appellant Calderon and his executive, legal and financial
staffs. There is also no merit in the contention of appellant Calderon that the appellees have tampered the
books of Luzon Brokerage Corporation because there is no proof to back this charge, let alone the fact that
appellant Calderon did not even present the said books to support his charge.
As stated above, the amount of customers' deposits in the sum of P4,574,498.32 includes the deposits of
Philippine Refining Co., Inc. (Exhibits 46-A, 46-B, 46-C, 46-D, 46-E, 46-F, 46-G, 46-H, 46-1, 46-J, t.s.n. July
23, 1980, pp. 12-13, 14-15). The amounts deposited by Philippine Refining Co., Inc. on various dates with
Luzon Brokerage Corporation made before the execution of the sale were all entered in three other corporate
books of Luzon Brokerage Corporation namely, the Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and
39-A-1-B to 39-K-1-B), the Journal Vouchers (Exhibits 42 to 46 and 42-A to 43- A), and the Customer's
Deposit Ledger (Exhibit 46-A to 46-J) ... .
Thus, the claim of appellant Calderon that the deposits made by Philippine Refining Co., Inc. with Luzon
Brokerage Corporation of P406,430.00 on August 24, 1976 (Exhibit N P53,640.00 on October 13, 1976
(Exhibit 0), P406,430.00 on September 8, 1976 (Exhibit P P199,508.00 on September 24, 1976 (Exhibit Q
P52,738.00 on October 22, 1976 (Exhibit R and P264,436.00 on October 7, 1976 (Exhibit S) were not
entered in the books of Luzon Brokerage Corporation, is completely without merit. ... (pp. 85-87, Rollo)
It is evident from the foregoing that the attachment was maliciously sued out and that as already pointed out
Schulze was not in bad faith.
While as a general rule, the liability on the attachment bond is limited to actual damages, moral and exemplary
damages may be recovered where the attachment was alleged to be maliciously sued out and established to be
so. (Lazatin vs. Twano et al,
L-12736, July 31, 1961).
In the instant case, the issues of wrongful and malicious suing out of the writ of preliminary attachment were joined
not only in private respondents' motion to discharge the attachment but also in their answer to the amended
complaint (p. 38, Rollo). The trial court observed that the books and records of Luzon Brokerage Corporation
disclose that the liabilities of the said corporation in the total amount of P4,574,498.32 appear under the heading
"Customs Deposit" (Exhibit 1-A) and this amount includes the deposit of Philippine Refining Co., Inc. in the sum of
P1,475,840.00 (p. 26, Rollo). On the other hand, plaintiff never appeared in court, and failed to produce any
evidence to substantiate his charges (p. 26, Rollo).
Well settled is the rule that the factual findings of the trial court are entitled to great weight and respect on appeal,
especially when established by unrebutted testimonial and documentary evidence, as in this case.

Anent the petition of the surety, We say the following:

Specifically, petitioner surety contends that the dissolution of the attachment extinguishes its obligation under the
bond, for the basis of its liability, which is wrongful attachment, no longer exists, the attachment bond having been
rendered void and ineffective, by virtue of Section 12, Rule 57 of the Rules of Court. (p. 5, Petition)
While Section 12, Rule 57 of the Rules of Court provides that upon the filing of a counterbond, the attachment is
discharged or dissolved, nowhere is it provided that the attachment bond is rendered void and ineffective upon the
filing of counterbond.
The liability of the attachment bond is defined in Section 4, Rule 57 of the Rules of Court, as follows:
Sec. 4. Condition of applicant's bond. The party applying for the order must give a bond executed to the
adverse party in an amount to be fixed by the judge, not exceeding the applicant's claim, conditioned that the
latter will pay all the costs which may be adjudged to the adverse party and all damages which he may sustain
by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto.
It is clear from the above provision that the responsibility of the surety arises "if the court shall finally adjudge that
the plaintiff was not entitled thereto." In Rocco vs. Meads, 96 Phil. Reports 884, we held that the liability attaches if
the plaintiff is not entitled to the attachment because the requirements entitling him to the writ are wanting, or if the
plaintiff has no right to the attachment because the facts stated in his affidavit, or some of them, are untrue. It is,
therefore, evident that upon the dismissal of an attachment wrongfully issued, the surety is liable for damages as a
direct result of said attachment.
Equally untenable is the Surety's contention that by filing a counterbond, private respondents waived any defect or
flaw in the issuance of the attachment writ, for they could have sought, without need of filing any counterbond, the
discharge of the attachment if the same was improperly or irregularly issued, as provided in Section 13, Rule 57 of
the Rules of Court.
Whether the attachment was discharged by either of the two (2) ways indicated in the law, i.e., by filing a
counterbond or by showing that the order of attachment was improperly or irregularly issued, the liability of the
surety on the attachment bond subsists because the final reckoning is when "the Court shall finally adjudge that the
attaching creditor was not entitled" to the issuance of the attachment writ in the first place.
The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by
simply availing himself of one way of discharging the attachment writ, instead of the other. Moreover, the filing of a
counterbond is a speedier way of discharging the attachment writ maliciously sought out by the attaching creditor
instead of the other way, which, in most instances like in the present case, would require presentation of evidence in
a full-blown trial on the merits and cannot easily be settled in a pending incident of the case.
We believe, however, that in the light of the factual situation in this case, the damages awarded by the Intermediate
Appellate Court are rather excessive. They must be reduced.
WHEREFORE, the judgment of said Appellate Court is hereby modified as follows: Both petitioner Calderon and
petitioner First Integrated Bonding and Insurance Company, Inc. are hereby ordered to give jointly and severally:
1. Respondent George Schulze, P250,000.00 as moral damages and P50,000.00 as exemplary damages; and
2. Respondent Antonio C. Amor, P50,000.00 as moral damages and P10,000.00 as exemplary damages.
The rest of the judgment of the Intermediate Appellate Court is hereby AFFIRMED. SO ORDERED.
SECOND DIVISION
G.R. No. 83897 November 9, 1990

ESTEBAN B. UY JR. and NILO S. CABANG, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, WILSON TING, and YU HON. respondents.

the owners of the personal properties reflected in the Partial Sheriffs Return dated April 13, 1983 which have
been attached and seized by defendant Cabang. In this second civil case, the court a quo (then presided over
by CFI Judge Concepcion B. Buencamino) issued an order on May 5, 1982, stating among other things, the
following:

PARAS, J.:
This is a petition for review on certiorari seeking to reverse the decision ** which dismissed CA-G.R. No. SP-05659
for certiorariand Prohibition with Preliminary Injunction and/or Restraining Order filed by petitioner seeking to annul
and set aside the two Orders dated August 24, 1982 and October 10, 1983 issued by the then Court of First
Instance of Rizal Branch LII *** (now Regional Trial Court of Quezon City Branch XCLVll ****) in Civil Case No. Q35128, granting a writ of preliminary attachment and directing the sheriff assigned therein to attach the properties of
defendants Uy and Cabang (herein petitioners); and denying defendants' motion to dismiss.
The antecedent facts of the case as found by the Court of Appeals are as follows:
On March 24, 1982, Esteban B. Uy, Jr. (herein petitioner) filed a complaint against Sy Yuk Tat for sum of
money, damages, with preliminary attachment, docketed as Civil Case No. Q-34782 ("the first case" for
short) in the then Court of First Instance of Rizal, Branch LII, Quezon City (the case was later assigned to the
Regional Trial Court of Quezon City, Branch XCVII now presided over by respondent Judge). On the same
day, upon plaintiff filing a bond of P232,780.00 said court issued a writ of preliminary attachment and
appointed Deputy Sheriff Nilo S. Cabang (co-petitioner herein) as Special Sheriff to implement the writ. On
April 6, 1982, the same court issued a break-open order upon motion filed by petitioner Uy.
On the following day, April 7, 1982, petitioner Cabang began to implement the writ of
preliminary attachment as the Special Sheriff on the case.
On April 19, 1982, petitioner Cabang filed a Partial Sheriffs Return, stating, inter alia:
xxx xxx xxx
That in the afternoon of April 12, 1982, the undersigned together with Atty. Lupino Lazaro, plaintiff's counsel
and the members of the same team proceeded to No. 65 Speaker Perez St., Quezon City, and effected a
physical and actual count of the items and merchandise pointed to by the Ting family as having been taken
from the Mansion Emporium and nearby bodega which are as follows:
a) 329 boxes of "GE" Flat Iron, each box containing 6 pcs. each;
b) 229 boxes of Magnetic Blank Tapes with 48 pcs. each;
c) 239 boxes of floor polishers marked "Sanyo"
d) 54 boxes of floor polishers marked "Ronson"

Considering that it will take time before this Court could act upon said prayers for the issuance of a Writ
of Preliminary Injunction, the parties are hereby ordered to maintain the STATUS QUO in this case with
respect to the properties attached and subject of this action alleged to belong to the plaintiffs" (Rollo, p.
133)
Meanwhile, in the first case, where a judgment by default had been rendered, the first court issued an
order striking off from the records all pleadings filed by the third party claimants.
With respect to the case in the court a quo, defendants Uy and Cabang filed their answer with
counterclaim.
Meanwhile, in the first case, plaintiff Uy on June 7, 1982, filed an ex-parte motion for writ of execution
which was granted the following day, June 8, 1982.
On the same day (June 7, 1982) that plaintiff Uy filed his exparte motion for writ of execution he and
Cabang filed a motion to quash or dissolve status quo order in the case a quo as defendants therein on
the ground that the court "has no jurisdiction to interfere with properties under custodia legis on orders
of a court of co-equal and co-ordinate jurisdiction" and that plaintiffs' complaint is not for recovery of
properties in question.
On June 24, 1982, plaintiff Uy in the first case filed his ex parte motion to authorize Sheriff to sell the
attached properties enumerated in Sheriff Cabang's partial return filed on April 19, 1982, on the ground
that the properties under custodia legis were perishable especially those taken from No. 65 Speaker
Perez, Quezon City.
Subsequently, on July 2, 1982, in the case a quo the court denied defendants', Uy and Cabang, motion
to quash or dissolve the status quo order.
Meanwhile, the first case on July 12, 1982, Cabang filed another partial sheriffs return this time stating
among others that the judgment in that case had been partially satisfied, and that in the public auction
sale held on July 6, 1982, certain personal properties had been sold to plaintiff Esteban Uy, Jr., the
winning bidder for P15,000.00 while the other properties were sold in the amount of P200,000.00 in
cash with Bernabe Ortiz of No. 97 Industrial Avenue, Northern Hill, Malabon Manila as the highest
bidder.

xxx xxx xxx

On April 12, 1982, a third party claim was filed by Wilson Ting and Yu Hon (private respondents herein) in the
same Civil Case No. Q-34782, addressed to petitioner Cabang asserting ownership over the properties
attached at No. 65 Speaker Perez St., Quezon City (other than those attached at No. 296 Palanca St.,
Manila). The third party claim specifically enumerated the properties, as reflected in the Partial Sheriffs Return
dated April 1 3, 1 982, belonging to the plaintiffs (private respondents herein).
On the same day that petitioner Cabang filed his Partial Sheriffs Return (April 19, 1982) the third party
claimants and Yu filed a motion to dissolve the aforementioned writ of preliminary attachment in the same Civil
Case No. Q-34782; alleging among others, that being the absolute owners of the personal properties listed in
their third party claim which were illegally seized from them they were willing to file a counterbond for the
return thereof; which motion was opposed by plaintiff Uy.
On April 29, 1982, then CFI Judge Jose P. Castro rendered judgment by default in said Civil Case No. Q34782 in favor of plaintiff Uy.
Meanwhile, on May 5, 1982, third party claimants Wilson Ting and Yu Hon filed a complaint for Damages with
application for preliminary injunction against Esteban Uy and Nilo Cabang (co-petitioners herein) in the then
Court of First Instance of Rizal, Branch 52, Quezon City ('the court a quo' for short) which case was docketed
as Civil Case No. Q-35128 ('the second case' for short). The complaint alleged inter alia that the plaintiffs are

Back to the case a quo, on August 23, 1982, plaintiffs Ting and Yu Hon filed a motion for preliminary
attachment alleging this ground: "In the case at bar, which, is one 'to recover possession of personal
properties unjustly detained, ... the property... has been ... removed ... (and) disposed of to prevent its
being found or taken by the applicant or an officer" and/or said defendants are guilty of fraud in
disposing of the property for the taking, (or) detention ... of which the action is brought (Sec. 1(c) and
(d), Rule 57, Rules of Court)
Acting on such motion the court a quo, on August 24, 1 982, issued the disputed order granting the writ
of preliminary attachment prayed for by the plaintiffs (Wilson Ting and Yu Hon), stating that:
Let a writ of preliminary attachment issue upon the plaintiffs putting up a bond in the amount of
P1,430,070.00, which shall be furnished to each of the defendants with copies of the verified
application therewith, and the sheriff assigned to this court, Danilo Del Mundo, shall forthwith attach
such properties of the defendants not exempt from execution, sufficient to satisfy the applicants'
demand. (Rollo, p. 247)
On August 31, 1982, in the same case a quo, defendant Uy filed an urgent motion to quash and/or
dissolve preliminary attachment which motion was opposed by plaintiffs Ting and Yu Hon.

About half a year later, on February 21, 1982, in the case a quo, defendant Uy filed a motion for
preliminary hearing on affirmative defenses as motion to dismiss. Following an exchange of
subsequent papers between the parties, the court a quo issued the other disputed order which denied
defendant Uy's motion to dismiss on October 10, 1983. The motion to quash was also denied by the
court a quo on December 9, 1983. Defendant Uy filed a motion for reconsideration on both Orders.
Finally, on February 15, 1985, respondent Judge issued two Orders denying both motions for
reconsideration. (CA decision, Rollo, p. 109-122)

Neither can petitioner complain that they were denied their day in court when the Regional Trial Court issued a writ
of preliminary attachment without hearing as it is well settled that its issuance may be made by the court ex parte.
As clearly explained by this Court, no grave abuse of discretion can be ascribed to respondent Judge in the
issuance of a writ of attachment without notice to petitioners as there is nothing in the Rules of Court which makes
notice and hearing indispensable and mandatory requisites in its issuance. (Filinvest Credit Corp. v. Relova, 117
SCRA 420 [1982]; Belisle Investment & Finance Co. Inc. v. State Investment House, Inc. 151 SCRA 631 [1987];
Toledo v. Burgos, 168 SCRA 513 [1988]).

Thereafter, petitioners Esteban Uy, Jr. and Nilo Cabang filed with the Court of Appeals a petition for Certiorari and
Prohibition with prayer for a Writ of Preliminary Injunction or a Restraining Order to annul and set aside the two
orders issued by the then CFI of Rizal Branch 52.

In addition, petitioner's motion to quash or discharge the questioned attachment in the court a quo is in effect a
motion for reconsideration which cured any defect of absence of notice. (Dormitorio v. Fernandez, 72 SCRA 388
[1976]).

In its decision, the Court of Appeals dismissed the petition, the dispositive portion of which reads:

Estoppel is likewise unavailing in the case at bar by the mere fact that private respondent Ting (complainant in the
court a quo) pointed the items and merchandise taken from the Mansion House and nearby Bodega which were
levied and hauled by Special Sheriff Cabang, where in the report of said Sheriff made earlier on April 6, 1982, he
stated that on the same occasion referred to in his Partial Return, private respondents denied Sy Yuk Tat's
ownership over the goods in question. (Rollo, pp. 203-204).

WHEREFORE, finding respondent Judge not to have committed a grave abuse of discretion amounting
to lack or excess of jurisdiction in issuing the order dated August 24, 1982, denying petitioners' motion
to quash the writ of preliminary attachment, and the order dated October 10, 1983, denying petitioners'
motion to dismiss the complaint a quo, we hereby deny the instant petition, and therefore dismiss the
same. No pronouncement as to cost. (Rollo, pp. 132-133)
Hence, the instant petition.

In like manner, the sale of the disputed properties at the public auction, in satisfaction of a judgment of a co-equal
court does not render the case moot and academic. The undeviating ruling of this Court in such cases is that
attachment and sale of properties belonging to a third person is void because such properties cannot be attached
and sold at public auction for the purpose of enforcing a judgment against the judgment debtor. (Orosco v.
Nepomuceno, 57 Phil. 1007 [1932-33]).

In the resolution of October 16, 1989, the Court gave due course to the petition and required both parties to submit
simultaneous memoranda within thirty days from notice (Rollo, p. 190). Private respondents filed their memorandum
on December 6, 1989 (Ibid., p. 192) while petitioners filed their memorandum on January 5, 1990 (Ibid., p. 208)

The other issues in this case deserve scant consideration.

The main issue in this case is whether or not properties levied and seized by virtue of a writ of attachment and later
by a writ of execution, were under custodia legis and therefore not subject to the jurisdiction of another co-equal
court where a third party claimant claimed ownership of the same properties.

On the issue of the expiration of the restraining order, there is no argument that the life span of the status quoorder
automatically expires on the 20th day and no judicial declaration to that effect is necessary (Paras v. Roura, 163
SCRA 1 [1988]). But such fact is of no consequence in so far as the propriety of the questioned attachment is
concerned. As found by the Court of Appeals, the grounds invoked by respondents for said attachment did not
depend at all upon the continuing efficacy of the restraining order.

The issue has long been laid to rest in the case of Manila Herald Publishing Co. Inc. v. Ramos (88 Phil. 94 [1951])
where the Court filed that while it is true that property in custody of the law may not be interfered with, without the
permission of the proper court, this rule is confined to cases where the property belongs to the defendant or one in
which the defendant has proprietary interests. But when the Sheriff, acting beyond the bounds of his office seizes a
stranger's property, the rule does not apply and interference with his custody is not interference with another court's
order of attachment.

As to petitioner's contention that the complaint filed by private respondent in the lower court is merely seeking an
ancillary remedy of injunction which is not a cause of action itself, the Court of Appeals correctly observed that the
object of private respondents' complaint is injunction although the ancillary remedy of preliminary injunction was also
prayed for during the pendency of the proceeding.

Under the circumstances, this Court categorically stated:

It has been seen that a separate action by the third party who claims to be the owner of the property
attached is appropriate. If this is so, it must be admitted that the judge trying such action may render
judgment ordering the sheriff or whoever has in possession of the attached property to deliver it to the
plaintiff claimant or desist from seizing it. It follows further that the court may make an interlocutory order,
upon the filing of such bond as may be necessary, to release the property pending final adjudication of the
title. Jurisdiction over an action includes jurisdiction on interlocutory matter incidental to the cause and
deemed necessary to preserve the subject matter of the suit or protect the parties' interests. This is selfevident. (Manila Herald Publishing Co. Inc. v. Ramos,supra).
The foregoing ruling was reiterated in the later case of Traders Royal Bank v. IAC (133 SCRA 141 [1984]) and even
more recently in the case of Escovilla v. C.A. G.R. No. 84497, November 6, 1989, where this Court stressed:
The power of the court in the execution of judgments extends only over properties
unquestionably belonging to the judgment debtor. The levy by the sheriff of a property by virtue of a writ of
attachment may be considered as made under the authority of the court only when the property levied upon
belongs to the defendant. If he attaches properties other than those of the defendant, he acts beyond the
limits of this authority. The court issuing a writ of execution is supposed to enforce its authority only over
properties of the judgment debtor. Should a third party appear to claim the property levied upon by the
sheriff, the procedure laid down by the Rules is that such claim should be the subject of a separate and
independent action.

Finally, the non-joinder of the husband of private respondent, Yu Hon as well as her failure to verify the complaint
does not warrant dismissal of the complaint for they are mere formal requirements which could be immediately
cured without prejudice to the rights of the petitioners. This Court frowns on the resort to technicalities to defeat
substantial justice. Thus, the Court states that the rules of procedure are intended to promote not to defeat
substantial justice, and therefore, they should not be applied in a very rigid and technical sense. (Angel v. Inopiquez,
G.R. 66712, January 13, 1989). Again on another occasion where an appeal should have been dismissed for noncompliance with the Rules, the Court relaxed the rigid interpretation of the Rules holding that a straight-jacket
application will do more injustice. (Pan-Am Airways v. Espiritu, 69 SCRA 45 [1976]).
PREMISES CONSIDERED, the petition is hereby DENIED and the assailed decision of the Court of Appeals is
hereby AFFIRMED.
SO ORDERED.

THIRD DIVISION

G.R. No. 102448 August 5, 1992

RICARDO CUARTERO, petitioner,
vs.
COURT OF APPEALS, ROBERTO EVANGELISTA and FELICIA EVANGELISTA, respondents.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari seeking to annul the decision of the Court of Appeals
promulgated on June 27, 1991 as well as the subsequent resolution dated October 22, 1991 denying
the motion for reconsideration in CA-G.R. SP No. 23199 entitled "Spouses Roberto and Felicia
Evangelista v. Honorable Cezar C. Peralejo, Presiding Judge Regional Trial Court of Quezon City,
Branch 98, and Ricardo Cuartero," which nullified the orders of the trial court dated August 24, 1990
and October 4, 1990 and cancelled the writ of preliminary attachment issued on September 19, 1990.
Following are the series of events giving rise to the present controversy.
On August 20, 1990, petitioner Ricardo Cuartero filed a complaint before the Regional Trial Court of
Quezon City against the private respondents, Evangelista spouses, for a sum of money plus
damages with a prayer for the issuance of a writ of preliminary attachment. The complaint was
docketed as Civil Case No. Q-90-6471.
On August 24, 1990, the lower court issued an order granting ex-parte the petitioner's prayer for the
issuance of a writ of preliminary attachment.
On September 19, 1990, the writ of preliminary attachment was issued pursuant to the trial court's
order dated August 24, 1990. On the same day, the summons for the spouses Evangelista was
likewise prepared.
The following day, that is, on September 20, 1990, a copy of the writ of preliminary attachment, the
order dated August 24, 1990, the summons and the complaint were all simultaneously served upon
the private respondents at their residence. Immediately thereafter, Deputy Sheriff Ernesto L. Sula
levied, attached and pulled out the properties in compliance with the court's directive to attach all the
properties of private respondents not exempt from execution, or so much thereof as may be sufficient
to satisfy the petitioner's principal claim in the amount of P2,171,794.91.
Subsequently, the spouses Evangelista filed motion to set aside the order dated August 24, 1990 and
discharge the writ of preliminary attachment for having been irregularly and improperly issued. On
October 4, 1990, the lower court denied the motion for lack of merit.
Private respondents, then, filed a special civil action for certiorari with the Court of Appeals
questioning the orders of the lower court dated August 24, 1990 and October 4, 1990 with a prayer for
a restraining order or writ of preliminary injunction to enjoin the judge from taking further proceedings
below.
In a Resolution dated October 31, 1990, the Court of Appeals resolved not to grant the prayer for
restraining order or writ of preliminary injunction, there being no clear showing that the spouses
Evangelista were entitled thereto.
On June 27, 1991, the Court of Appeals granted the petition for certiorari and rendered the
questioned decision. The motion for reconsideration filed by herein petitioner Cuartero was denied for
lack of merit in a resolution dated October 22, 1991. Hence, the present recourse to this Court.
The petitioner raises the following assignment of errors

I
THE COURT OF APPEALS ERRED AND COMMITTED A GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK OF JURISDICTION WHEN IT HELD THAT THE REGIONAL TRIAL
COURT DID NOT ACQUIRE JURISDICTION OVER RESPONDENT SPOUSES.
II
THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF
DISCRETION WHEN IT HELD THAT THE REGIONAL TRIAL COURT COULD NOT VALIDLY
ISSUE THE SUBJECT WRIT OF PRELIMINARY ATTACHMENT WHICH IS AN ANCILLARY
REMEDY. (Rollo, p. 13)
The Court of Appeals' decision is grounded on its finding that the trial court did not acquire any
jurisdiction over the person of the defendants (private respondents herein). It declared that:
. . . the want of jurisdiction of the trial court to proceed in the main case as well as the ancillary
remedy of attachment is quite clear. It is not disputed that neither service of summons with a
copy of the complaint nor voluntary appearance of petitioners was had in this case before the
trial court issued the assailed order dated August 24, 1990, as well as the writ of preliminary
attachment dated September 19, 1990. This is reversible error and must be corrected
on certiorari. (Rollo, p. 24)
The appellate tribunal relied on the case of Sievert v. Court of Appeals, 168 SCRA 692 (1988) in
arriving at the foregoing conclusion. It stated that:
Valid service of summons and a copy of the complaint vest jurisdiction in the court over the
defendant both for the purpose of the main case and for purposes of the ancillary remedy of
attachment and a court which has not acquired jurisdiction over the person of defendant,
cannot bind the defendant whether in the main case or in any ancillary proceeding such as
attachment proceedings (Sievert v. Court of Appeals, 168 SCRA 692). (Rollo, p. 24)
The private respondents, in their comment, adopted and reiterated the aforementioned ruling of the
Court of Appeals. They added that aside from the want of jurisdiction, no proper ground also existed
for the issuance of the writ of preliminary attachment. They stress that the fraud in contracting the
debt or incurring the obligation upon which the action is brought which comprises a ground for
attachment must have already been intended at the inception of the contract. According to them,
there was no intent to defraud the petitioner when the postdated checks were issued inasmuch as the
latter was aware that the same were not yet funded and that they were issued only for purposes of
creating an evidence to prove a pre-existing obligation.
Another point which the private respondents raised in their comment is the alleged violation of their
constitutionally guaranteed right to due process when the writ was issued without notice and hearing.
In the later case of Davao Light and Power Co., Inc. v. Court of Appeals, G.R. No. 93262, November
29, 1991, we had occasion to deal with certain misconceptions which may have arisen from
our Sievert ruling. The question which was resolved in the Davao Light case is whether or not a writ
of preliminary attachment may issue ex-parteagainst a defendant before the court acquires
jurisdiction over the latter's person by service of summons or his voluntary submission to the court's
authority. The Court answered in the affirmative. This should have clarified the matter but apparently
another ruling is necessary.
A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court
where an action is pending to be levied upon the property or properties of the defendant therein, the
same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment might
be secured in said action by the attaching creditor against the defendant (Adlawan v. Tomol, 184
SCRA 31 [1990] citing Virata v. Aquino, 53 SCRA 30-31 [1973]).
Under section 3, Rule 57 of the Rules of Court, the only requisites for the issuance of the writ are the
affidavit and bond of the applicant. As has been expressly ruled in BF Homes, Inc. v. Court of
Appeals, 190 SCRA 262 (1990), citing Mindanao Savings and Loan Association, Inc. v. Court of
Appeals, 172 SCRA 480 (1989), no notice to the adverse party or hearing of the application is
required inasmuch as the time which the hearing will take could be enough to enable the defendant to
abscond or dispose of his property before a writ of attachment issues. In such a case, a hearing
would render nugatory the purpose of this provisional remedy. The ruling remains good law. There is,

thus, no merit in the private respondents' claim of violation of their constitutionally guaranteed right to
due process.
The writ of preliminary attachment can be applied for and granted at the commencement of the action
or at any time thereafter (Section 1, Rule 57, Rules of Court). In Davao Light and Power, Co., Inc. v.
Court of Appeals, supra, the phrase "at the commencement of the action" is interpreted as referring to
the date of the filing of the complaint which is a time before summons is served on the defendant or
even before summons issues. The Court added that
. . . after an action is properly commenced by filing of the complaint and the payment of all
requisite docket and other fees the plaintiff may apply and obtain a writ of preliminary
attachment upon the fulfillment of the pertinent requisites laid down by law, and that he may
do so at any time, either before or after service of summons on the defendant. And this,
indeed, has been the immemorial practice sanctioned by the courts: for the plaintiff or other
proper party to incorporate the application for attachment in the complaint or other appropriate
pleading (counter-claim, cross-claim, third-party-claim) and for the Trial Court to issue the
writ ex-parte at the commencement of the action if it finds the application otherwise sufficient
in form and substance.
The Court also pointed out that:
. . . It is incorrect to theorize that after an action or proceeding has been commenced and
jurisdiction over the person of the plaintiff has been vested in the Court, but before acquisition
of jurisdiction over the person of the defendant (either by service of summons or his voluntary
submission to the Court's authority), nothing can be validly done by the plaintiff or the Court. It
is wrong to assume that the validity of acts done during the period should be dependent on, or
held in suspension until, the actual obtention of jurisdiction over the defendants person. The
obtention by the court of jurisdiction over the person of the defendant is one thing; quite
another is the acquisition of jurisdiction over the person of the plaintiff or over the subject
matter or nature of the action, or the res or object thereof.
It is clear from our pronouncements that a writ of preliminary attachment may issue even before
summons is served upon the defendant. However, we have likewise ruled that the writ cannot bind
and affect the defendant. However, we have likewise ruled that the writ cannot bind and affect the
defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when
the proper officer commences implementation of the writ of attachment, service of summons should
be simultaneously made.
It must be emphasized that the grant of the provisional remedy of attachment practically involves
three stages: first, the court issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial two
stages, it is not necessary that jurisdiction over the person of the defendant should first be obtained.
However, once the implementation commences, it is required that the court must have acquired
jurisdiction over the defendant for without such jurisdiction, the court has no power and authority to
act in any manner against the defendant. Any order issuing from the Court will not bind the defendant.
In Sievert v. Court of Appeals, supra, cited by the Court of Appeals in its questioned decision, the writ
of attachment issued ex-parte was struck down because when the writ of attachment was being
implemented, no jurisdiction over the person of the defendant had as yet been obtained. The court
had failed to serve the summons to the defendant.
The circumstances in Sievert are different from those in the case at bar. When the writ of attachment
was served on the spouses Evangelista, the summons and copy of the complaint were also
simultaneously served.

It is appropriate to reiterate this Court's exposition in the Davao Light and Power case cited earlier, to
wit:
. . . writs of attachment may properly issue ex-parte provided that the Court is satisfied that
the relevant requisites therefore have been fulfilled by the applicant, although it may, in its
discretion, require prior hearing on the application with notice to the defendant, but that levy
on property pursuant to the writ thus issued may not be validly effected unless preceded, or
contemporaneously accompanied by service on the defendant of summons, a copy of the
complaint (and of the appointment of guardian ad litem, if any), the application for attachment
(if not incorporated in but submitted separately from the complaint), the order of attachment,
and the plaintiff's attachment bond.
The question as to whether a proper ground existed for the issuance of the writ is a question of fact
the determination of which can only be had in appropriate proceedings conducted for the purpose
(Peroxide Philippines Corporation V. Court of Appeals, 199 SCRA 882 [1991]). It must be noted that
the spouses Evangelista's motion to discharge the writ of preliminary attachment was denied by the
lower court for lack of merit. There is no showing that there was an abuse of discretion on the part of
the lower court in denying the motion.
Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it
is upon a ground which is at the same time the applicant's cause of action in the main case since an
anomalous situation would result if the issues of the main case would be ventilated and resolved in a
mere hearing of a motion (Davao Light and Power Co., Inc. v. Court of Appeals, supra, The
Consolidated Bank and Trust Corp. (Solidbank) v. Court of Appeals, 197 SCRA 663 [1991]).
In the present case, one of the allegations in petitioner's complaint below is that the defendant
spouses induced the plaintiff to grant the loan by issuing postdated checks to cover the installment
payments and a separate set of postdated cheeks for payment of the stipulated interest (Annex "B").
The issue of fraud, then, is clearly within the competence of the lower court in the main action.
WHEREFORE, premises considered, the Court hereby GRANTS the petition. The challenged
decision of the Court of Appeals is REVERSED, and the order and writ of attachment issued by Hon.
Cezar C. Peralejo, Presiding Judge of Branch 98, Regional Trial Court of Quezon City against
spouses Evangelista are hereby REINSTATED. No pronouncement as to costs.
SO ORDERED.

SECOND DIVISION
[G.R. No. 32945 : December 3, 1990.]
191 SCRA 783-795
MARIANO T. NASSER, Petitioner, vs. THE COURT OF APPEALS, HON. MALCOLM
SARMIENTO, in his capacity as Presiding Judge, Court of First Instance of Pampanga,
Branch I, AURORA RIVERA CANLAS, PATERNO R. CANLAS, and TOMAS CENTILLAS,
Respondents.

Matias S. Matute, co-administrator of the Olave Estate executed (a) an original Contract of
Lease dated February 10, 1965, to expire on August 10, 1970 and (b) a Supplemental Contract
of Lease dated June 12, 1965, for a period of five (5) years after the expiration of the original
Contract of Lease dated February 10, 1965, both of which are in favor of NASSER as lessee
(pp. 112-113, G.R. No. 32945).
On April 25, 1966, NASSER executed three (3) Promissory Notes in favor of Matias S. Matute,
with the following highlighted provisions, viz:
(1) P378,000.00
x x x

[G.R. No. 32946. December 3, 1990.]

191 SCRA 783-795
MARIANO T. NASSER, Petitioner, vs. THE COURT OF APPEALS, PATERNO R. CANLAS,
AURORA RIVERA-CANLAS, TOMAS CENTILLAS and THE CHIEF OF POLICE OF SAN
ISIDRO, DAVAO ORIENTAL, Respondents.

"Any action involving the enforcement of this contract shall be brought within the City
of Manila, Philippines . . ." (G.R. No. L-32945, Vol. I, p. 109).

DECISION

PARAS, J.:
These are petitions for certiorari and/or prohibition filed by petitioner Mariano T. Nasser, in G.R.
No. L-32945 entitled "Mariano T. Nasser v. Court of Appeals, Hon. Malcolm Sarmiento etc.,
Aurora Rivera Canlas, Paterno R. Canlas and Tomas Centillas" seeking: (1) to annul and set
aside: (a) the decision * of the Court of Appeals dated October 7, 1970 in CA No. 45317-R
between the same parties, dismissing the petition for lack of merit and dissolving the writ of
preliminary injunction issued on June 17, 1970 and (b) the resolution dated December 4, 1970
denying the motion for reconsideration and (2) to restrain or enjoin the Chief of Police of
Governor General, Davao Oriental from implementing the Order of Attachment issued by the
Court of First Instance of Pampanga in Civil Case No. 3641 and in G.R. No. L-32946 entitled
"Mariano T. Nasser, et. al. v. The Court of Appeals, Paterno R. Canlas, Aurora Rivera-Canlas,
Tomas Centillas and the Chief of Police of San Isidro, Davao Oriental seeking: (1 ) to annul and
set aside the decision of the Court of Appeals dated October 10, 1970 in CA-G.R. No. 44856-R
entitled "Aurora Rivera-Canlas et al. v. Hon. Judge Vicente P. Bullecer, et al." which declared
permanent the Amended Writ of Preliminary Injunction it issued on June 16, 1970 directing the
CFI of Davao Oriental to refrain from enforcing the writs of preliminary injunctions it issued in
Civil Case No. 3641 of the Court of First Instance of Pampanga and (2) to restrain or prohibit:
(a) the Court of Appeals from enforcing the amended writ of preliminary injunction it issued on
June 16, 1970 and (b) Tomas Centillas, Chief of Police of Governor Generoso and the Chief of
Police of San Isidro, both of Davao Oriental from further executing or implementing the Order of
Attachment dated January 20, 1970, issued also in Civil Case No. 3641, CFI of Pampanga.:cralaw
These two cases have their origin from an order of attachment issued in Civil Case No. 3641,
entitled "Aurora Fe Rivera Canlas vs. Mariano T. Nasser" in the Court of First Instance of
Pampanga (now Regional Trial Court, RTC for short) Branch I, presided by respondent Hon.
Judge Malcolm G. Sarmiento, for collection of a sum of money. It is evident that both petitions
seek to enjoin or prohibit the implementation of the said order.
As gathered from the records, the facts of the case are as follows:
Petitioner Mariano T. Nasser was a lessee of haciendas La Union, Montserrat, Sigaboy,
Pundaguitan and Colatinan, in Davao Oriental owned by the Estate of Don Amadeo Matute
Olave (G.R. No. 32945, p. 109, vol. I, Rollo).

10

"Should my original contract of lease dated February 10, 1965 and supplemental
contract of lease dated January 7, 1966 over the haciendas of the Estate (Hacienda
La Union, Sigaboy, Montserrat, Colatinan and Pundaguitan) leased by the coadministrator Matias S. Matute is already terminated or cancelled before the
expiration of the period thereof by final court judgment or sale to us, any and all future
installments of this PROMISSORY NOTE as of said date of termination and
cancellation shall be deemed also extinguished, cancelled and become no longer
payable.

(2) "ORIGINAL LEASE

231,000.00
x x x
(3) "SUPPLEMENTAL LEASE
P210,000.00
x x x
(G.R. No. L-32945, Vol. I, pp. 110)
On February 7, 1967, Matias S. Matute assigned, sold, transferred and set-over unto
respondent Aurora Rivera-Canlas, all the above described promissory notes with the express
conformity of petitioner Nasser (G.R. No. L-32945, Vol. I, p. 107).
In 1968, NASSER bought the hereditary shares of the heirs Luis Augustina, Elena, Amadeo, all
surnamed Matute and Anunciacion Candelario for the total amount of P660,000.00 (Rollo of
G.R. No. 32945, pp. 182-186-195, Vol. I).
Out of the total amount of P819,000.00 due on the three (3) promissory notes, petitioner has
paid only P121,983.45 leaving a total unpaid balance of P697,016.55.:-cralaw
In G.R. No. L-32945
Respondent Aurora joined by her husband, Paterno R. Canlas, filed a complaint on January 6,
1970 for a sum of money with application for a Writ of Preliminary Attachment docketed as Civil
Case No. 3641 before the Court of First Instance of Pampanga (now Regional Trial Court)
dated December 27, 1969 (Rollo, G.R. No. L-32945, pp. 99-105; 106-108) which was granted
by Judge Sarmiento upon a bond of P20,000.00 put up by respondents (G.R. No. L-32945, pp.
120-121). The Sheriff of Manila issued a notice of garnishment against NASSER as transfereependente-lite of heirs Luis and Jose Matute and Amadeo Matute Candelario, Jr., which was
entered and made part and parcel of the case in Special Proceeding No. 25876 in Re: Testate
Estate of Amadeo Matute Olave (G.R. No. L-32945, p. 122). Upon motion of Canlas spouses,
respondent judge issued an order deputizing the Chief of Police of Governor Generoso, Davao
Oriental, to serve, execute and fully implement the Order of Attachment dated January 20,
1970, until the amount of P697,016.55 is realized.

By virtue of the writ, respondent Chief of Police attached the properties of petitioner, not
otherwise exempt from execution, among which were the latter's leasehold rights in Hacienda
Sigaboy, Montserrat, La Union, Colatinan and Pundaguitan, which are producing copra and
rendered his report of such action to the court on February 18, 1970. (emphasis supplied)

Nasser's motion and supplemental motion for reconsideration were denied. Hence, this petition
in G.R. No. L-32945.

Meanwhile, NASSER, as defendant, filed: (1) an Urgent Motion to Dismiss on the ground of
improper venue (G.R. No. L-32945, pp. 136-140) and (2) an Urgent Motion to Dissolve or
Discharge the Order of Attachment issued on January 20, 1970, on the ground that the order of
attachment was improperly and irregularly issued (G.R. No. L-32945, pp. 143-150). Said
motions were opposed by the respondent spouses on February 10, 1970 (G.R. No. L-32945,
pp. 152-159; 162-167) both of which were denied by respondent Judge. Instead of filing an
answer, NASSER filed an urgent Motion for Reconsideration.:-cralaw

Meanwhile, Nasser on February 12, 1970 filed Civil Case No. 138 in a co-equal court CFIDavao Oriental, a complaint for injunction against respondent Chiefs of Police of Governor
Generoso and San Isidro praying that the latter be enjoined or restrained from attempting to
stop petitioner from removing or disposing the copra from the haciendas for lack of authority.

Hence, on March 19, 1970, respondent judge declared Nasser in default, allowed spouses
Canlas to present their evidence ex-parte (G.R. No. L-32945, p. 206), and on the following day,
March 20, 1970 rendered judgment in Civil Case No. 3641 in favor of said spouses and ordered
Nasser to pay them P684,015.55, with interest at 6% per annum from the filing of the complaint
until fully paid plus P20,000.00 as attorney's fees and another P5,000.00 for expenses of
litigation.

On February 23, 1970, NASSER filed Civil Case No. 140 with the CFI-Davao Oriental against
respondents Canlas and Matias S. Matute for annulment of said Promissory Notes and Deed of
Assignment.

In G.R. No. L-32946

Respondents Chiefs of Police filed an Urgent Opposition to the Issuance of a Writ of

Preliminary Injunction and Motion to Dismiss Civil Case No. 138 alleging that the CFI-Davao
Oriental lacks jurisdiction over the case and that the complaint states no cause of action.

However, respondent judge motu propio set aside the order of default on March 23, 1970
(Rollo, Vol. I, pp. 206-208), it appearing that Nasser had filed an "Urgent Ex-Parte Motion to Lift
Order of Default dated March 19, 1970" (Rollo, p. 201-204).

On even date NASSER filed in Civil Case No. 138, a Supplemental Complaint with Urgent
Motion for Grant of a Writ of Preliminary Injunction Ex-Parte and Urgent Motion for Restraining
Order dated February 28, 1970, which motions (G.R. No. L-32946, pp. 14-15, Vol. I) were
granted by Judge Vicente Bullecer, CFI-Davao Oriental in the Order of March 3, 1970,
restraining the Chiefs of Police of Governor Generoso and San Isidro from further attaching the
copra of petitioner. (Emphasis supplied)

Then on April 3, 1970, herein petitioner filed in the lower court another "Urgent Motion to Set
Aside or Revoke the order of January 24, 1970" deputizing the Chief of Police of Governor
Generoso, Davao Oriental as special sheriff with prayer for restraining order or injunction (Rollo,
pp. 208-223). This was opposed by the Canlas spouses on April 8, 1970 (Rollo, pp. 228-250) to
which Nasser filed a "Reply".

On March 7, 1970, Canlas and the respective Chiefs of Police of Governor Generoso and San
Isidro filed a petition for certiorari and prohibition with preliminary injunction before the Court of
Appeals docketed as CA-G.R. No. 44856-R against Judge Bullecer of CFI-Davao Oriental and
petitioner, praying that Judge Bullecer be restrained from continuing the hearing of Civil Case
No. 138 and from enforcing the restraining order he had issued.

On April 24, 1970, respondent judge issued two orders, namely: (1) holding in abeyance his
resolution on petitioner's motion to relieve the Chief of Police of Governor Generoso, in view of
the pendency of CA G.R. No. 44856-R before the Court of Appeals, where the same issue was
supposedly raised (Rollo, p. 267); and (2) denying Nasser's motion for a reconsideration of the
order dated February 23, 1970 denying his motion to dismiss.

On March 11, 1970, the Court of Appeals issued the writ of preliminary injunction prayed for,
enjoining petitioner or any of his agents, representatives or employees to refrain from interfering
and taking possession of the properties levied on the properties subject of leasehold rights and
levied on attachment by the special sheriff and from impeding and obstructing the Writ of
Attachment issued in Civil Case No. 3641, CFI-Pampanga, until further orders.

From the orders dated April 24, 1970, petitioner filed a petition for certiorari and/or prohibition
with the Supreme Court, the same was docketed as G.R. No. L-31904. After finding that the
issues posed are closely connected and interdependent with those raised in CA-G.R. No.
44856-R pending in the Court of Appeals, the Supreme Court remanded the case to the Court
of Appeals for appropriate action in its resolution dated May 8, 1970 and was docketed as CAG.R. No. 45317-R.

Afterwards other cases were filed against respondents allegedly by dummies of NASSER and
in which Judge Bullecer of CFI-Davao Oriental also issued writs of preliminary injunction as
follows:

On June 17, 1970, the Court of Appeals gave due course to the petition and issued a writ of
preliminary injunction enjoining the respondent judge Malcolm G. Sarmiento from continuing the
hearing of Civil Case No. 3641 in whatever stage it may be found and to enforce the Order of
Attachment issued in Civil Case No. 3641, and enjoining also the Chief of Police of Governor
Generoso, Davao Oriental, from executing such Order of Attachment.

Civil Case No. 175 entitled Felixberto Carios, plaintiff versus Sisenando Rivera, Jr., Rufino
Nasser, Tomas Centillas and Vicente Castro, defendants.

An answer to the petition was filed by the Canlas spouses on July 23, 1970.:-cralaw
On October 7, 1970, the respondent Court of Appeals rendered its decision in CA-G.R. No.
45317-R, the dispositive portion of which reads:
"WHEREFORE, the present petition for writs of certiorari and or prohibition is hereby
denied for lack of merit and the writ of preliminary injunction issued by this Court on
June 16, 1970 in connection with this case is ordered dissolved. The costs of this
proceeding shall be borne by the petitioner.
SO ORDERED." (Rollo, Vol. II, p. 644)

11

Civil Case No. 174 entitled Renato Cruz, plaintiff versus Sisenando Rivera, Jr., Vicente Castro,
Tomas Centillas, Defendants.

Civil Case No. 176 entitled Jose S. Matute, Rosario S. Matute, Trinidad Matute, Fortunata
Zambrano Matute, plaintiffs versus Sisenando Rivera, Jr., Rufino Nasser, Tomas Centillas,
Vicente Castro, Cesario Udtoman, and Rolando Centillas, defendants.
enjoining the defendants, their agents, and / or representatives and men working under them to
desist from interfering harassing and molesting and taking away the possession of and
management of the five (5) haciendas (which were subject matter of the Order of Attachment
issued in Civil Case No. 3641, CFI-Pampanga). (pp. 226-227, Vol. I, G.R. No. L-32946; and pp.
622-633, Vol. II, Ibid. (Emphasis supplied)
In view thereof, upon motion of respondent Canlas, the Court of Appeals issued an Amended
Writ of Preliminary Injunction which likewise enjoined the hearing of Civil Cases Nos. 140, 174,
175, 176 or any other case brought before the CFI-Davao Oriental by any party for the purpose
of rendering nugatory or ineffective, impeding or obstructing the writ of preliminary attachment
issued by the CFI-Pampanga in Civil Case No. 3641.

On October 10, 1970, the Court of Appeals rendered its decision in CA-G R. No. 44856-R
making permanent the Amended Writ of Preliminary Injunction dated June 16, 1970.

unduly interfered with the acts of another court of co-equal, coordinate and concurrent
jurisdiction.:-cralaw

A motion to reconsider said decision was filed by NASSER but the same was denied by the
Court of Appeals on November 3, 1970.

It is doctrinal that no court has the power to interfere by injunction with the judgment or order of
another court of concurrent or coordinate jurisdiction (Ngo Bun Tiong v. Sayo, 163 SCRA 237
[1988]; Investors Finance Corporation v. Ebarle, 163 SCRA 60 [1988]; Municipality of Malolos v.
Libangang Malolos, Inc., 164 SCRA 290 [1988]).

Hence, this petition in G.R. No. L-32946.

G.R. Nos. L-32945 and L-32946 were consolidated in the resolution of January 12, 1971 and a
writ of preliminary injunction was issued in G.R. No. L-32945 enjoining the Court of Appeals
from enforcing its decision dated October 7, 1970 and respondent judge from continuing the
hearing of Civil Case No. 3641 and the Chief of Police of Governor Generoso from executing
the Order of Attachment.:- nad
Respondents filed a Joint Memorandum in both cases (G.R. No. L-32946, p. 747, Vol. II) while
petitioner failed to file the required memorandum.
The center of the conflict is whether or not the writ of preliminary attachment in Civil Case No.
3641 (G.R. No. L-32945) issued by the CFI of Pampanga in favor of Canlas may be enjoined in
Civil Case No. 138 (G.R. No. L-32946) by the CFI of Davao Oriental in favor of Nasser.
The issues common to both G.R. No. L-32945 and L-32946 are: (1) that the venue was
improperly laid, subject Civil Case No. 3641 having been filed in Pampanga instead of in Manila
as stipulated; (2) that the appointment of the Chief of Police of Governor Generoso, Davao
Oriental as Special Sheriff to serve and implement the Order of Attachment was erroneous; and
(3) that the Order of Attachment was not validly issued.
Aside from the fact, that it has already been settled, that stipulations in a contract which specify
a definite place for the institution of an action arising in connection therewith, do not, as a rule,
supersede the general rule on the matter set out in Rule 4 of the Rules of Court, so that it
should be construed merely as an agreement on an additional forum, not as limiting venue to
the specified place (Western Minolco Corporation v. Court of Appeals, 167 SCRA 592 [1988]),
Nasser has in effect waived his objection thereto, by: (a) his motion to dismiss based on the
court's lack of authority to issue the Order of Attachment but on the non-observance of
requirements of the Rules; (b) his motion to lift order of default; and (c) his answer with
counterclaim fled in the Court of First Instance of Pampanga. Consequently, it is immaterial as
to whether or not there is a novation of contract in this case.chanrobles virtual law library
It is likewise evident that respondent judge did not err in deputizing the Chief of Police of
Governor Generoso, as special sheriff under Section 2, Rule 57 of the Revised Rules of Court
where the former is expressly authorized to require not only the sheriff but also other officers of
the province or the sheriffs or other proper officers of different provinces in this case, the Chief
of Police of Governor Generoso, to attach all the properties of the party against whom it may be
issued within the province not exempt from execution.
Finally, it is settled that a verified statement incorporated in the complaint without a separate
affidavit is sufficient and valid to obtain the attachment (Tolentino v. Carla, et al., 66 Phil. 140143). Thus, under the same ruling, the verified complaint in the case at bar entitled "Application
for a Writ of Preliminary Attachment" which specifically stated that to avoid redundancy and
repetition, the affidavit of the plaintiffs as required under Section 3, Rule 57 of the Revised
Rules of Court is dispensed with, as the matters to be treated and contained therein are already
incorporated and made part of the complaint, duly verified by them, has undoubtedly
substantially complied with the requirements of the Rules and the court to which the application
for the attachment was filed has jurisdiction to issue the writ prayed for (Central Capiz v. Salas,
43 Phil., 30 [1922]).

Respondents Canlas are aggrieved parties within the meaning of Sections 1 and 2 of Rule 65,
Revised Rules of Court even if not made parties nor intervenors in Civil Case No. 138 since
they are the plaintiffs in the prior case (Civil Case No. 3641) in whose favor the Order of
Attachment was issued and which order was being enforced by respondents Chiefs of Police. It
is but natural that any interference with or obstruction to the implementation of said Order of
Attachment would work prejudice to them and make them aggrieved parties. Otherwise stated,
respondents Canlas as ruled in a recent case, are real parties in interest who would be
benefitted or injured by the judgment or entitled to the avails of the suit (Lee v. Romillo, Jr., 161
SCRA 589 [1988]).
In the same manner, the Court of Appeals cannot be faulted by its issuance by mere motion of
respondents Canlas of an Amended Writ of Preliminary Injunction which included Civil Cases
Nos. 140, 174, 175, 176 or any other case brought before the Court of First Instance of Davao
Oriental by any party for the purpose of obstructing or rendering nugatory the preliminary
attachment issued by the Court of First Instance of Pampanga in Civil Case No. 3641. To
require the parties to file a new petition or an independent suit for the purpose would be
preposterous, it being the very objection of the petition in CA-G.R. No. 44856-R where the
motion was filed, to enjoin the undue and improper interference of the CFI-Davao Oriental to
the Order of Attachment issued by the CFI-Pampanga.:- nad
The issuance of an amended writ of preliminary injunction by the Court of Appeals is within its
inherent power to amend and control its processes and orders so as to make them conformable
to law and justice (Section 5(g), Rule 135, Revised Rules of Court). Undoubtedly, the injunction
is essential for the orderly administration of justice and was sought to avoid multiplicity of suits.
In Government Service Insurance System vs. Hon. Alfredo C. Florendo, etc., et al., G.R. No. L48603, September 29, 1989, the High Tribunal ruled that:
". . . The very foundation of the jurisdiction to issue the writ of injunction rests in the probability
of irreparable injury, inadequacy of pecuniary compensation and the prevention of multiplicity of
suit . . ."
PREMISES CONSIDERED, both petitions in G.R. Nos. L-32945 and L-32946 are hereby
DISMISSED for lack of merit and the assailed decisions of the Court of Appeals are hereby
AFFIRMED and the temporary restraining order issued in G.R. No. L-32945 is hereby LIFTED.
SO ORDERED.

Additional issues raised in G.R. No. L-32946, are: (1) the prematurity of the petition for certiorari
and prohibition and (2) lack of legal standing of Canlas to file this petition.
The certiorari and prohibition case instituted by respondents Chiefs of Police was not filed
prematurely in view of the injunction order issued by the CFI-Davao Oriental enjoining the
further enforcement of the Order of Attachment in Civil Case No. 3641, which injunction order

12

FIRST DIVISION

G.R. No. 84481 April 18, 1989

MINDANAO SAVINGS & LOAN ASSOCIATION, INC. (formerly Davao Savings & Loan Association) &
FRANCISCO VILLAMOR, petitioners,
vs.
HON. COURT OF APPEALS, POLY R. MERCADO, and JUAN P. MERCADO, respondents.
GRIO-AQUINO, J.:
On September 10, 1986, private respondents filed in the Regional Trial Court of Davao City, a complaint against
defendants D.S. Homes, Inc., and its directors, Laurentino G. Cuevas, Saturnino R. Petalcorin, Engr. Uldarico D.
Dumdum, Aurora P. De Leon, Ramon D. Basa, Francisco D. Villamor, Richard F. Magallanes, Geronimo S. Palermo
Felicisima V. Ramos and Eugenio M. De los Santos (hereinafter referred to as D.S. Homes, et al.) for "Rescission of
Contract and Damages" with a prayer for the issuance of a writ of preliminary attachment, docketed as Civil Case
No. 18263.
On September 28, 1986, Judge Dinopol issued an order granting ex parte the application for a writ of preliminary
attachment.
On September 22, 1986, the private respondents amended their complaint and on October 10, 1986, filed a second
amended complaint impleading as additional defendants herein petitioners Davao Savings & Loan Association, Inc.
and its president, Francisco Villamor, but dropping Eugenio M. De los Santos.
On November 5, 1986, Judge Dinopol issued ex parte an amended order of attachment against all the defendants
named in the second amended complaint, including the petitioners but excluding Eugenio C. de los Santos.
D. S. Homes. Inc., et al. and the Davao Savings & Loan Association (later renamed Mindanao Savings & Loan
Association, Inc. or "MSLA") and Francisco Villamor filed separate motions to quash the writ of attachment. When
their motions were denied by the Court, D.S. Homes, Inc., et al. offered a counterbond in the amount of
Pl,752,861.41 per certificate issued by the Land Bank of the Philippines, a banking partner of petitioner MSLA The
lower court accepted the Land Bank Certificate of . Deposit for Pl,752,861.41 as counterbond and lifted the writ of
preliminary attachment on June 5, 1987 (Annex V)
On July 29, 1987, MSLA and Villamor filed in the Court of Appeals a petition for certiorari (Annex A) to annul the
order of attachment and the denial of their motion to quash the same (CA-G.R. SP No. 12467). The petitioners
alleged that the trial court acted in excess of its jurisdiction in issuing the ex parte orders of preliminary attachment
and in denying their motion to quash the writ of attachment, D.S. Homes, Inc., et al. did not join them.
On May 5, 1988, the Court of Appeals dismissed the petition for certiorari and remanded the records of Civil Case
No. 18263 to the Regional Trial Court of Davao City, Branch 13, for expeditious proceedings. It held:
Objections against the writ may no longer be invoked once a counterbond is filed for its lifting or dissolution.
The grounds invoked for the issuance of the writ form the core of the complaint and it is right away obvious
that a trial on the merits was necessary. The merits of a main action are not triable in a motion to discharge
an attachment otherwise an applicant for dissolution could force a trial on the merits on his motion (4 Am.
Jur., Sec. 635, 934, cited in G.G. Inc. vs. Sanchez, et al., 98 Phil. 886, 890, 891). (Annex B, p. 185, Rollo.)

the applicant, or the value of the. property the possession of which he is entitled to recover, is as much as
the sum for which the order is granted above all legal counterclaims. The affidavit, and the bond required by
the next succeeding section must be duly filed with the clerk or judge of the court before the order issues.
No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat
the purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the
defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing
is required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. vs. State
Investment House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. vs. Relova, 11 7 SCRA 420), a motion to
quash the writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12
and 13, Rule 57, Rules of Court).
The Court of Appeals did not err in holding that objections to the impropriety or irregularity of the writ of attachment
"may no longer be invoked once a counterbond is filed," when the ground for the issuance of the writ forms the core
of the complaint.
Indeed, after the defendant has obtained the discharge of the writ of attachment by filing a counterbond under
Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13, Rule 57 to quash the
writ for impropriety or irregularity in issuing it.
The reason is simple. The writ had already been quashed by filing a counterbond, hence, another motion to quash it
would be pointless. Moreover, as the Court of Appeals correctly observed, when the ground for the issuance of the
writ is also the core of the complaint, the question of whether the plaintiff was entitled to the writ can only be
determined after, not before, a full-blown trial on the merits of the case. This accords with our rulingG.B. Inc. vs.
Sanchez, 98 Phil. 886 that: "The merits of a main action are not triable in a motion to discharge an attachment,
otherwise an applicant for the dissolution could force a trial on the merits of the case on this motion."
May the defendant, after procuring the dissolution of the attachment by filing a counterbond, ask for the cancellation
of the counterbond on the ground that the order of attachment was improperly issued? That question was answered
by this Court when it ruled in Uy Kimpang vs. Javier, 65 Phil. 170, that "the obligors in the bond are absolutely liable
for the amount of any judgment that the plaintiff may recover in the action without reference to the question of
whether the attachment was rightfully or wrongfully issued."
The liability of the surety on the counterbond subsists until the Court shall have finally absolved the defendant from
the plaintiff s claims. Only then may the counterbond be released. The same rule applies to the plaintiffs attachment
bond. "The liability of the surety on the bond subsists because the final reckoning is when the Court
shall finally adjudge that the attaching creditor was not entitled to the issuance of the attachment writ," (Calderon vs.
Intermediate Appellate Court, 155 SCRA 531.)
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. SP No. 12467, the
petition for review is denied for lack of merit with costs against the petitioners.
SO ORDERED.
Cruz, Gancayco and Medialdea, JJ., concur.

Dissatisfied, the petitioners appealed to this Court.

A careful consideration of the petition for review fails to yield any novel legal questions for this Court to resolve.
The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of
Court are the affidavit and bond of the applicant.
SEC. 3. Affidavit and bond required . An order of attachment shall be granted only when it
is made to appear by the affidavit of the applicant, or of some other person who personally knows the facts,
that a sufficient cause of action exists that the case is one of those mentioned in section 1 hereof, that there
is no other sufficient security for the claim sought to be enforced by the action, and that the amount due to

13

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.

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

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 Resolution 2 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, 1993 3 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 ex-parte, 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

14

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 Motion 27 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

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.

The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge records,
contending that:

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.

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 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:
37

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.40

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 petitioner-husbands 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.

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:

15

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. Lozano57 and Associated Insurance & Surety Co., Inc. v. Banzon 58 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 petitioner-husband 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:

16

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 petitionerhusband 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.

SECOND DIVISION
G.R. No. L-28454 May 18, 1978

EMILIO APACHECHA and ROSITA OTERO, petitioners,

vs.
HONORABLE VALERIO V. ROVIRA, as Judge of the Court of First Instance of Iloilo
(Branch IV); EUSTAQUIO AGOS, MARIA BALAJADIA and PACIFICO
LUMAUAG, respondent
BARREDO, J.:
Petitioner for certiorari impugning " a grave abuse of discretion the order of respondent
judge of September 16, 1967 in Civil Case No. 5911 of the Court of First Instance of Iloilo,
entitled Emilio Apachecha and Rosita Otero vs. Eustaquio Agos and Maria
Balajadia, which denied petitioners' motion praying that private respondent Pacifico
Lumauag be made to pay, as surety on the supersedeas bond filed to stay the execution
pending appeal of the judgment that petitioners had secured against Agos and Balajadia
in the same Civil Case No. 5911, d appeal having been dismissed by the Court of
Appeals, ultimately affirmed by the Supreme Court, for failure of the appellants to submit
the printed record on appeal on time and after the record had been remanded to the trial
court and the execution against the judgment debtors had been returned unsatisfied.
In denying petitioners' motion in question, respondent judge sustained the contention of
Lumauag that under Section 9 of Rule 58 in connection with Section 20 of Rule 57, and
the rulings of the Supreme Court thereunder, in order that a surety may be bound under a
bond for damages, the application for damages must be filed before the entry of final
judgment and there must be a hearing with notice to the surety. Respondent judge paid no
heed to the contention of petitioners that the matter on hand is not a claim for damages in
a case of preliminary injunction governed by the rules just referred to but a motion to
enforce the supereas bond filed by Lumauag and two other persons to secure the stay of
the immediate execution of a judgment in favor of petitioners, which is significally
governed by Section 3 of Rule 39 providing thus:

PREMISES CONSIDERED, the Court hereby renders judgment in favor of the

plaintiffs and against the defendants, hereby ordering the defendants to resell to the
plaintiffs the land described in paragraph 2 of the complaint in consideration of the
sum of P3,000.00; the defendants shall execute in favor or, sign and deliver to the
plaintiffs, the corresponding deed of sale, otherwise, the Clerk of Court shall execute
the same once this decision becomes final and after the plaintiffs shall have
deposited' with him the sum of P3,000.00 representing the repurchase price of the
land; the defendants shall immediately vacate the land and deliver its possession to
the plaintiffs: they shall also reimburse the plaintiffs the sum of P6,123.30 for the
produce of the land which the defendants received and which the plaintiffs could have
received for the period from January, 1961 up to October 27, 1964; to pay a monthly
damage of P278.33 beginning November 1, 1964 until possession of the land shall
have been delivered to the plaintiffs; pay the plaintiffs attorneys fees in the amount of
P1,000.00, plus the costs. (Page 37, Record.)
Although the questioned order here has already resolved the matter of the execution of
the instrument of resale ordered in the above judgment., what needs to be clarified before
execution may issue against Lumauag is the exact amount of the liability of the judgment
debtors, which does not seem to be necessarily the full amount of the P10,000
supersedeas bond he had filed.
ACCORDINGLY, the petition is granted and the impugned orders of respondent judge of
April 22, 1967 and October 21, 1967 are hereby set aside, and said respondent is directed
to proceed to act on petitioners' motion of April 22, 1967 pursuant to the above opinion.
Costs against private respondent Lumauag.
Fernando (Chairman), Antonio, Aquino, Concepcion, Jr., and Santos, JJ., concur.

SEC. 3. Stay of execution. Execution issued before the expiration of the nine to
appeal may be stayed upon the approval by the court of a sufficient supersedeas
bond filed by the appellant, conditioned upon the performance of the judgment or
order appealed from in case it be affirmed wholly or in part. The bond thus given may
be proceeded against on motion before the trial court, with notice to the surety, after
the case is remanded to it by the appellate court.
The petition must be granted. Petitioners are correct that what they seek is not damages
resulting from an improper preliminary injunction. Rather, they are after the execution of a
judgment in their favor which was stayed on the strength of the supersedeas bond filed by
Lumauag. And it appearing that the appeal in question has been finally dismissed and the
record of the case has already been remanded to respondent court, the filing of
petitioners' motion seeking relief against private respondent Lumauag was perfectly in
order.
Anent Lumauag's contention in his answer here that apparently, his principals, the
judgment debtors, have amicably settled with petitioners, the same was not raised by him
in the court below. Besides, it is denied by petitioners and, therefore, becomes a factual
issue not appropriate for Us to resolve here. It should be threshed out in the trial court.
Before concluding, however, We deem it opportune to draw attention of the respondent
court to the terms of the judgment in issue which reads thus:

17

THIRD DIVISION
G.R. No. 98118 December 6, 1991

HON. PETE NICOMEDES PRADO, in his capacity as Officer-in-Charge of the Department of

Transportation and Communications, ATTY. JUAN C. STA. ANA, in his capacity as Manager of the
Philippine Ports Authority, Port District of Manila, and the PHILIPPINE PORTS
AUTHORITY, petitioners,
vs.
HON REGINO T. VERIDIANO II, in his capacity as the Presiding Judge of Branch 31 of the Regional
Trial Court of Manila, PORT AREA REALTY, INC., EVERETT STEAMSHIP CORPORATION, HARBOR
IMPORT SHOPPING CENTER, ORIENTAL MEDIA, INC. and ESTER CALING LIM, respondents.
DAVIDE, JR., J.:p
On the basis of an unverified motion, may a court validly issue ex-parte a so-called "status quo order" which
could operate either as a temporary restraining order or writ of preliminary injunction?
This is the main issue in this case which the following and procedural antecedents have generated:
On 11 September 1920, the Smith Bell and Company leased from the Government, through the Bureau of
Lands, Blocks 144 and 145, containing an area of 9,023.36 square meters, located at the Port Area, Manila.
The lessee transferred all its leasehold rights to the Philippine Building Corporation on 27 May 1946, which
the Secretary of Agriculture and Natural Resources approved. The assignee was able to renew the lease
contract, but transferred in 1952 all its rights under the lease agreement to S. Villanueva Enterprises, Inc.
(SVEI), which secured on 1 September 1969 a renewal of the contract for another 25 years. On 26
November 1986, the then Minister of General Services ordered the cancellation of the contract for violation
by SVEI of its provisions. SVEI appealed the order to the Office of the President which affirmed it in its Order
of 29 September 1987. SVEI's several motions for reconsideration were denied. The last denial, which
affirmed with finality the 29 September 1987 Order, was issued on 29 January 1990.
Earlier, on 17 March 1988, the President issued Executive Order No. 321 expanding the territorial area of
the South Harbor Zone of the Port of Manila and placing the whole area under the jurisdiction of the
Philippine Ports Authority (PPA).
On 16 March 1989, the PPA wrote SVEI informing the latter of PPA's intention to take possession of the
leased premises and demanding payment of P728,861.38 representing accrued rentals and interests. On 30
June 1989, SVEI offered to restructure its obligations provided that the PPA assured it in writing that the
contract of lease will not be terminated. In its letter of 22 August 1989, the PPA rejected the proposal and
instead demanded that SVEI vacate the premises within thirty (30) days from receipt of the letter.
Thereafter, the PPA caused to be published a notice of bidding of Blocks 144 and 145 to be held on 28
November 1989. SVEI, however, filed on 23 November 1989 a complaint for Specific Performance with
prayer for preliminary injunction and/or restraining order against the PPA with Branch 38 of the Regional
Trial Court of Manila. The complaint sought to enjoin the PPA from conducting the scheduled bidding. The
case was docketed as Civil Case No. 89-51192. SVEI invoked its right to remain in the premises until 1994
by virtue of its 25-year renewed contract of lease. The court issued a writ of preliminary injunction enjoining
the PPA from proceeding with the bidding.
In the meantime, on 22 March 1990, the PPA filed with the Metropolitan Trial Court of Manila an ejectment
case against SVEI. The case was docketed as Special Action 131889-CV and was assigned to Branch 5 of
said court. 1
Upon the PPA's motion to dismiss Civil Case No. 89-51192, on the ground that the lease contract had
already been cancelled, and such cancellation was affirmed by the Office of the President, and that there is
a pending ejectment case, Branch 38 of the Regional Trial Court of Manila, through Judge Arturo Barias, Jr.,
issued on 30 August 1990 an Order dismissing the case. It held that the Government had sufficient ground
to cancel the contract of lease in view of the violations of its terms by SVEI and that:
Secondly, the mere fact that there is an ejectment case filed with the Metropolitan Trial Court of
Manila, the Court is of the opinion and so holds that all the issues raised herein, more specifically that
of possession, should better be threshed out in the metropolitan trial court involving as they do (sic)
the same parties and the same subject matter. 2

18

SVEI appealed the order to the Court of Appeals where it is still pending resolution.
In line with its plan to fully maximize the utility of Block 145, the PPA decided to improve and renovate it.
Pursuant thereto, it caused to be published in the issues of the Manila Bulletin of 17, 22 and 29 October
1990 an Invitation to Prequalify and Bid for the lease and rehabilitation-development of Block 145. Per the
published notice, the opening of sealed bids was set for 28 November 1990 at 2:00 P.M.
On 27 November 1990, herein private respondents Port Area Realty, Inc., Everett Steamship Corporation,
Harbor Import Shopping Center, Oriental Media, Inc., and Ester Caling Lim, on her behalf and on behalf of
others similarly situated, claiming to be actual occupants of the building located in Block 145, filed a
petition 3 with the Regional Trial Court of Manila for Specific Performance with preliminary injunction and/or
restraining order against the Philippine Ports Authority, the Department of Transportation and
Communication, Atty. Juan C. Sta. Ana, in his capacity as Chairman of the Bidding Committee and the
members thereof. They claim to be sublessees of Block 145, which is now a commercial complex. Private
respondents Port Area Realty, Inc. and Harbor Import Shopping Center allege that they developed their
respective areas into shopping stalls which they leased to interested parties. Private respondent Oriental
Media alleges that it is using a portion of its premises for its printing machines but had the rest developed
into stalls which are leased to other parties. Private respondent Everett Steamship claims that it is using the
premises for its offices while private respondent Lim avers that she is one of the stallholders.
They attached to the petition a copy of the Order of Judge Barias.
The petition was docketed as Civil Case No. 90-55248 and was assigned to Branch 31 of the Regional Trial
Court of Manila which is presided over by respondent Judge.
As their cause of action, private respondents allege in their petition that the offer to bid Block 145 is patently
discriminatory and deprives them of their property rights without due process of law as there was no notice
to them, much less a call for a meeting, despite the knowledge of the PPA-Port District of Manila that they
developed, improved and spent for the establishment of the complex. They are "small-time" and struggling
businessmen who "could not afford and easily win in such bidding," and that in order to prevent such
discrimination and deprivation of their property rights, they should be allowed to negotiate with the
Government on such terms and conditions that are appropriate, reasonable and just. They then pray that the
court issue an order restraining the defendants from continuing with the bidding of Block 145 and that if it is
already auctioned off, to annul the sale and direct the defendants to negotiate with them for a contract of
lease, rehabilitate, operate and/or manage Block 145 under such terms as are reasonable, just and proper
and that after trial, render judgment making the preliminary injunction permanent.
The respondent Judge issued on 28 November 1990 a temporary restraining order (TRO) which was,
however, served after the bidding; the bidding itself was declared a failure because only two (2) bidders
participated.
Defendants, petitioners herein, filed an opposition to the application for preliminary injunction. This was later
followed by their Answer wherein they plead the following special an affirmative defenses:
1) Plaintiffs are mere sublessees of S. Villanueva Enterprise Inc. (SVEI); the contract in favor of the
latter was cancelled, validity of which cancellation was upheld in the Order of 30 August 1990 in Civil
Case No. 89-51192.
2) An ejectment case against SVEI is pending; considering a judgment in an ejectment case is
binding not only upon the defendant but also against the latter's sublessees, privies, agents and/or
successors-in-interest, then the complaint should be dismissed on ground (sic) of litis pendencia,
moreover, plaintiffs are guilty of forum shopping.
3) Plaintiffs do not have better rights than SVEI; are bidder and/or possessors in bad faith; their
possession of Block 145 does not create any vested right; have not availed of appropriate
administrative remedies.
4) A negotiated contract, as suggested by plaintiffs, is never mode to ensure any party the award of a
contract.
and interpose a counterclaim for temperate and exemplary damages. 4

The application for injunction was heard on 7 January 1991 with the private respondents presenting their
first witness, Mr. Catalino Luzano, president of the Port Area Realty, Inc. The hearing was ordered set for
continuation on 15, 17 and 22 January 1991. On 1 5 January 1991, counsel for private respondents moved
for postponement and the hearing was reset for 29 January 1991. On said date, the parties manifested to
the court that they had agreed to consider the injunction incident moot and academic because the act
sought to be enjoined had already been accomplished. Respondent Judge dictated in open court an order
declaring the application for injunction as "deemed abandoned." By agreement of the parties, the pre-trial
conference was set for 28 February 1991.
Thereafter, the PPA caused to be published in the 7, 14 and 21 February 1991 issues of the Manila Bulletin
another Invitation to Prequahfy and Bid for the "lease, renovation and operations of Block 145," setting the
pre-bid conference on 16 April 1991 and the submission and opening of sealed bids on 25 April 1991.
On 28 February 1991, private respondents moved for the postponement of the pre-trial on the ground that
they had not yet received the notice of pre-trial. The pre-trial was reset for 16 April 1991.

The movants pointed that in violation of this agreement, the defendants are intending
to conduct a public bidding on April 25,1991 which will render the issues in this case
moot and academic.
It is the observation of this court that plaintiffs have insisted in this action their vested
rights to enter into negotiations in lieu of public bidding, and in order that the same will
not become moot and academic, the Motion is hereby granted.
and ruled as follows:
WHEREFORE, both parties are hereby ordered to maintain a status quo condition,
that is defendants and their agents are enjoined from continuing the public bidding on
April 25, 1991 or any bidding thereafter until the issues shall have been resolved by
this Court. 7

On 15 April 1991, a day before the pre-trial conference, private respondents filed in Civil Case No. 90-55248
an unverified Urgent Motion for the Issuance of a Status Quo Order 5 alleging therein as follows:
1. That the Restraining Order issued by this Honorable Court has already lapsed;
2. That the hearing on Plaintiffs' motion for the issuance of a writ of preliminary injunction was then in
progress before it was abandoned because of Defendants' assurance that there would be no public
bidding to be conducted during the pendency of this case;
3. That Defendants, in violation of this agreement, are intending and threatening to conduct a-s in fact, a
public bidding of the premises was (sic) scheduled to be conducted on April 25,1991 which, if
completed, would render the issues in this case moot and academic.

When the case was called for pre-trial on 16 April 1991, as earlier agreed upon by the parties, counsel for
private respondents asked for a postponement on the ground that one of them, Atty. Bandayrel, had not yet
prepared his Pre-Trial Brief, while the other, Atty. Jurado, claimed that his client, Oriental Media, Inc., had not
received its notice of hearing. Despite the objection by counsel for herein petitioners, respondent Judge
reset the pre-trial for 16, 23 and 30 May 1991.

and praying that "a status quo order be issued enjoining the Defendants and their agents from continuing
the scheduled public bidding on April 25, 1991 until after the issues shall have been resolved by the
Honorable Court." 6

In Our Resolution of 24 April 1991, We required the respondents to comment on the petition and issued a
Temporary Restraining Order enjoining the respondent Judge, his agents, representatives and/or any
person acting upon his orders or in his place or stead from enforcing and/or carrying out the above Order of
15 April 1991.

This motion does not contain any notice of hearing to counsel for the defendants (petitioners herein). There
is a notice of hearing but it is addressed to the Clerk of Court and reads:
The Clerk of Court
RTC-Manila
Branch 31
Greetings:
Kindly set the afore-stated Motion for resolution and approval of the Honorable Court
on April 15, 1991 at 9:00 A.M. or as soon thereafter at the convenience of the Court.
Above this notice is an entry reading:
Copy Furnished:
Solicitor Roman G. Del Rosario
Office of the Solicitor General
Salcedo Street, Legaspi Village
Makati, Metro Manila
Acting on the aforesaid urgent motion on the day it was filed, the respondent Judge dictated in open court
an Order wherein he stated that:
... The motion alleges among other things the Prayer for Writ of Preliminary Injunction
was abandoned because of Defendants' assurance that there would be no public
bidding to be conducted during the pendency of this case.

19

Petitioners then filed on 22 April 1991 the instant petition without even moving for a reconsideration of
the status quo order in view of the urgent necessity for relief pleaded by the government 8 and because
such a move would be inadequate.

Petitioners herein assert that respondent Judge committed grave abuse of discretion in issuing the
challengedstatus quo order since private respondents' unverified urgent motion for its issuance does not
allege any fact or show any clear legal right to justify it and that it was heard without notice to petitioners;
additionally, it was issued without requiring private respondents to put up a bond.
In their Comment filed on 6 May 1991, respondents allege that they did not pursue their prayer for a
preliminary mandatory injunction because of the assurance of petitioners that the public bidding shall not be
held while the resolution of the issues in the case remain pending. However, since petitioners disregarded
that commitment, private respondents had to rush to the court a quo for the issuance of a restraining order.
The latter argue, inter alia, that what the respondent judge issued was not a preliminary injunction but
merely a temporary restraining order, which, as mandated by law, lapses ipso vigore after twenty (20) days
from its issuance. Hence, the legal basis for its issuance, that is, without hearing and without requiring the
putting up of a bond, should not be under question." 9
In their Reply filed on 26 June 1991, petitioners insist that the status quo order of 15 April 1991 is a "writ of
preliminary injunction, but whether it is a temporary restraining order or a writ of preliminary injunction, the
same was issued despotically and without the least legal basis." If it is to be considered a temporary
restraining order, it is, in effect, an extension of the 28 November 1990 TRO, which would be irregular and
unlawful per Defalobos vs. Aquilizan. 10 Moreover, private respondents are not entitled to the writ since the
complaint fails to show a cause of action. Finally, there was no agreement whatsoever that no bidding would
be conducted; the claim is a blatant lie, for, at the hearing on 7 January, when Atty. Bandayrel for the private
respondents sought to make a misrepresentation on this point, his scheme was immediately aborted, thus:
Atty. Bandayrel:
But there is already an admission of the defendant that there will
be no more bidding with respect to the Block 145, Your Honor.

Solicitor Del Rosario:

the rules and, hence, the clerk has no right to receive it. 16 In Filipinas Fabricators and Sales, Inc., et al. vs.
Hon. Magsino, et al., 17 this Court was more emphatic:
There was no admission, Your Honor. There was merely a
bidding which was declared a failure. As to whether we will hold
another bidding, Your Honor, that depends upon the discretion of
the management of the Philippine Ports Authority.

Atty. Bandayrel:
I withdraw that manifestation, Your Honor. 11
In the Resolution of 3 July 1991, this Court gave due course to the petition and required both parties to file
their respective memoranda, which petitioners complied with on 14 August 1991 and the respondents on 6
November 1991. In their Memorandum, respondents come forward with a new theory, namely: The
questioned status quoorder "was (sic) a mere reinstatement of the previous temporary restraining order
already issued which was recalled because of Petitioner's assurance." 12
We do not hesitate to grant the petition. It is impressed with merit. There is no doubt at all that respondent
Judge had acted with palpable abuse of discretion, so grave that it amounts to lack of jurisdiction, in issuing
the status quo order of 15 April 1991. His conduct can vividly be described as despotic, arbitrary and
capricious. The following suffice to support this conclusion:
1. Respondent Judge knew, or should have known because it was his duty to read the pleading, that the
urgent motion for the issuance of a status quo order does not contain a notice of hearing addressed to the
counsel of the adverse parties (defendants, herein petitioners). The notice incorporated therein is a notice
addressed to the Clerk of Court. This does not comply with Sections 4 and 5, Rule 15 of the Rules of Court
which explicitly provide that the notice shall be served by the applicant to all parties concerned at least three
(3) days before the hearing thereof and "shall be directed to the parties concerned, and shall state the time
and place for the hearing of the motion." A notice of hearing addressed to the Clerk of Court and not to the
parties is no notice at all.
In Philippine Advertising Counselors, Inc. vs. Revilla, 13 this Court, citing prior relevant cases, held:
Finally, Section 4, Rule 15 of the Rules of Court provides that notice of a motion shall be served by
the applicant to all parties concerned, at least three (3) days before the hearing thereof, together
with a copy of the motion, and of any affidavits and other papers accompanying it; and Section 5 of
the same Rule requires the notice to be directed to the parties concerned and to state the time and
place for the hearing of the motion. A motion which fails to comply with these requirements is
nothing but a useless piece of paper [Manila Surety and Fidelity Co., Inc. v. Bath Construction
Company, et al., L-16636, June 24, 1965, 14 SCRA 435, 437, citing PNB v. Donasco, L-18638,
February 28, 1963; Manakil v. Revilla, Phil. 81; Roman Catholic Bishop of Lipa v. Municipality of
Unisan, 44 Phil. 866; and Director of Lands v. Sanz, 45 Phil. 117. Sebastian v. Cabal, etc., et al., L25699, April 30, 1970, 32 SCRA 453, 454-55. Cledera, etc., et al., v. Sarmiento, etc., et al., L-3245054, June 10, 1971, 39 SCRA 552, 562-576]. In the instant case, there was, according to the trial
court in its Order of April 7, 1969, "no proof that plaintiff was duly served with a copy of the motion
for reconsideration."Moreover, the motion did not contain a notice of hearing directed to petitioner
stating the time and place of the hearing. The notice was addressed to the Clerk of Court requesting
the latter to "set the foregoing motion for the consideration and approval of this Honorable Court
immediately upon receipt hereof." The notice of hearing caused to be issued by the trial court did not
cure the defect of lack of notice, for the duty to give such notice devolves upon the movant, not upon
the court [Magno v. Ortiz, etc., et al., L-22670, January 31, 1969, 26 SCRA 692, 695, citing Fulton
Insurance Company v. Manila Railroad Co., et al., L-24263, Nov. 18, 1967, 21 SCRA 974. Cledera,
etc., et al. v. Sarmiento, etc., et al., Ibid.]." (emphasis supplied).
We reiterated the above rule in Sacdalan vs. Bautista, et al., 14 and, recently, in Bank of the Philippine
Islands vs. Far East Molasses Corp. 15
A motion that does not contain a notice of hearing is but a mere scrap of paper; it presents no question
which merits the attention and consideration of the Court. It is not even a motion for it does not comply with

20

... a motion without notice of hearing is nothing but a piece of paper filed in
court, which should be disregarded and ignored. ... (emphasis supplied).
The motion in question does not also show that a copy thereof was actually served on counsel for the
defendants (petitioners herein). It merely states, copy furnished: without indicating how a copy was so
furnished. The respondent Judge could not have failed to notice that the motion was filed only on 15 April
1991 and that there was no sufficient proof of service thereof to counsel for the adverse parties. Section 6,
Rule 15 of the Rules of Court provides that "no motion shall be acted upon by the court, without proof of
service of the notice thereof, except when the court is satisfied that the rights of the adverse party or parties
are not affected." Respondent Judge knew very well that Government rights and interests were involved and
that its appropriate agencies have been resisting not only the claims of private respondents as sublessees
but also those of the lessee (SVEI) whose contract of lease had in fact been cancelled and against whom an
ejectment suit is presently pending.
No compelling reason existed for acting on the motion on shorter notice. It sought to restrain the holding of a
public bidding scheduled on 25 April 1991, a full ten (10) days from its filing. The pre-trial conference had
earlier been reset to 16 April 1991. If private respondents had some respect for fairness and were motivated
by good faith, they could have very well set the hearing of the motion on 16 April 1991. That there was in
fact an absence of urgency is best borne out by the date the motion was prepared. It is dated APRIL 10,
1991. 18 If the movants had actually intended to have had it heard on 15 April, they clearly had sufficient
time to comply with the rules without using the cover of "Urgency." Besides, the notice of bidding was last
published in the 21 February 1991 issue of the Manila Bulletin. There is no indication at all that private
respondents came to know of the publication only on or shortly before 10 April to justify their sense of
urgency in preparing the said motion.
Obviously, respondent Judge deliberately defied and ignored the above solemn pronouncements of this
Court and disregarded the basic rules on notice if only to grant special favor to movants. To quote a line
from Manila Surety and Fidelity Co., Inc. vs. Batu Construction Co., et al., supra, what he did is "intolerable
in a well-ordered judicial system."
What We stated in Cledera vs. Sarmiento, supra, bears repeating if only to express the Court's
condemnation of callous and defiant disregard of simple rules and settled doctrines:
To emphasize once more, the directives in Section 2 of Rule 37 and Sections 4, 5, and
6 of Rule of the Revised Rules of Court are as mandatory as they are clear and simple; and noncompliance therewith is fatal to the cause of the movant, because the mere filing of the motion for
reconsideration, without the requisite notice of hearing, does not toll the running of the period for
appeal. Unless the movant sets the time and place of hearing in the notice and serves the adverse
party with the same, the court would have no way to determine whether the party agrees to or objects
to the motion, and if he objects, to hear him on his objection, since the rules themselves do not fix any
period within which to file his reply or opposition. The rules commanding the movant to serve on the
adverse party a written notice of the motion (Section 2, Rule 37) and that the notice of hearing "shall be
directed to the parties concerned, and shall state the time and place for the hearing of the motion"
(Section 5, Rule 15), do not provide for any qualifications, much less exceptions. To deviate from the
peremptory principle thus uniformly reaffirmed in the latest cases aforecited in, and to exempt from the
rigor of the operation of said principle, the case at bar would be one step in the emasculation of the
revised rules and would be subversive of the stability of the rules and jurisprudence thereon all to
the consternation of the Bench and Bar and other interested persons as well as the general public who
would thereby be subjected to such an irritating uncertainty as to when to render obedience to the
rules and when their requirements may be ignored. We had to draw a line somewhere and WE did
when we promulgated on January 1, 1964 the Revised Rules of Court, wherein WE delineated in a
language matchless in simplicity and clarity the essential requirements for a valid notice of hearing on
any motion, to eliminate all possibilities of equivocation or misunderstanding.
2. The urgent motion for a status quo order is unverified. Whether it be considered as one for a temporary
restraining order or for a preliminary injunction, it is still patently insufficient in form and in substance. What
is sought to be enjoined is "the scheduled public bidding on April 25, 1991," an event which is not pleaded in

or covered by the original petition in Civil Case No. 90-55248 filed on 27 November 1990. It is, therefore, a
subsequent event or occurrence which could properly be the subject of a supplemental pleading pursuant to
Section 6, Rule 10 of the Rules of Court. But even conceding for the moment that a motion may be allowed
for the purpose, such must be verified. This is the conclusion which necessarily flows from the mandatory
preconditions for the issuance of either a preliminary injunction or a temporary restraining order. Section 4,
Rule 58 of the Rules of Court provides that a preliminary injunction may be granted only if: (a) the complaint
is verified and (b) the plaintiff files with the clerk of court in which the action is pending the requisite bond;
and the pertinent portion of Section 5 thereof, as amended by B.P. Blg. 224, reads:
SECTION 5. Preliminary injunction not granted without notice; issuance of restraining
order. No preliminary injunction shall be granted without notice to the defendant. If it
shall appear from the facts shown by affidavits or by the verified complaint that great
or irreparable injury would result to the applicant before the matter can be heard on
notice, the judge to whom the application for preliminary injunction was made, may
issue a restraining order to be effective only for a period of twenty days from date of its
issuance. Within the said twenty-day period, the judge must cause an order to be
served on the defendant requiring him to show cause, at a specified time and place,
why the injunction should not be granted, and determine within the same period
whether or not the preliminary injunction shall be granted, and shall accordingly issue
the corresponding order. In the event that the application for preliminary injunction is
denied, the restraining order is deemed automatically vacated. ... (emphasis supplied).
Thus, if in a pending case, a mere motion for the issuance of a writ of preliminary injunction or temporary
restraining order may be allowed in connection with a supervening act, event or occurrence, the motion
must also be verified. That said motion is only an incident to a verified petition does not provide an exception
to what is stated above since the event against which it is directed is not covered by or within the
contemplation of the petition.
In an apparent attempt to be clever, respondent Judge sought to circumvent the above rule by carefully
avoiding the use of the term preliminary injunction or temporary restraining order. He just directed the
parties to maintain a status quo condition. Unfortunately, such move displayed neither wisdom nor wit, but
rather defiance of the rule.
3. The status quo order is in fact a preliminary injunction which enjoins the defendants (petitioners) and their
agents from continuing not only the public bidding on 25 April 1991, but also "any bidding thereafter until the
issues shall have been resolved by the court a quo." Even if We set aside the requirement of verification for
the motion, respondent court cannot validly and lawfully issue it without notice to the defendants and without
the compliance of the bond requirement, which is mandatory. 19

4. Finally, respondents submit that the status quo order "was a mere reiteration of the previous temporary
restraining order already issued which was recalled because of petitioners' assurance." This compounds the
arbitrariness of respondent Judge's action and his inexplicable propensity to disregard doctrines laid down
by this Court. We ruled in Dionisio, et al. vs. CFI of South Cotabato 24 that if before the expiration of the 20
day period the application for preliminary injunction is denied, the temporary restraining order would thereby
be deemed automatically vacated. But if no action is taken by the judge on the application within said 20-day
period, the temporary restraining order would automatically expire on the 20th day by the sheer force of
law. 25 By the terms of B.P. Blg. 224, a temporary restraining order can no longer exist indefinitely. This rule
was reiterated in Board of Transportation vs. Castro; 26whoever, to emphasize the automatic expiration, this
Court further stated that no judicial declaration to that effect is necessary. In the recent case ofAquino, et al.
vs. Luntok, et al., 27 We further made the following pronouncement:
The 20-day period of effectivity of a TRO is non-extendible; the restraining order automatically
terminates at the end of such period without the need of any judicial declaration to that effect. [Golden
Gate Realty Corp. vs. IAC, 152 SCRA 684]. Any extension would, therefore, ordinarily, be disallowed.
But, when injunction is subsequently granted, as in the case at bar, any defect in the order brought
about by the extension of its enforceability is deemed cured [Footnote, Banque De L'Indochine Et De
Suez, et al. vs. Torres, et al., G.R. Nos. 82405-06, July 10, 1989].
By no stretch of the imagination then may the earlier TRO, issued on 28 November 1990, be deemed to
have been reinstated, revived or resurrected.
Finally, We find to be unsubstantiated the claim of private respondents that petitioners violated the
"gentleman's agreement" that no bidding shall be conducted until the issues are resolved. On the contrary,
as shown above, the crude attempt of Atty. Bandayrel in the court below to hold the petitioners to an alleged
admission was immediately rebuffed by Solicitor De Rosario and Atty. Bandayrel was compelled to withdraw
his manifestation.
WHEREFORE, the instant petition is GRANTED. The challenged status quo order dated 15 April 1991
issued by respondent Judge in Civil Case No. 90-55248 is hereby SET ASIDE and declared NULL AND
VOID.
Costs against private respondents. IT IS SO ORDERED

Worse, considering the allegations in the motion and the petition itself, to which is attached as Annex "A" the
Order of Judge Barias of 30 August 1990, it is obvious that private respondents have not shown any clear
and positive right to be entitled to the protection by the ancillary relief of preliminary injunction. They are
mere sublessees. As indisputably shown in the Order of Judge Barias, which dismissed Civil Case No. 8951192 filed by SVEI, the contract of lease over Blocks 144 and 145 in favor of SVEI had been cancelled and
such cancellation was affirmed with finality by the Office of the President on 29 January 1990. Respondent
Judge is presumed to have read the petition and this Annex "A", as well as the Answer of the defendants
which makes reference to it and attaches as part thereof a copy of the complaint for ejectment against SVEI.
Such admissions and pleadings provide enough basis for a denial of the application for preliminary
injunction since, in the absence of any further evidence, it is quite obvious that the applicants had failed to
show any clear and positive right to the premises. As mere sublessees, they cannot invoke any right
superior to that of the lessee, their sublessor. The moment the sublessor (SVEI in this case) is ousted from
the premises, the sublessees would have no legs to stand on. 20 In an ejectment case, sublessees need
even be impleaded as co-defendants with the lessee (sublessor and a judgment of eviction against the
lessee binds sublessees. 21 As such, they cannot likewise claim any right to a negotiated contract,
especially one on their terms because according to them, they are merely "small-time" or "struggling"
businessmen. This would clearly be against public policy and public interest.
For a writ of injunction to issue, the existence of a clear and positive right especially calling for judicial
protection must be shown; injunction is not to protect contingent or future rights; nor is it a remedy to enforce
an abstract right. 22 An injunction will not issue to protect a right not in esse and which may never arise or to
restrain an act which does not give rise to a cause of action. There must exist an actual right. 23

21

FIRST DIVISION
G.R. No. 88705 June 11, 1992

JOY MART CONSOLIDATED CORPORATION, petitioners,

vs.
HON. COURT OF APPEALS, PHOENIX OMEGA DEVELOPMENT AND MANAGEMENT
CORPORATION and LIGHT RAIL TRANSIT AUTHORITY, respondents.
GRIO-AQUINO, J.:
Does a trial court possess jurisdiction to dissolve a writ of preliminary injunction which is
pending review oncertiorari in the Court of Appeals?
In 1978-79, the government planned the Light Rail Transit (LRT) system to service the
transportation requirements of the commuting public from Baclaran to Balintawak Monument
and vice versa. The property of Joy Mart at Carriedo Street, Sta. Cruz, Manila, where the
Isetann Department Store is located, and three (3) other adjoining parcels of land (with a total
area of 1,611 sq. m., on which stands the Presidente Hotel leased by Joy Mart) was among the
properties that would be needed for the LRT system and were being considered for
expropriation should negotiations for their acquisition fail. As a gesture of cooperation with the
government, Joy Mart consented to sell the property and give up its leasehold rights over the
adjacent properties, provided, it would be given the first option to redevelop the entire area
denominated as the consolidated block of the LRT Carriedo station encompassing Joy Mart's
properties.
On September 8, 1982, while negotiations for the purchase of the properties were ongoing
between Joy Mart and the Special Committee on Land and Property Acquisition of the Light Rail
Transit Authority (LRTA), the latter entered into a contract with the Philippine General Hospital
Foundation Inc. which had been granted the right, authority, and license to develop the areas
adjacent to the LRT stations and to manage and operate the concessions to be established in
Caloocan, Manila, and Pasay, with the right to sublease, assign, and transfer any of its rights
and interests therein.
On February 22, 1983, Joy Mart conveyed its property and waived its leasehold rights on the
adjacent lots in favor of the government, through the LRTA, under a Deed of Absolute Sale. The
Deed provided, among other things, that "upon recommendation of the special panel created by
the LRTA Committee on Land and Property Acquisition. LRTA agreed that Joy Mart, the owner
of Isetann and lessee of the Presidente Hotel, should be given the first option in the
redevelopment of the consolidated block, notwithstanding their compensation for the property."
As partial compliance with the aforestated first option, the PGH Foundation subleased to Joy
Mart the LRT Carriedo station covering the consolidated block for the purpose of constructing a
multi-storey building of first class materials.
Subsequently, Joy Mart submitted to LRTA its plans for the construction of the building
occupying the consolidated block. However, LRTA informed Joy Mart that the proposed building
should occupy only an area of 1,141.20 square meters as the rest of the areas within the
consolidated block would be used by the LRT station and as set-back area or open space for
the benefit of the commuting public.
When Joy Mart reminded LRTA of the contract provisions over the consolidated block, the
former was assured that, in the event any area in the consolidated block was to be released for
redevelopment, the first option of Joy Mart would be respected and implemented.

22

On August 30, 1984, an Addendum to the Sublease Agreement was executed between Joy
Mart and the PGH Foundation increasing the area to be used and occupied by Joy Mart. Aside
from the increase of monthly rental and provision for an escalation clause, Joy Mart was made
to pay "goodwill" in the sum of P3.0 Million.
Pursuant to its understanding with, and the assurances of, LRTA, Joy Mart constructed an
eight-storey building with ten levels fully airconditioned in the subject area. Joy Mart had to
borrow P50.0 Million for this project. The feasibility study on the viability of this project was
conditioned upon Joy Mart serving the business requirements in the LRT Carriedo station and
maintaining its first option to redevelop and occupy any available area therein.
On November 28, 1986, LRTA entered into Commercial Stalls Concession Contract with the
Phoenix Omega Development and Management Corporation ("Phoenix" for brevity) awarding to
it all the areas and commercial spaces within the three LRT terminals and the fifteen (15) online stations.
In the third quarter of 1987, Joy Mart learned of the contract between LRTA and Phoenix when
construction activities commenced within the consolidated block of the LRT Carriedo station.
Joy Mart made representations with the LRTA and reiterated its first option to redevelop the
subject area, but to no avail.
Joy Mart filed a complaint for specific performance of contract and damages for breach of
contract with injunction against the LRTA and Phoenix on August 21, 1987. The case entitled
"Joy Mart vs. LRTA and Phoenix," was docketed as Civil Case No. 87-41731 in the Regional
Trial Court of Manila. Branch XXXII. Joy Mart asked that LRTA be ordered to award to it, either
by sale, or lease, the redevelopment of the area known as the consolidated block of the LRT
Carriedo station which is part of the area subject of the Deed of Absolute Sale dated February
22, 1983, executed by Joy Mart in favor of the Government or LRTA. Joy Mart also asked the
court to issue a writ of preliminary injunction and/or restraining order "commanding the
respondents (LRTA and Phoenix) individually and collectively, their officers and employees, to
cease and desist from the construction being had in the property adjacent to the leased
premises."
On September 25, 1987, the trial court, presided by Judge (now Court of Appeals Justice)
Artemon D. Luna, after hearing the parties and considering their respective memorandums in
amplification of oral arguments, issued a writ of preliminary injunction "commanding the
defendant Phoenix to cease and desist from continuing with the construction going on adjacent
to the property on lease to the plaintiff by LRTA, until further orders from this court, upon posting
by the plaintiff of a P10,000.00 bond approved by the court, which may answer for any
damages that the defendants may sustain by reason of the issuance of this writ" (p. 41. Rollo).
Phoenix sought relief in the Court of Appeals by filing a Petition for Certiorari and Prohibition
(CA-G.R. SP No. 12998) praying the appellate court: (1) to require the trial court to immediately
lift the writ of injunction and/or to refrain from further carrying out or implementing it; and (2)
after due hearing: (a) reverse and set aside the order granting the writ of preliminary injunction;
(b) dissolve the writ of injunction dated September 23, 1987; and (c) prohibit the trial judge from
taking cognizance of the case and to remand it to Branch IX of the Regional Trial Court of
Manila which had first taken cognizance of the case. The petition was docketed as CA-G.R. SP
No. 12998 and raffled to the Sixteenth Division of the Court of Appeals which gave due course
to the petition but did not issue a restraining order against the trial court.
Meanwhile, in the trial court, the LRTA and Phoenix filed separate answers to Joy Mart's
complaint in Civil Case No. 87-41731. The pre-trial of the case was set on November 13, 1987.

As Phoenix and Joy Mart were, exploring avenues for an amicable settlement, the pre-trial
conference was re-set on December 11, 1987, January 14, 1988, and lastly on March 2, 1988
when it was declared terminated.
On May 30, 1988, while their certiorari petition to review the writ of preliminary injunction issued
by Judge Luna (CA-G.R. SP No. 12998) was still pending in the Court of Appeals, the LRTA and
Phoenix filed in the trial court a joint petition to dissolve the said Writ of Preliminary Injunction,
offering to post a counterbond for that purpose. They alleged that the writ of preliminary
injunction was causing tremendous losses to LRTA and Phoenix because they have been
unable to use the commercial stalls in the consolidated block while Joy Mart could be
compensated for any loss it may suffer if the injunction were lifted; "that at a rate of P1,000.00
monthly rental per square meter, the 28 stalls would earn P305,800.00 a month (tsn, idem), that
since September 21, 1987 when the injunction was issued up to the present, Phoenix should
have earned P2,752.200.00 and suffered as much in damages which it will continue to suffer if
the injunction is not lifted" (p. 80. Rollo). They pleaded that they "are as much entitled to the
protection of their rights as plaintiff, that if fair play gives the plaintiff a right to prolong the
litigation, fairness also demands that defendants be relieved of the thousands of pesos in
damages that they suffer for every day of delay in this case occasioned by the imposition of the
injunction" (p. 69. Rollo).
Joy Mart opposed the petition to dissolve the injunction. The petition was heard on June 17,
1988 with the parties orally arguing their respective sides of the question.
On July 6, 1988, the trial court dissolved the writ of preliminary injunction on the ground that its
continuance would cause great damage to the respondents, while the petitioner's claim for
damages, which was yet to be proven, can be fully compensated. Joy Mart filed a motion for
reconsideration. LRTA and Phoenix opposed it. The trial court denied Joy Mart's Motion for
Reconsideration on August 9, 1988, stating thus:
The petition for dissolution is based on pertinent portion of Section 6, Rule 58 of the Rules of
Court, that the continuance of the injunction would cause great and irreparable damage to
defendants while plaintiff can be fully compensated for whatever damages that it may suffer.
The evidence adduced during the hearing of the petition for dissolution of the writ showed
that the continuance of the writ would cause great damages to defendants and plaintiff's
claim for damages, if any and which it has yet to prove, can be fully compensated.
The order of dissolution expressed in no uncertain terms that this Court may not be ascribed
as having pre-empted the authority and jurisdiction of the Court of Appeals over
the certiorariproceedings. The authority of this Court to dissolve the writ is inferable in
Section 6, Rule 58, Rules of Court that it may dissolve the writ if it appears during the hearing
that although plaintiff is entitled to the injunction, its continuance would cause great damage
to the defendants while the plaintiff can be fully compensated for such damages as it may
suffer (Cf. Tiaoqui and Imperial vs. Horilleno, 63 Phil. 116, 120). (pp. 70-71, Rollo.)
On August 17, 1988, the Sixteenth Division of the Court of Appeals upon being apprised by
Phoenix of the trial court's action, dismissed Phoenix's petition for certiorari (CA-G.R. SP No.
12998) for having become moot and academic.
On September 14, 1989, Joy Mart sought relief in the Court of Appeals from Judge Luna's order
lifting the writ of preliminary injunction. In its petition for certiorari with preliminary injunction and
restraining order (CA-G.R. SP No. 15618, assigned to the Ninth Division of the Court of
Appeals), Joy Mart prayed that:

. . . a temporary restraining order be forthwith issued commanding the

Honorable respondent Court to refrain from further proceeding in the matter sought to be
reviewed . . . ; (c) the application for a writ of preliminary injunction be granted restraining
respondent Phoenix from continuing its subleasing and construction activities adjacent to the
premises leased to petitioner by respondent LRTA until the main case is finally decided; and
(d) a judgment be rendered declaring the order of 6 July 1988, as well as the order of 9
August 1988, of the Honorable respondent Court to be null and void, and upholding the order
of 21 September 1987 to be valid and binding. (pp. 39-40, Rollo.)
The Court of Appeals, Ninth Division, gave due course to the petition and required the
respondents to answer within ten (10) days from notice. The Court temporarily restrained the
respondents "from implementing the questioned orders of 6 July 1988 and 9 August 1988, and
for private respondent Phoenix to refrain from engaging in subleasing and construction activities
in the questioned premises, and from implementing the sublease contracts if already signed, or
the occupancy of the commercial stalls if already constructed, until further orders from this
court" (pp. 17-18, Rollo). It set the hearing of the application for a writ of preliminary injunction
on September 29, 1988.
Despite the temporary restraining order which it received on September 19, 1988, Phoenix
continued its construction activities and allowed its tenants to occupy the finished stalls.
Whereupon Joy Mart filed a motion praying the Court of Appeals to declare Phoenix in
contempt of court.
After hearing the application for a writ of preliminary injunction, the opposition and answers of
the LRTA and Phoenix, and the memoranda of the parties, the Court of Appeals, Ninth Division,
on February 28, 1989, dismissed Joy Mart's petition.
Hence, this petition for review in which Joy Mart alleges that the Court of Appeals erred:
1. in not finding that the trial court lost jurisdiction to act on the motion to dissolve the writ
of preliminary injunction, after the said writ had been elevated to the Court of Appeals,
Sixteenth Division, for review;
2. in not finding that Phoenix is guilty of forum-shopping; and
3. in not finding Phoenix guilty of contempt, of court, and in not issuing a writ of preliminary
mandatory injunction.
These assignments of error are reducible to the lone issue of whether the trial court continued
to have control of the writ of preliminary injunction even after the same had been raised to the
Court of Appeals for review.
The answer is no. After the LRTA and Phoenix had elevated the writ of preliminary injunction
even after the same had been raised to the Court of Appeals for review.
The answer is no. After the LRTA and Phoenix had elevated the writ of preliminary injunction to
the Court of Appeals for determination of the propriety of its issuance (CA-G.R. SP No. 12998),
the trial court (notwithstanding the absence of a temporary restraining order from the appellate
court) could not interfere with or preempt the action or decision of the Court of Appeals on the
writ of preliminary injunction whose annulment was sought therein by Phoenix and the LRTA.
In petitioning the trial court to lift the writ of preliminary injunction which they themselves had
brought up to the Court of Appeals for review, Phoenix and the LRTA engaged in forum-

23

shopping. After the question of whether the writ of preliminary injunction should be annulled or
continued had been elevated to the Court of Appeals for determination, the trial court lost
jurisdiction or authority to act on the same matter. By seeking from the trial court an order lifting
the writ of preliminary injunction, Phoenix and LRTA sought to divest the Court of Appeals of its
jurisdiction to review the writ. They improperly tried to moot their own petition in the Court of
Appeals a clear case of trifling with the proceedings in the appellate court or of disrespect for
said court.
In Prudential Bank vs. Castro, 142 SCRA 223, 231 where the trial judge issued an order
changing or correcting his previous order which had been elevated to the Supreme Court for
review, the judge's actuation was deemed to be "disrespectful of this Court."
(e) Respondent Judge, in his Order of March 13, 1985, gave course to the
appeal of Complainant Bank although he had already ruled that the latter had lost the right
of appeal. That Order of March 13, 1985 was issued after Complainant Bank had instituted
G.R. No. 69907 on February 19, 1985, asking that Respondent Judge be ordered to allow
its appeal from the summary judgment. The order of March 13, 1985 was clearly intended to
render G.R. No. 69907 moot and academic. Said Order was disrespectful of this Court. If at
all, Respondent Judge should have come to this Court in said G.R. No. 69907, to ask for
leave to allow the appeal of Complainant Bank with admission that he had realized that his
previous denial of the appeal was erroneous.
The actuation of Judge Luna in Civil Case No. 87-41731 can be categorized as such. It is not
excused by the fact that Phoenix and LRTA were presenting evidence of losses and damages
in support of their motion to lift the writ of preliminary injunction, for that could as easily have
been done by them in the Court of Appeals which possesses "the power to try cases and
conduct hearing, receive evidence and perform any and all acts necessary to resolve factual
issues raised in cases falling within its original and appellate jurisdiction, including the power to
grant and conduct new trials or further proceedings" (Sec. 9, par. [3], 2nd par.. B.P. Blg. 129).
The trial judge played into the hands of Phoenix and the LRTA, and acted with grave abuse of
discretion amounting to excess of jurisdiction in granting their motion to dissolve the writ of
injunction. Judicial courtesy behooved the trial court to keep its hands off the writ of preliminary
injunction and defer to the better judgment of the Court of Appeals the determination of whether
the writ should be continued or discontinued.
The non-issuance of a temporary restraining order by the Court of Appeals upon receipt of the
petition in CA-G.R. SP No. 12998 simply meant that the trial court could proceed to hear and
decide the main complaint of Joy Mart for specific performance of contract and damages
against the LRTA and Phoenix. It did not give the lower court a license to interfere with the
appellate court's disposition of the writ of preliminary injunction.

injunction before the Court of Appeals could rule on whether or not it was properly issued, the
trial court in effect preempted the Court of Appeals' jurisdiction and flouted its authority.
The private respondents' application to the trial court for the dissolution of the writ of preliminary
injunction that was pending review in the Court of Appeals was a form of forum shopping which
this Court views with extreme disapproval. The lower court's proceeding being void for lack of
jurisdiction, the writ of preliminary injunction should be reinstated, and the petition to annul the
writ (CA-G.R. SP No. 12998) should be dismissed on the ground of forum shopping as provided
in Rule No. 17 of the Interim Rules and Guidelines, Rules of Court.
17. Petitions for writs of certiorari, etc. No petition for certiorari, mandamus,
prohibition, habeas corpus or quo warranto may be filed in the Intermediate Appellate
Court if another similar petition has been filed or is still pending in the Supreme Court.
Nor may such petition be filed in the Supreme Court if a similar petition has been filed or
is still pending in the Intermediate Appellate Court, unless it be to review the action taken
by the Intermediate Appellate Court on the petition filed with it. A violation of this rule shall
constitute contempt of court and shall be a cause for the summary dismissal of both
petitions, without prejudice to the taking of appropriate action against the counsel or party
concerned.
The dismissal of Phoenix and LRTA's petition in G.R. No. SP 12998 by the Court of Appeals
(Sixteenth Division) was correct, but it should be for violation of Rule 17 of the Interim Rules
and Guidelines (forum-shopping), not because the petition had become moot and academic.
The dismissal of Joy Mart's petition for certiorari in. CA-G.R. SP No. 15618 by the Court of
Appeals (Ninth Division) is annulled and set aside for grave abuse of discretion.
WHEREFORE, the petition for review is GRANTED. The Court of Appeals' decision dated
February 28, 1989 in CA G.R. SP No. 115618, dismissing Joy Mart's petition for certiorari and
upholding the dissolution by the Regional Trial Court of Manila, Branch 32, of the preliminary
writ of injunction in Civil Case No. 87-41731, is hereby annulled and set aside and the
preliminary writ of injunction issued by the trial court on September 23, 1987 in Civil Case No.
87-41731 is reinstated. However, if in the meantime the construction and occupancy of the
private respondents' commercial stalls sought to be stopped by the injunction have been
completed, the rentals received by the private respondents after the finality of this decision shall
be deposited by them, or the lessees, in the Regional Trial Court to await the final judgment in
Civil Case No. 87-41731. Costs against the private respondents.
The Court of Appeals, Ninth Division, is ordered to hear and decide Joy Mart's petition to
declare Phoenix in contempt of court for having allegedly defied and disobeyed the Court's
temporary restraining order of September 15, 1988 in CA-G.R. SP No. 115618.

By simply "noting" that the trial court's order lifting the writ of preliminary injunction
had mooted the case before it, the Court of Appeals displayed regrettable indifference toward
the lower court's interference with the exercise of the appellate court's jurisdiction to decide and
dispose of the petition for certiorari pending before it. Instead of being jealous of its jurisdiction,
the Appellate Court was simply glad to be rid of the case.

SO ORDERED.

The Court of Appeals' reasoning that the trial court did not overlap or encroach upon its (the
Court of Appeals') jurisdiction because the trial court "was actually delving into a new matter
the propriety of the continuance of the writ of preliminary injunction in view of developments and
circumstances occurring after the issuance of the injunction" (pp. 51-52, Rollo), is unconvincing,
for the issue of the impropriety of issuing the writ of preliminary injunction was inseparable from
the issue of whether the writ should be maintained or not. By lifting the writ of

G.R. No. 110086. July 19, 1999]

PARAMOUNT INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS and
DAGUPAN ELECTRIC CORPORATION, respondents.

24

DECISION

YNARES-SANTIAGO, J.:
Before this Court is a petition for review on certiorari assailing the Decision of the Court of
Appeals dated April 30, 1993 in CA-G.R. CV No. 11970 which dismissed petitioner Paramount
Insurance Corporations (PARAMOUNT) appeal, thereby affirming the decision of the court a
quo finding petitioner liable on its injunction bond.
McAdore Finance and Investment, Inc. (McADORE) was the owner and operator of the
McAdore International Palace Hotel in Dagupan City. Private respondent Dagupan Electric
Corporation (DECORP), on the other hand, was the grantee of a franchise to operate and
maintain electric services in the province of Pangasinan, including Dagupan City.
On February 2, 1978, McADORE and DECORP entered into a contract whereby
DECORP shall provide electric power to McADOREs Hotel. During the term of their contract for
power service, DECORP noticed discrepancies between the actual monthly billings and the
estimated monthly billings of McADORE. Upon inspection, it was discovered that the terminal in
the transformers connected to the meter had been interchanged resulting in the slow rotation of
the meter. Consequently, DECORP issued a corrected bill but McADORE refused to pay. As a
result of McADOREs failure and continued refusal to pay the corrected electric bills, DECORP
disconnected power supply to the hotel on November 27, 1978.
Aggrieved, McADORE commenced a suit against DECORP for damages with prayer for a
writ of preliminary injunction. McADORE posted injunction bonds from several sureties, one of
which was herein petitioner PARAMOUNT, which issued an injunction bond on July 7, 1980 with
a face amount of P500,000.00. Accordingly, a writ of preliminary injunction was issued wherein
DECORP was ordered to continue supplying electric power to the hotel and restrained from
further disconnecting it.
After due hearing, the Regional Trial Court of Quezon City, Branch 106, rendered
judgment in favor of DECORP, the dispositive portion of which reads:
WHEREFORE, there being preponderance of evidence, the court hereby dismisses the
amended complaint. Further, the court rescinds the service contract between the parties, and
orders McAdore to pay Decorp the following:
1. Actual damages consisting of total arrearages for electric services rendered from
February 1978 to January 1983, in the sum of P3,834,489.62, plus interest at
the legal rate, computed from the date of demand until full payment;
2. Moral damages in the sum of P600,000.00;
3. Exemplary damages in the sum of P400,000.00;
4. Attorneys fees in the sum of P100,000.00; and
5. Costs of the suit.
While this case was under litigation, the court issued a number of restraining orders or
injunctions. During these incidents, McAdore filed the following bonds: Policy No. 8022709 by
Paramount Insurance Corporation for P500,000.00; No. 00007 and No. 00008 by Sentinel
Insurance Company, Inc. for P100,000.00 and P50,000.00; and No. 1213 by the Travelers
Multi-Indemnity Corporation for P225,000.00.

McADORE did not appeal the above decision. PARAMOUNT, however, appealed to the
Court of Appeals assigning the following errors, to wit:
I. APPELLANT SURETY WAS NOT GRANTED DUE PROCESS NOR GIVEN ITS
DAY IN COURT.
II. APPELLANTS SURETY BOND, BEING AN INJUNCTION OR TEMPORARY
RESTRAINING ORDER BOND, THE MANDATORY PROCEDURE IN SEC. 20,
RULE 57, IN RELATION TO SEC. 9, RULE 58, RULES OF COURT WAS NOT
OBSERVED IN THIS CASE;
III. NO EVIDENCE NOR PROOF HAD BEEN PRESENTED TO SHOW THAT
HEREIN APPELLANT SURETY BOND SHOULD BE HELD LIABLE FOR
TOTAL DAMAGES AS ADJUDGED IN THE CHALLENGED DECISION.[2]
In essence, PARAMOUNT contended that it was not given its day in court because it was
not notified by DECORP of its intention to present evidence of damages against its injunction
bond, as mandated by Sec. 9 of Rule 58, in relation to Sec. 20 of Rule 57 of the Revised Rules
of Court.
The Court of Appeals was not convinced with petitioners contentions. On April 30, 1993, it
affirmed the decision of the trial court.
In the instant petition, PARAMOUNT seeks to reverse and set aside the decision of the
Court of Appeals on the following assignment of errors:
FIRSTLY, THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NOTICE TO
PETITIONER AND ITS PRESENCE THROUGH COUNSEL IN ONE HEARING WHERE NO
EVIDENCE IN SUPPORT OF THE DAMAGES GUARANTEED BY PETITIONERS BOND
RENDERS THE NEED FOR ANOTHER HEARING ON THAT MATTER A SUPERFLUITY.
SECONDLY, THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
DECISION OF THE COURT A QUO THAT PETITIONER IS JOINTLY AND SEVERALLY
LIABLE WITH McADORE TO THE EXTENT OF ITS BOND, WHICH DECISION IS NOT
SUPPORTED BY THE EVIDENCE.[3]
PARAMOUNT asserts that (t)he bone of contention in the instant case is the matter of
evidence (or lack thereof) presented by private respondent during the hearing of the case a
quo, notice (or lack thereof) to the surety relative to the proceedings before the court a
quo during which said evidence was presented, as well as the actual proceedings themselves.
[4]
PARAMOUNT further asseverates that no evidence relative to damages suffered by private
respondent as a result of the injunction was ever presented, or that if any such evidence was
presented, the same was done without notice to petitioner and in violation of its right to due
process.[5] Moreover, petitioner maintains that the injunction bond was issued and approved
sometime in April 1980 to guarantee actual and material damages as may be sustained and
duly proved by private respondent. Thus, it can only cover the period prospectively from the
date of its issuance and does not retroact to the date of the initial controversy.

Send this decision to: plaintiffs counsel Atty. Pagapong; defendants counsel Atty. Vera Cruz;
and to each of the bondsman.

In its Comment, DECORP claims that PARAMOUNT participated in the proceedings and
was given its day in court. This is evidenced by the Notice of Hearing dated February 26, 1985
addressed to the three sureties. In fact, at the hearing on March 22, 1985, PARAMOUNT was in
attendance represented by Atty. Nonito Q. Cordero. Likewise, PARAMOUNT was notified of the
next hearing scheduled for April 26, 1985. DECORP further stressed that the hearing on April
26, 1985 proceeded as scheduled without any comment, objection, opposition or reservation
from PARAMOUNT.

It is so ordered.[1]

The core issue to be resolved here is whether or not petitioner Paramount Insurance
Corporation was denied due process when the trial court found the injunction bond it issued in

Pursuant to the dispositive portion of this decision, the court holds that these bonding
companies are jointly and severally liable with McAdore, to the extent of the value of their
bonds, to pay the damages adjudged to Decorp.

25

favor of McADORE liable to DECORP. Stated otherwise, was there sufficient evidence to
establish the liability of the petitioner on its injunction bond?
The petition is devoid of merit.
Petitioners submissions necessitates going into the nature of an injunction as well as over
the procedure in claiming, ascertaining and awarding damages upon the injunction bond.
Injunction is an extraordinary remedy calculated to preserve the status quo of things and
to prevent actual or threatened acts violative of the rules of equity and good conscience as
would consequently afford an injured party a cause of action resulting from the failure of the law
to provide for an adequate or complete relief. [6] A preliminary injunction is an order granted at
any stage of an action or proceeding prior to the judgment or final order, requiring a party or a
court, agency or a person to refrain from a particular act or acts. It may also require the
performance of a particular act or acts, in which case it shall be known as a preliminary
mandatory injunction.[7] Its sole purpose is not to correct a wrong of the past, in the sense of
redress for injury already sustained, but to prevent further injury.[8]
A preliminary injunction or temporary restraining order may be granted only when, among
others, the applicant, unless exempted by the court, files with the court where the action or
proceeding is pending, a bond executed to the party or person enjoined, in an amount to be
fixed by the court, to the effect that the applicant will pay such party or person all damages
which he may sustain by reason of the injunction or temporary restraining order if the court
should finally decide that the applicant was not entitled thereto. Upon approval of the requisite
bond, a writ of preliminary injunction shall be issued. [9] At the trial, the amount of damages to be
awarded to either party, upon the bond of the adverse party, shall be claimed, ascertained, and
awarded under the same procedure prescribed in Section 20 of Rule 57.[10]
Rule 57, Section 20, of the 1997 Rules of Civil Procedure, which is similarly applicable to
preliminary injunction, pertinently provides:
Sec. 20. Claim for damages on account of improper, irregular or excessive attachment. - An
application for damages on account of improper, irregular or excessive attachment must be filed
before the trial or before appeal is perfected or before the judgment becomes executory, with
due notice to the attaching obligee or his surety or sureties, setting forth the facts showing his
right to damages and the amount thereof. Such damages may be awarded only after proper
hearing and shall be included in the judgment on the main case.
If the judgment of the appellate court be favorable to the party against whom the attachment
was issued, he must claim damages sustained during the pendency of the appeal by filing an
application in the appellate court with notice to the party in whose favor the attachment was
issued or his surety or sureties, before the judgment of the appellate court becomes
executory. The appellate court may allow the application to be heard and decided by the trial
court.
Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching
obligee not exempt from execution should the bond or deposit given by the latter be insufficient
or fail to fully satisfy the award. (mutatis mutandis)
The above rule comes into play when the plaintiff-applicant for injunction fails to sustain
his action, and the defendant is thereby granted the right to proceed against the bond posted by
the former. In the case at bench, the trial court dismissed McADOREs action for damages with
prayer for writ of preliminary injunction and eventually adjudged the payment of actual, moral,
and exemplary damages against plaintiff-applicant. Consequently, private respondent DECORP
can proceed against the injunction bond posted by plaintiff-applicant to recover the damages
occasioned by the issuance by the trial court of the writ of injunction.

26

In order for the injunction bond to become answerable for the above-described damages,
the following requisites must concur:[11]
1. The application for damages must be filed in the same case where the bond was
issued;
2. Such application for damages must be filed before the entry of judgment; and
3. After hearing with notice to the surety.
The records of this case reveal that during its pendency in the trial court, DECORP filed
its Answer raising compulsory counterclaims for rescission of contract, moral damages,
exemplary damages, attorneys fees and litigation expenses. [12] During the trial, Atty. Nonito
Cordero appeared[13] as counsel for petitioner. PARAMOUNT as well as the other sureties were
properly notified of the hearing and given their day in court. Specifically, notice was sent to Atty.
Cordero of the hearing on April 27, 1985, which was set for the purpose of determining the
liability of the sureties. The counterclaims for damages of DECORP were proven at the trial and
yet PARAMOUNT did not exert any effort to controvert the evidence presented by
DECORP. Given these circumstances, PARAMOUNT cannot hide under the cloak of nonliability on its injunction bond on the mere expediency that it was deprived of due process. It
bears stressing that what the law abhors is not the absence of previous notice but rather the
absolute lack of opportunity to ventilate a partys side. [14] In other words, petitioner cannot
successfully invoke denial of due process where it was given the chance to be heard. As aptly
held by the Court of Appeals, viz.:
The records of the case disclose that during the trial of the case, PARAMOUNT was present
and represented by its counsel Atty. Nonito Q. Cordero as shown in the trial courts order dated
March 22, 1985 (Annex A of Appellees Brief). In the said order, PARAMOUNT was duly notified
of the next hearing which was scheduled on April 26, 1985. Evidently, PARAMOUNT was wellapprised of the next hearing and it cannot feign lack of notice. Having been given an
opportunity to be heard during the main hearing for the matter of damages, PARAMOUNT
therefore, cannot bewail that it was not given an opportunity to be heard upon denial of its
motion to cancel its injunction bond. Of what use, therefore, is there to conduct another hearing
when the issue of damages has been the subject of the main action of which PARAMOUNT had
been duly notified? A new notice and hearing prescribed by Sec. 20, Rule 57, is therefore a
repetition and a superfluity.
Moreover, PARAMOUNT has only itself to blame when it did not make any opposition or
objection during the hearing for the reception of DECORPs evidence. Having manifested its
desire to cancel its bond, it should have asked for a deferment of hearing on DECORPs
evidence but PARAMOUNT did not do anything of this sort. Only when an adverse judgment
was rendered by the trial court against its principal McAdore did it whimper a denial of
procedural due process.[15]
On the same point, PARAMOUNT argues that contrary to the ruling of the Court of
Appeals, there is a need for a separate hearing for the purpose of presenting evidence on the
alleged damages claimed by DECORP on petitioners injunction bond. PARAMOUNT contends
that a separate hearing is needed as no evidence dealing with DECORPs claim for damages on
petitioners bond was presented during the hearing wherein petitioners counsel attended nor in
the next hearing wherein petitioner was notified but failed to attend. Since no hearing was held
for the purpose of establishing its liability on the injunction bond, PARAMOUNT concludes that
it is released from its obligation as surety.
Contrary to petitioners thesis, it is neither mandatory nor fatal that there should be
a separate hearing in order that damages upon the bond can be claimed, ascertained and
awarded, as can be gleaned from a cursory reading of the provisions of Rule 57, Section
20. This Court agrees with the appellate courts ruling that:

Jurisprudential findings laid down the doctrine that a final adjudication that the applicant is not
entitled to the injunction does not suffice to make the surety liable. It is necessary, in addition,
that the surety be accorded due process, that is, that it be given an opportunity to be heard on
the question of its solidary liability for damages arising from a wrongful injunction order. Withal,
the fact that the matter of damages was among the issues tried during the hearings on the
merits will not render unnecessary or superfluous a summary hearing to determine the extent of
a suretys liability unless of course, the surety had been impleaded as a party, or otherwise
earlier notified and given opportunity to be present and ventilate its side on the matter
during the trial.
The exception under the doctrinal ruling abovenoted is extant in the case at bar.[16]
What is necessary only is for the attaching party and his surety or sureties to be duly
notified and given the opportunity to be heard. In the case at bench, this Court accords due
respect to the factual finding of the Court of Appeals that PARAMOUNT was present and
represented by its counsel Atty. Nonito Q. Cordero as shown in the trial courts order dated
March 22, 1985 x x x.[17]
As stated, PARAMOUNT also argues that assuming it is liable on its injunction bond, its
liability should be limited only to the amount of damages accruing from the time the injunction
bond was issued until the termination of the case, and not from the time the suit was
commenced. In short, it claims that the injunction bond is prospective and not retroactive in
application.
This Court does not agree. Rule 58, Section 4(b), provides that a bond is executed in
favor of the party enjoined to answer for all damages which he may sustain by reason of the
injunction. This Court already had occasion to rule on this matter in Mendoza v. Cruz,[18] where it
held that (t)he injunction bond is intended as a security for damages in case it is finally decided
that the injunction ought not to have been granted. It is designed to cover all damages which
the party enjoined can possibly suffer. Its principal purpose is to protect the enjoined party
against loss or damage by reason of an injunction. No distinction was made as to when the
damages should have been incurred.

Be that as it may, a scrutiny of petitioners Indemnity Agreement [21] with McADORE shows
that the former agreed to become surety for the stated amount in favor of Dagupan Electric
Corp. It should be noted that McADORE was already in arrears starting from June 1979 [22] up to
the time it entered into an Indemnity Agreement with PARAMOUNT on July 17, 1980.
It may not be amiss to point out that by the contract of suretyship, it is not for the obligee
to see to it that the principal pays the debt or fulfills the contract, but for the surety to see to it
that the principal pay or perform. [23] The purpose of the injunction bond is to protect the
defendant against loss or damage by reason of the injunction in case the court finally decides
that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly. Thus, the
bondsmen are obligated to account to the defendant in the injunction suit for all damages, or
costs and reasonable counsels fees, incurred or sustained by the latter in case it is determined
that the injunction was wrongfully issued.[24]
The posting of a bond in connection with a preliminary injunction (or attachment under
Rule 57, or receivership under Rule 59, or seizure or delivery of personal property under Rule
60) does not operate to relieve the party obtaining an injunction from any and all responsibility
for the damages that the writ may thereby cause. It merely gives additional protection to the
party against whom the injunction is directed. It gives the latter a right of recourse against either
the applicant or his surety, or against both. [25] In the same manner, when petitioner
PARAMOUNT issued the bond in favor of its principal, it undertook to assume all the damages
that may be suffered after finding that the principal is not entitled to the relief being sought.
WHEREFORE, based on the foregoing, the instant petition is DENIED. The decision of
the Court of Appeals dated April 30, 1993 in CA-G.R. CV No. 11970 is AFFIRMED. With costs.
SO ORDERED.

Moreover, when petitioner issued its injunction bond in favor of DECORP, it was done with
the full knowledge of the relevant facts obtaining in the controversy between DECORP and
McADORE. At the time the injunction bond was issued, DECORP was already claiming arrears
in electric bills and damages from McADORE.
It bears stressing that McADORE was found liable to pay actual damages, moral
damages, exemplary damages, attorneys fees and costs of the suit. To argue therefore that
PARAMOUNT is only liable on its injunction bond from the time of its issuance and not from the
time the suit was commenced is preposterous if not absurd. Indeed, it would be impossible to
determine the reckoning point when moral damages, exemplary damages, attorneys fees and
costs of the suit were supposed to have been incurred. Consequently, it can be safely deduced
that the bond answers for any and all damages arising from the injunction, regardless of
whether it was sustained before or after the filing of the injunction bond.
PARAMOUNT further maintains that it is liable to pay actual damages only. [19] However,
Rule 58, Section 4(b), clearly provides that the injunction bond is answerable for all damages.
The bond insures with all practicable certainty that the defendant may sustain no ultimate loss
in the event that the injunction could finally be dissolved. Consequently, the bond may obligate
the bondsmen to account to the defendant in the injunction suit for all: (1) such damages; (2)
costs and damages; (3) costs, damages and reasonable attorneys fees as shall be incurred or
sustained by the person enjoined in case it is determined that the injunction was wrongfully
issued.[20] Thus, PARAMOUNT is liable, jointly and severally, for actual damages, moral
damages, exemplary damages, attorneys fees and costs of the suit, to the extent of the amount
of the bond.

27

FIRST DIVISION
A.M. No. P-91-549 July 5, 1993
REYNALDO SEBASTIAN, complainant,
vs.
SHERIFF ALBERTO A. VALINO, respondent.
QUIASON, J.:

Marblecraft, Inc., represented by its Assistant General Manager, Reynaldo Sebastian, charges Alberto A. Valino,
Senior Deputy Sheriff, Office of the Regional Sheriff, Pasig, Metro Manila, with (1) gross abuse of authority
committed in connection with the implementation of the writ issued by the Regional Trial Court, Makati, Metro
Manila, in Civil Case No. 89-3368, and (2) refusal to enforce the trial court's for the return of the seized items.
Complainant alleges that:
1. On March 3, 1989, Private Development Corporation of the Philippines (PDCP) filed a replevin suit
against Marblecraft, Inc., in Civil Case No. 89-3368, in order to foreclose the chattels mortgaged by Marblecraft. On
March 30, 1989, the Regional Trial Court, Makati, issued a writ of seizure directed against Marblecraft covering the
chattels sought to be replevied.
2. The enforcement of the writ of seizure was delayed because of the writ of preliminary injunction
enjoining PDCP from proceeding with the foreclosure sale issued by the Regional Trial Court, Pasig, Metro Manila in
Civil Case No. 58006, It was only on October 31,1990, when the Regional Trial Court, Pasig, dissolved the writ of
preliminary injunction.
3. On November 9, 1990, at around 10:37 A.M., respondent, accompanied by several policemen and
PDCP employees, went to the office of Marblecraft at Barrio Santolan, Pasig, to implement the writ of seizure.
Respondent and his companions forcibly opened the lockers and desk drawers of the employees of complainant
and took their personal belongings, as well as some office equipment issued to them. The employees filed with the
Office of the Provincial Prosecutor of Rizal two criminal complaints for robbery against respondent and his
companions.
4. Respondent only showed to complainant's counsel a copy of the writ but did not furnish him with a
copy of the application for the writ, the supporting affidavit and the bond.
5. In the course of the implementation of the writ, which lasted for four days, several pieces of machinery
and equipment were destroyed or taken away by respondent.
6. Respondent turned over the seized articles to the counsel of PDCP and allowed these items to be
stored in PDCP's warehouse in Taguig, Metro Manila.
7. On November 14, 1990, complainant posted a counterbond. In an order issued on the same day, the
Regional Trial Court, Makati, approved the bond and directed the immediate return of the seized items. After
denying PDCP's motion to set aside the November 14 Order, the trial court reiterated the directive for the return of
the seized items in its November 26 Order. Respondent did not implement the orders.
8. PDCP filed a motion for reconsideration of the November 26 Order, which was denied in an Order
dated December 11, 1990.
In his comment, respondent branded the administrative complaint against him as pure harassment filed by
Marblecraft after he had refused to defer the implementation of the writ of seizure. He said that if he did not
implement the writ, he would have been accused by PDCP of non-performance of his duties as a sheriff. He pointed
out that the criminal complaints for theft filed against him by the employees of complainant were dismissed by the
Provincial Prosecutor of Rizal.
The administrative complaint was referred to Judge Martin S. Villarama Jr. of the Regional Trial Court, Pasig, for
investigation, report and recommendation.
In his report, Judge Villarama, found respondent guilty of partiality when he immediately turned over the seized
items to PDCP, and of willful refusal to enforce the November 14, 26 and December 11, 1990 Orders of the Regional
Trial Court, Makati.
Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to
the plaintiff. The sheriff must retain it in his custody for five days and shall return it to the defendant, If the latter, as in
the case, requires its return and files a counterbond (Sec. 4, Rule 60, Revised Rules of Court). In violation of said
Rule, respondent immediately turned over the seized articles to PDCP. His claim that the Office of the Regional
Sheriff did not have a place to store the seized items, cannot justify his violation of the Rule. As aptly noted by the
Investigating Judge, the articles could have been deposited in a bonded warehouse.
Respondent must serve on Marblecraft not only a copy of the order of seizure but also a copy of the application,
affidavit and bond (Sec. 4, Rule 60, Revised Rules of Court). Respondent did not furnish defendant with a copy of
the application, affidavit and bond. By his own admission, he only served it with a copy of the order of seizure (Rollo,
p. 37).
The more serious infraction of respondent is his refusal to implement the order of the Regional Trial Court, Makati
for him to return to complainant the articles seized pursuant to the writ of seizure dated March 30, 1990.

The Order dated November 14, 1990 directed him "to immediately return to defendant all its properties seized and
taken from its premises pursuant to the writ of seizure of March 30, 1989, from receipt of this Order (sic)" (Rollo,
p. 42)
The Order dated November 26, 1990 directed him "to implement the Order of this Court dated November 14, 1990
and to immediately return to defendant all its properties seized and taken from its premises pursuant to the writ of
seizure dated March 30, 1989 from receipt of this Order (sic)" (Rollo,
p. 44).
The Order dated December 11, 1990 directed him "to implement the Order of this Court dated November 26, 1990,
within three (3) days from the receipt hereof, otherwise this Court will be constrained to appoint and deputize
another sheriff to implement the order dated November 26, 1990" (Rollo, p. 47).
The only action taken by respondent to implement the Order dated December 11, 1990 was to write a letter on
December 12, 1990, addressed to the counsel of PDCP, requesting the turnover of seized articles. As expected,
PDCP's counsel refused to part with the possession of the seized articles and to issue a letter of authorization to
withdraw the same from the warehouse. Instead of taking possession of the articles, respondent merely reported to
the Regional Trial Court that "[i]t is now clear that the undersigned cannot implement the Court order dated
December 11, 1990 by reason of the refusal of PDCP to accept or to honor said Court order" (Rollo, p.48).
The petition for certiorari of PDCP to question the orders of the Regional Trial Court, Makati, was filed with the Court
of Appeals only on December 17, 1990. The Court of Appeals issued a temporary restraining order only on
December 21, 1990. Respondent therefore had more than seven days within which to enforce the orders of the trial
court if he was minded to do so.
Respondent could have avoided getting into his present predicament had he not turned over the possession of the
seized goods prematurely to the PDCP.
The complainant cannot be blamed if it harbored the suspicion that respondent was beholden to PDCP. The zeal
with which respondent enforced the order of seizure in favor of PDCP was in sharp contrast with his inaction in
enforcing the three orders of the trial court directing him to return the seized items to complainant.
It is not for respondent to question the validity of the orders of the trial court. It is for him to execute them. As
observed by the Investigating Judge, "[t]here is therefore no excuse for respondent's wilfull refusal to implement the
Order of the Court" (Report and Recommendation, p. 10). Disobedience by court employees of orders of the court is
not conducive to the orderly administration of justice. The display of partially in favor of a party as against the other
party erodes public confidence in the integrity of the courts.
IN VIEW OF THE FOREGOING, the Court finds respondent guilty of serious misconduct and RESOLVED to impose
upon him the penalty of FOUR (4) MONTHS SUSPENSION without pay, the period of which should not be charged
to his accumulated leave, with a WARNING that a repetition of the same or of acts calling for disciplinary action will
be dealt with more severely. This resolution is IMMEDIATELY EXECUTORY, and respondent is hereby ordered to
forthwith desist from performing any further official functions appertaining to said office.
SO ORDERED.

SECOND DIVISION
G.R. No. 89020 May 5, 1992
STRONGHOLD INSURANCE CO., INC., petitioner,
vs.
COURT OF APPEALS, respondent.
Gascon, Garcia & Associates for petitioner.

28

Castillo, Laman, Tan & Pantaleon for Northern Motors, Inc.

PARAS, J.:
In this petition for review on certiorari, petitioner Stronghold Insurance Co., Inc. assails the
decision * of the Court of Appeals in CA-G.R. CV No. 16154 affirming the order of the Regional Trial
Court, Branch 167, Pasig, Metro Manila in its Civil Case No. 52177. The dispositive portion of this
order of the Trial court reads:
WHEREFORE, in view of the foregoing consideration, the claim of the defendant
against SICI Bond No. 11652 of the Stronghold Insurance Company, Inc. is found to have been
established and said surety company is adjudged liable for damages suffered by the defendant as
found by this Court in its decision dated June 9, 1986, to the extent of the amount of the replevin
bond, which is P42,000.00 (p. 20, Rollo)
The factual antecedents are not disputed.
On March 21, 1985, Leisure Club, Inc. filed Civil Case No. 52177 against Northern Motors Inc. for
replevin and damages. It sought the recovery of certain office furnitures and equipments. In an order
dated March 22, 1985, the lower court ordered the delivery of subject properties to Leisure Club Inc.
subject to the posting of the requisite bond under Section 2, Rule 60 of the Rules of Court.
Accordingly, Leisure Club Inc. posted a replevin bond (SICI Bond No. 11652) dated March 25, 1985 in
the amount of P42,000.00 issued by Stronghold Insurance Co., Inc. In due course, the lower court
issued the writ of replevin, thereby enabling Leisure Club Inc. to take possession of the disputed
properties.
Northern Motors Inc. filed a counterbond for the release of the disputed properties. However, efforts
to recover these properties proved futile as Leisure Club Inc. was never heard of again.
For failure to appear in the pre-trial of the case, Leisure Club, Inc. was declared non-suited. Northern
Motors Inc. presented its evidence ex-parte and on June 9, 1986, the lower court rendered its
decision in favor of Northern Motors Inc., the dispositive portion of which reads
PREMISE CONSIDERED, the instant petition is hereby dismissed and on the counterclaim, plaintiff
is ordered to pay defendant the following:
a) the actual value of the property sold at public auction by defendant, and repossessed by plaintiff,
of P20,900.00;
b) exemplary damages of P10,000.00;
c) attorney's fees in the amount of P10,000.00; and
d) costs of suit.
SO ORDERED. (p. 21, Rollo)
In the said decision, the lower court ruled that:
1. Northern Motors Inc. had rightful ownership and right of possession over the
subject properties.
2. Leisure Club Inc. is a sister company of Macronics Inc., a debtor of Northern
Motors Inc., and former owner of these properties.
3) Under the circumstances, Leisure Club Inc. instituted the action for replevin as
part of a scheme to spirit away these properties and pave the way for the evasion
of lawful obligations by its sister company. (Decision dated June 4, 1986, p. 4).
On July 3, 1986, Northern Motors Inc. filed a "Motion for Issuance of Writ of Execution Against Bond
of Plaintiff's Surety", pursuant to Section 10, Rule 20 of the Rules of Court, which was treated by the
lower court as an application for damages against the replevin bond.

29

At the hearing of the said motion as well as the opposition thereto filed by Stronghold Insurance Co.,
Inc., Northern Motors Inc. presented one witness in the person of its former manager Clarissa G.
Ocampo, whose testimony proved that:
(a) Northern Motors Inc., and Macronics Marketing entered into a leased agreement wherein the
latter leased certain premises from the former.
(b) Macronics failed to pay its bills to Northern Motors Inc., so the latter was forced to terminate
the lease.
(c) Because of Macronics' unpaid liabilities to Northern Motors Inc., the latter was forced to sell off
the former's properties in an auction sale wherein Northern Motors Inc. was the buyer. Macronics
was duly notified of the sale.
(d) These properties sold were the sole means available by which Northern Motors Inc. could
enforce its claim against Macronics. (TSN dated January 30, 1987; pp. 94-95, Rollo)
Stronghold Insurance Co., Inc. did not cross-examine the said witness. Instead it asked for
continuance in order to present its own witness. Stronghold, however, never presented any witness.
On July 21, 1987, the lower court issued its now disputed Order finding Stronghold liable under its
surety bond for the damages awarded to Northern Motors Inc. in the June 8, 1986 Decision. In the
said Order, the lower court held:
Submitted for resolution is the "Motion for Issuance of Writ of Execution Against Bond of Plaintiff's
Surety" filed by the defendant and the opposition thereto filed by the Stronghold Insurance
Company, Inc.
In the decision rendered by the Court on June 9, 1977, the defendant Northern Motors, Inc. was
the prevailling party and the judgment in its favor ordered the plaintiff to pay the actual value of
the property sold at public auction by the defendant and repossessed by plaintiff in the amount of
P20,900.00, which is in favor of the plaintiff if the latter is found not entitled to the writ of replevin
earlier issued against the defendant.
The thrust of the opposition of the bonding company is to the effect that the motion for a writ of
execution is not the proper remedy but an application against the bond should have been the
remedy pursued. The surety company contends that it is not a party to the case and that the
decision clearly became final and executory and, therefore, is no longer liable on the bond. The
surety company likewise raised the issue as to when the decision became final and executory.
Moreover, the surety company avers that the defendant failed to prove any damage by reason of
the insurance of replevin bond.
Sec. 20 of Rule 57, in relation to Sec. 10 of Rule 60, provides that the party against whom the
bond was issued may recover on the bond for any damage resulting from the issuance of the
bond upon application and hearing. The application must be filed either: before trial; before
appeal is perfected; before judgment becomes final and executory.
Being the prevailing party, it is undeniable that the defendant is entitled to recover against the
bond. The application for that propose was made before the decision became final and before the
appeal was perfected. Both the prevailing and losing parties may appeal the decision. In the case
of the plaintiff appears that its counsel did not claim the decision which was sent by registered
mail on June 20, 1986 and filed the motion for execution against the bond on July 3, 1986.
Hence, with respect to the defendant the motion against the bond was filed before any appeal
was instituted and definitely on or before the judgment became final.
Although the claim against the bond was denominated as a motion for issuance of a writ of
execution, the allegations are to the effect that the defendant is applying for damages against the
bond. In fact, the defendant invokes Sec. 10, Rule 60, in relation to Sec. 20, Rule 57, Rules of
Court. Evidently, therefore, the defendant is in reality claiming damages against the bond.

It is undisputed that the replevin bond was obtained by the plaintiff to answer for whatever
damages the defendant may suffer for the wrongful issuance of the writ. By virtue of the writ, the
plaintiff took possession of the auctioned properties. Despite a redelivery bond issued by the
defendant, the plaintiff refused to return the properties and in the fact repossessed the same.
Clearly, defendant suffered damages by reason of the wrongful replevin, in that it has been
deprived of the properties upon which it was entitled to enforce its claim. Moreover, the extent of
the damages has been qualified in the decision dated June 9, 1986.
(pp. 21-23, Rollo)
This Order was appealed by Stronghold to the Court of Appeals. In a decision dated July 7, 1989, the
Court of Appeals affirmed the order of the lower court. This decision is now the subject of the instant
petition.
Petitioner raises the following assignment of error:
1. The lower court erred in awarding damages against herein petitioner despite
complete absence of evidence in support of the application.
2. The lower court erred in just adopting the dispositive portion of the decision
dated June 7, 1986 as basis for the award of damages against herein petitioner.
3. The lower court erred in awarding exemplary damages in favor of Northern
Motors, Inc. and against petitioner Stronghold Insurance Co., Inc.
4. The lower court erred in awarding the attorney's fees of P10,000.00 as
damages against the bond.
(pp. 10-11, Rollo)
We find no merit in the petition.
In the case of Visayan Surety & Insurance Corp. vs. Pascual, 85 Phil. 779, the Court explained the
nature of the proceedings to recover damages against a surety, in this wise:
In such case, upon application of the prevailing party, the court must order the
surety to show cause why the bond should not respond for the judgment of damages. If the
surety should contest the reality or reasonableness of the damages claimed by the prevailing
party, the court must set the application and answer for hearing. The hearing will be
summary and will be limited to such new defense, not previously set up by the principal, as the
surety may allege and offer to prove. (Id. at 785; emphasis supplied) (p. 96, Rollo)

(iii) a reasonable sum was adjudged to be due to respondent, by way of actual

and exemplary damages, attorney's fees and costs of suit.
(p. 63, Rollo)
On the propriety of the award for damages and attorney's fees, suffice it to state, that as correctly
observed by the Court of Appeals, the record shows that the same is supported by sufficient
evidence. Northern Motors proved the damages it suffered thru evidence presented in the hearing of
the case itself and in the hearing of its motion for execution against the replevin bond. No evidence to
the contrary was presented by Stronghold Insurance Co., Inc. in its behalf. It did not impugn said
award of exemplary damages and attorney's fees despite having every opportunity to do so.
As correctly held by respondent Court of Appeals
Stronghold Insurance, Inc. has no ground to assail the awards against it in the
disputed Order. Unless it has a new defense, it cannot simplistically dissociate
itself from Leisure Club, Inc. and disclaim liability vis-a-vis the findings made in
the Decision of the lower court dated June 9, 1986. Under Section 2, Rule 60 the
bond it filed is to ensure "the return of the property to the defendant if the return
thereof be adjudged, and for the payment to the defendant of such sum as he
may recover from the plaintiff in the action." The bond itself ensures, inter alia,
"the payment of such sum as may in the cause be recovered against the plaintiff
and the cost of the action." (pp. 24-25, Rollo)
Beside, Leisure Club Inc.'s act of filing a replevin suit without the intention of prosecuting the same
but for the mere purpose of disappearing with the provisionally recovered property in order to evade
lawfully contracted obligations constitutes a wanton, fraudulent, reckless, oppressive and malevolent
breach of contract which justifies award of exemplary damages under Art. 2232 of the Civil Code.
The attorney's fees awarded in favor of Northern Motors Inc. are likewise warranted under Article
2208 of the New Civil Code.
In any event, the trial court has decided with finality that the circumstances justifying the award of
exemplary damages and attorney's fees exist. The obligation of Stronghold Insurance Co., Inc., under
the bond is specific. It assures "the payment of such sum as may in the cause be recovered against
the plaintiff, and the costs of the action." (emphasis supplied)
WHEREFORE, the petition is DENIED for lack of merit. No costs.

Stronghold Insurance Co., Inc., never denied that it issued a replevin bond. Under the terms of the
said bond, Stronghold Insurance together with Leisure Club Inc. solidarily bound themselves in the
sum of P42,000
(a) for the prosecution of the action,
(b) for the return of the property to the defendant if the return thereof be
adjudged, and
(c) for the payment of such sum as may in the cause be recovered against the
plaintiff and the costs of the action.

SO ORDERED.

THIRD DIVISION

In the case at bar, all the necessary conditions for proceeding against the bond are present, to wit:
(i) the plaintiff a quo, in bad faith, failed to prosecute the action, and after
relieving the property, it promptly disappeared;
(ii) the subject property disappeared with the plaintiff, despite a court order for
their return; and

G.R. No. 79021 May 17, 1993

ROMEO S. CHUA, petitioner,
vs.
THE HON. COURT OF APPEALS, DENNIS CANOY AND ALEX DE LEON, respondents.
BIDIN, J.:

30

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
assailing the decision of the Court of Appeals dated May 7, 1987 which nullified the orders
dated April 18, 1986 and May 19, 1986 of the Regional Trial Court of Cebu City Branch
VIII.
The facts of the case are not disputed. On April 12, 1986, Judge Lauro V. Francisco of the
Regional Trial Court of Cebu City Branch XIII, after examining 2Lt. Dennis P. Canoy and
two (2) other witnesses, issued a search warrant directing the immediate search of the
premises of R.R. Construction located at M.J. Cuenco Avenue, Cebu City, and the seizure
of an Isuzu dump truck with plate number GAP-175. At twelve noon of the same date,
respondent Canoy seized the aforesaid vehicle and took custody thereof.
On April 14, 1986, a civil action for Replevin/Sum of Money for the recovery of possession
of the same Isuzu dump truck was filed by petitioner against respondent Canoy and one
"John Doe" in the Regional Trial Court of Cebu City Branch VIII, presided by Judge
Leonardo B. Caares and docketed thereat as Civil Case No. CEB 4384 alleging among
other things, petitioner's lawful ownership and possession of the subject vehicle; that he
has not sold the subject vehicle to anyone; that he has not stolen nor carnapped it, and
that he has never been charged of the crime of carnapping or any other crime for that
matter. Further, petitioner questioned the validity of the search warrant and the
subsequent seizure of the subject vehicle on the strength of the aforesaid search warrant.
On the same date, April 14, 1986, Judge Caares of the Regional Trial Court of Cebu City
Branch VIII directed the issuance of a writ of replevin upon the posting of a bond in the
amount of one hundred thousand pesos (P100,000.00). The writ of replevin was also
issued on the same date, and the subject vehicle was seized on 15 April 1986 by Deputy
Sheriff Galicano V. Fuentes.
On April 16, 1986, respondent Canoy filed a motion for the dismissal of the complaint and
for the quashal of the writ of replevin. The motion was opposed by petitioner. The motion
to dismiss and to quash the writ of replevin was denied in an Order dated April 18, 1986. A
motion for reconsideration of the aforementioned Order was filed and was opposed by
petitioner. In an order dated May 19, 1986, the Regional Trial Court of Cebu Branch VIII
denied the motion for reconsideration and directed the delivery of the subject vehicle to
petitioner. Not satisfied, herein private respondents filed with the Court of Appeals a
Petition for Certiorari and Prohibition praying for the nullification of the orders dated April
18, 1986 and May 19, 1986.
Meanwhile, a case for Carnapping docketed as I.S. No. 86-185, entitled "Alex De Leon,
Complainant, vs. Romeo Chua, Respondent" pending preliminary investigation before the
Office of the City Fiscal of Cebu City was provisionally dismissed upon motion of Romeo
Chua with the following reservation: "without prejudice to its reopening once the issue of
ownership is resolved", (Rollo, p. 62).
In a decision dated May 17, 1987, the Court of Appeals reversed the Regional Trial Court
of Cebu City Branch VIII, and nullified the questioned orders. The appellate court ordered
the dismissal of the Replevin action, and directed that possession of the subject vehicle be
restored to Canoy. It applied the ruling in the case ofPagkalinawan vs. Gomez (21 SCRA
1275 [1967]) which held:
Once a Court of First Instance has been informed that a search warrant has been
issued by another court of first instance, it cannot require a sheriff or any proper officer

31

of the court to take the property subject of the replevin action, if theretofore it came into
custody of another public officer by virtue of a search warrant. Only the court of first
instance that issued such a search warrant may order its release.
Furthermore, it was also pointed out in the same case that the validity of a search warrant
may only be questioned in the same court that issued it.
Petitioner moved for a reconsideration of the decision, but the respondent court denied the
same. Thus, petitioner filed this appeal by certiorari. The parties submitted their respective
memoranda, and thereafter the case was deemed submitted for decision.
The issue presented before the Court is whether or not the validity of a seizure made
pursuant to a search warrant issued by a court can be questioned in another branch of the
same court, where the criminal action filed in connection with which the search warrant
was issued, had been dismissed provisionally.
At the outset, it must be pointed out that the ruling made by the Office of the City Fiscal in
the complaint for carnapping was erroneous. It held: ". . . the preliminary investigation of
that case is premature until such time that the issue of ownership will be resolved by the
Court of Appeals, so that the instant case is hereby dismissed provisionally without
prejudice to its reopening once the issue of ownership is resolved in favor of complainant."
(emphasis supplied).
A criminal prosecution for carnapping need not establish the fact that complainant therein
is the absolute owner of the motor vehicle. What is material is the existence of evidence
which would show that respondent took the motor vehicle belonging to another. The AntiCarnapping Law or Republic Act No. 6539 punishes as carnapping the taking with intent to
gain, of a motor vehicle belonging to another person, without the latter's consent or by
means of violence or intimidation of person or by using force upon things.
Another aspect which needs to be stressed is the fact that since a preliminary
investigation is not part of the trial, the dismissal of a case by the fiscal will not constitute
double jeopardy and hence there is no bar to the filing of another complaint for the same
offense (People vs. Medted, 68 Phil. 435).
We find no merit in the main issue presented before Us. Petitioner seeks a reversal of a
decision of the Court of Appeals which relied on the decision in Pagkalinawan vs. Gomez
(supra).
The principle followed among courts in the dispensation of justice is that a judge who
presides in a branch of a court cannot modify or annul the orders issued by another
branch of the same court, since the two (2) courts are of the same rank, and act
independently but coordinately (Montesa vs. Manila Cordage Co., 92 Phil. 25 [1952]).
It is a basic tenet of civil procedure that replevin will not lie for property in custodia legis. A
thing is in custodia legiswhen it is shown that it has been and is subjected to the official
custody of a judicial executive officer in pursuance of his execution of a legal writ
(Bagalihog vs. Fernandez, 198 SCRA 614 [1991]). The reason posited for this principle is
that if it was otherwise, there would be interference with the possession before the
function of the law had been performed as to the process under which the property was
taken. Thus, a defendant in an execution or attachment cannot replevy goods in the

possession of an officer under a valid process, although after the levy is discharged, an
action to recover possession will lie (Francisco, Revised Rules of Court in the Philippines:
Provisional Remedies, p. 402 [1985]).
The Court had occasion to rule on this issue in the case of Vlasons Enterprises
Corporation vs. Court of Appeals(155 SCRA 186 [1987]). In the aforementioned case, two
(2) propeller pieces were seized on the strength of a search warrant issued by the Court of
First Instance of Manila Branch XVIII. After the seizure, criminal complaints were filed
against the alleged thieves. However, the complaints were later on dismissed. Five (5)
months later, a civil action for the recovery of the possession of the propellers were filed in
the Court of First Instance of Manila Branch XXIX. The latter court granted the motion for
repossession of the propellers. On appeal this Court held:

It should have dismissed the case since by virtue of the "provisional dismissal", of the
carnapping case there is still a probability that a criminal case would be filed, hence a
conflict in jurisdiction could still arise. The basic principle that a judge who presides in one
court cannot annul or modify the orders issued by another branch of the same court
because they are co-equal and independent bodies acting coordinately, must always be
adhered to.
WHEREFORE, the petition is denied. The decision of the Court of Appeals dated May 7,
1987 is AFFIRMED.
SO ORDERED.

The proceeding for the seizure of the property in virtue of a search warrant does not
end with the actual taking of the property . . . and its delivery . . ., to the court . . . . It is
merely the first step in the process to determine the character of the seized property.
That determination is done in the criminal action involving the crime or crimes in
connection with which the search warrant was issued. Hence, such a criminal action
should be prosecuted, or commenced if not yet instituted, and prosecuted. The
outcome of the criminal action will dictate the disposition of the seized property.
(Vlasons Enterprises Corp. vs. Court of Appeals, supra.)
In the Vlasons case, the Court differentiated the case brought before it therein, from
the Pagkalinawan case. It stated that in the Pagkalinawan case, there was a conflict in
jurisdiction. On the other hand, in the Vlasons case, it was certain that no criminal case
would ensue subsequent to or in connection with the search warrant, hence no conflict in
jurisdiction or in the ultimate disposition of the property could arise. Thus, where personal
property is seized under a search warrant and it appears that the seizure will not be
followed by the filing of any criminal action, but there are conflicting claims asserted over
the seized property, the appropriate remedy is the institution of an ordinary civil action by
any interested party, or of an interpleader action by the Government itself, in the proper
competent court to which the seizing court shall transfer custody of the articles. Another
branch of the same court, in an action to recover said property and during the pendency
thereof, cannot order the delivery of said personal property to therein plaintiff pendente
lite.
Construing the Pagkalinawan case together with the Vlasons case, we rule that where
personal property is seized under a search warrant and there is reason to believe that the
seizure will not anymore be followed by the filing of a criminal and there are conflicting
claims over the seized property, the proper remedy is the filing of an action for replevin, or
an interpleader filed by the Government in the proper court, not necessarily the same one
which issued the search warrant; however, where there is still a probability that the seizure
will be followed by the filing of a criminal action, as in the case at bar where the case for
carnapping was "dismissed provisionally, without prejudice to its reopening once the issue
of ownership is resolved in favor of complainant" (emphasis supplied), or the criminal
information has actually been commenced, or filed, and actually prosecuted, and there are
conflicting claims over the property seized, the proper remedy is to question the validity of
the search warrant in the same court which issued it and not in any other branch of the
said court.
Thus, the Regional Trial Court of Cebu Branch VIII erred when it ordered the transfer of
possession of the property seized to petitioner when the latter filed the action for replevin.

32

THIRD DIVISION
G.R. No. 61508 March 17, 1999
Citibank, N.A. (Formerly First National City Bank), petitioner,
vs.
The Honorable Court of Appeals and Douglas F. Anama, respondents.
PURISIMA, J.:

At bar is a special civil action for certiorari with prayer for a temporary restraining order faulting the
Court of Appeals 1 with grave abuse of discretion for nullifying the lower court's order of seizure of
mortgaged properties subject of a case for sum of money and replevin.
The facts leading to the institution of the case are as follows:
In considering for a loan obtained from Citibank, N.A. (formerly First National City Bank), the
defendant (private respondent herein) Douglas Anama executed a promissory note, dated November
10, 1972, 2 to pay the plaintiff bank the sum of P418,000.00 in sixty (60) equal successive monthly
installments of P8,722.25, starting on the 10th day of December 1972 and on the 10th of every month
thereafter. The said Promissory Note stipulated further that:
(a) the loan is subject to interest at the rate of twelve percent (12%) per annum;
(b) the promissory note and the entire amount therein stated shall become immediately due
and payable without notice or demand upon
(aa) default in the payment of any installment of principal or interest at the time
when the same is due;
(bb) the occurrence of any change in the condition and affairs of the defendant,
which in the opinion of the plaintiff shall increase its credit risk;
(c) the defendant agrees to pay all costs, expenses, handling and insurance charges
incurred in the granting of the loan;
(d) in case the services of a lawyer is made necessary for collection, defendant shall be
liable for attorney's fees of at least ten percent (10%) of the total amount due. 3
To secure payment of the loan, private respondent Anama also constituted a Chattel Mortgage of
even date in favor of petitioner, on various machineries and equipment located at No. 1302 Epifanio
delos Santos Avenue, Quezon City, under the following terms and conditions:
(a) The machineries and equipment subject of the mortgage, stand as security for
defendant's account.
(b) All replacement, substitutions, additions, increases and accretions to the properties
mortgaged shall also be subject to the mortgage.
(c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter the
premises of the defendant and take actual possession of the mortgaged chattels without any
court order, to sell said property to any party.
(d) All expenses in carrying into effect the stipulations therein shall be for the account of the
defendant and shall form part of the amount of the obligation secured by the mortgage.
(e) In case the plaintiff institutes proceedings for the foreclosure of the mortgage, the plaintiff
shall be entitled to the appointment of a receiver without a bond.
(f) In case of default, the defendant shall be liable for attorney's fees and cost of collection in
the sum equal to twenty-five (25%) of the total amount of the indebtedness outstanding and
unpaid. 4

33

On November 25, 1974, for failure and refusal of the private respondent to pay the monthly
installment due under the said promissory note since January 1974, despite repeated demands,
petitioner filed a verified complaint against private respondent Anama for the collection of his unpaid
balance of P405,820.52 on the said promissory note, for the delivery and possession of the chattels
covered by the Chattel Mortgage preparatory to the foreclosure thereof as provided under Section 14
of the Chattel Mortgage Law, docketed as Civil Case No. 95991 before the then Court of First
Instance of Manila.
On February 20, 1975, the defendant Anama submitted his Answer with Counterclaim, denying the
material averments of the complaint, and averring inter alia (1) that the remedy of replevin was
improper and the writ of seizure should be vacated; (2) that he signed the promissory note for
P418,000.00 without receiving from plaintiff Citibank any amount, and was even required to pay the
first installment on the supposed loan in December 1974; (3) that the understanding between him and
the Citibank was for the latter to release to him the entire loan applied for prior to and during the
execution of his promissory note, but Citibank did not do so and, instead, delayed the release of any
amount on the loan even after the execution of the promissory note thereby disrupting his timetable of
plans and causing him damages; (4) that the amount released by Citibank to him up to the present
was not the amount stated in the promissory note, and his alleged default in paying the installment on
the loan was due to the delay in releasing the full amount of the loan as agreed upon; (5) that the
macheniries and equipment described in the chattel mortgage executed by him are really worth more
than P1,000,000.00 but he merely acceded to the valuation thereof by Citibank in said document
because of the latter's representation that the same was necessary to speed up the granting of the
loan applied for by him; (6) that the properties covered by said chattel mortgage are real properties
installed in a more or less permanent nature at his (defendant's) premises in Quezon City, as
admitted by Citibank in said mortgage document; (7) that the mortgage contract itself stipulated that
the manner and procedure for affecting the sale or redemption of the mortgage properties, if made
extrajudicial, shall be governed by Act No. 1508 and other pertinent laws which all pertain to real
properties; and (8) that because of the filing of this complaint without valid grounds therefor, he
suffered damages and incurred attorney's fees; the defendant, now private respondent, averred.
On December 2, 1974, the trial court upon proof of default of the private respondent in the payment of
the said loan, issued an Order of Replevin over the macheneries and equipment covered by the
Chattel Mortgage.
However, despite the issuance of the said order of seizure of subject chattels, actual delivery of
possession thereof to petitioner did not take place because negotiations for an amicable settlement
between the parties were encouraged by the trial court.
On March 24, 1975, a pre-trial conference was held and the lower court issued an order for joint
management by the petitioner and the private respondent of the latter's business for ten (10) days,
after which the former would appointed receiver for the said business.
On April 1, 1975, the petitioner took over private respondent's business as receiver. When further
proposals to settle the case amicably failed, the lower court proceeded to try the case on the merits.
On January 29, 1977, petitioner presented a Motion for the Issuance of an Alias Writ of Seizure,
ordering the sheriff to seize the properties involved and dispose of them in accordance with the
Revised Rules of Court. The lower court then gave private respondent five (5) days to oppose the
said motion and on February 22, 1977, he sent in his opposition thereto on the grounds: (1) that
Citibank's P400,000 replevin bond to answer for damages was grossly inadequate because the
market value of the properties involved is P1,710,000 and their replacement cost is P2,342,300.00
per the appraisal report of the Appraisal and Research Corp.; (2) that he was never in default to justify
the seizure; (3) that the Civil Case No. 18071 of the Court of First Instance, entitled Hernandes
vs. Anama, et al., which, according to Citibank, supposedly increased its credit risk in the alleged
obligation, had already been dismissed as against him and the case terminated with the dismissal of
the complaint against the remaining defendant, First National City Bank, by the Court in its orders of
January 12, 1977 and February 7, 1977; (4) that his (defendant's) supposed obligations with Citibank
were fully secured and his mortgaged properties are more than sufficient to secure payment thereof;

and (5) that the writ of seizure if issued would stop his business operations and contracts and expose
him to lawsuits from customers, and also dislocate his employees and their families entirely
dependent thereon for their livelihood.
On February 28, 1977, acting on the said Motion and private respondent's opposition, the trial court
issued an Order granting the Motion for Alias Writ of Seizure, ruling thus:
WHEREFORE, the motion for alias writ of seizure is hereby granted. At any rate,
this Order gives another opportunity for defendant and the intervenor who claims
to be a part owner to file a counterbond under Sec. 60 of Rules of Court. 5
Private respondent moved for reconsideration of the aforesaid order but the same was denied by the
Resolution of March 18, 1977, to wit:
In view of the foregoing, the motion for reconsideration is hereby denied.
At any rate, as already stated, the defendant has still a remedy available which is
to file a bond executed to the plaintiff in double the value of the properties as
stated in the plaintiff's affidavit. The Court at this instance therefore has no
authority to stop or suspended the writ of seizure already ordered. 6
Accordingly, by virtue of the Alias writ of Seizure, petitioner took possession of the mortgaged chattels
of private respondent. As a consequence, the sheriff seized subject properties, dismantled and
removed them from the premises where they were installed, delivered them to petitioner's possession
on March 17, 18 and 19, 1977 and advertised them for sale at public auction scheduled on March 22,
1977.
On March 21, 1977, private respondent filed with the Court of Appeals a Petition for Certiorari and
Prohibition 7with Injunction to set aside and annul the questioned resolution of the trial court on the
ground that they were issued "in excess of jurisdiction and with grave abuse of discretion" because of
the "lack of evidence and clear cut right to possession of First National City Bank (herein petitioner)"
top the machineries subject of the Chattel Mortgage.
On July 30, 1982, finding that the trial court acted with grave abuse of discretion amounting to excess
of lack of jurisdiction in issuing the assailed resolutions, the Court of Appeals granted petition, holding
that the provision of the Rules of Court on Replevin and Receivership have not been complied with, in
that (1) there was no Affidavit of Merit accompanying the Complaint for Replevin; (2) the bond posted
by Citibank was insufficient; and (3) there was non-compliance with the requirement of a receiver's
bond and oath of office. The decretal portion of the assailed decision of the Court of Appeals, reads:
WHEREFORE, the petition is granted. The questioned resolutions issues by the respondent
judge in Civil Case No. 95991, dated February 28, 1977 and March 18, 1977, together with the
writs and processes emanating or deriving therefrom, are hereby declare null and void ab initio.
The respondent ex-officio sheriff of Quezon City and the respondent First National City Bank are
hereby ordered to return all the machineries and equipment with their accessories seized,
dismantled and hauled, to their original and respective places and position in the shop flooring of
the petitioner's premises where these articles were, before they were dismounted, seized and
hauled at their own expense. The said respondents are further ordered to cause the repair of the
concrete foundations destroyed by them including the repair of the electrical wiring and facilities
affected during the seizure, dismanting and hauling.
The writ of preliminary injunction heretofore in effect is hereby made permanent. Costs against
the private respondents.

34

SO ORDERED 8
Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing grave abuse of
discretion to the Court of Appeals and assigning as errors, that:
I
THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT
RENDERING JUDGMENT ON THE MERITS AGAINST THE HEREIN
PETITIONER BY ORDERING THE RETURN OF THE MACHINERIES AND
EQUIPMENT AND ITS ACCESSORIES TO THEIR ORIGINAL AND
RESPECTIVE PLACES AND POSITIONS.
II
THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF
THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2,
RULE 60 OF THE RULES OF COURT.
III
THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND
POSTED BY THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT.
IV
THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER DID
NOT COMPLY WITH THE PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO
POST A RECEIVER'S BOND.
V
THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA
ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR
LACK OF JURISDICTION IN DEALING WITH THE SITUATION.
I
Anent the first assigned error, petitioner contends that the Court of Appeals, by nullifying
the writ of seizure issued below, in effect, rendered judgment on the merits and adjudged
private respondent Anama as the person lawfully entitled to the possession of the
properties subject of the replevin suit. It is theorized that the same cannot be done, as the
case before the court below was yet at trial stage and lower court still had to determine
whether or not private respondent was in fact in default in the payment of his obligation to
petitioner Citibank, which default would warrant the seizure of subject machineries and
equipment.
The contention is untenable. A judgment is on the merits when it determines the rights and
liabilities of the parties on the basis of the disclosed facts, irrespective of formal technical or
dilatory objections, and it is not necessary that there should have been a trial. 9 The
assailed decision of the Court of Appeals did not make any adjudication on the rights and
liabilities between Citibank and Douglas Anama. There was no finding yet of the fact of
default. The decision only ruled on the propriety of the issuance of the writ of seizure by the
trial court. As worded by the respondent court itself, "the main issues to be resolved are
whether there was lack or excess of jurisdiction, or grave abuse of discretion, in the
issuance of the orders in question, and there is no appeal nor any plain, speedy, and
adequate remedy in the ordinary course of law." 10
In resolving the issue posed by the petition, the Court of Appeals limited its disposition to a
determination of whether or not the assailed order of seizure was issued in accordance with
law, that is, whether the provisions of the Rules of Court on delivery of personal property or
replevin as a provisional remedy were followed. The Court of Appeals relied on Ruled 60 of
the Rules of Court, which prescribed the procedure for the recovery of possession of
personal property, which Rule, provides:
Sec. 2. Affidavit and Bond. Upon applying or such order the plaintiff must show
by his own affidavit or that of some other person who personally knows the facts:

(a) That the plaintiff is the owner of the property claimed

particularly describing it, or is entitled to the possession
thereof;

And similarly, in the case of an attachment which likewise requires an affidavit of merit, the Court held
that the absence of an affidavit of merit is not fatal where the petition itself, which is under oath,
recites the circumstances or facts constitutive of the grounds for the petition. 11

(b) That the property is wrongfully detained by the

defendant, alleging the cause of detention thereof according
to his best of knowledge, information and belief;

The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the property
particularly describing the same, or that he is entitled to its possession; (2) wrongful detention by
defendants of said property; (3) that the property is not taken by virtue of a tax assessment or fine
pursuant to law or seized under execution or attachment or, if it is so seized, that it is exempt from
seizure; and the, (4) the actual value of the property. 12

(c) That it has nor been taken for a tax assessment or fine
pursuant to law, or seized under an execution, or an
attachment against the property of the plaintiff, or is so
seized, that is exempt from such seizure; and
(d) The actual value of the property.
The plaintiff must also give a bond, executed to the defendant in double of the
value of the property as stated in the affidavit aforementioned, for the property to
the defendant of such sum as he may recover from the plaintiff in the action.
The Court of Appeals did not pass upon the issue of who, as between Douglas Anama and Citibank,
is entitled to the possession of subject machineries, as asserted by the latter. When it ordered the
restoration of the said machineries to Douglas Anama (now the private respondent), it merely
defendant to the possession of his properties, since there was a finding that the issuance of the writ
was not in accordance with the specific rules of the Rules of Court.
II
In its second assignment of errors, petitioner theorizes that the Court of Appeals erred in
finding that it did not comply with Section 2, Rule 60 of the Rules of Court requiring the
replevin plaintiff to attach an affidavit of merit to the compliant.
Petitioner maintains that although there was no affidavit of merit accompanying its complaint, there
was nonetheless substantial compliance with the said rule as all that is required to be alleged in the
affidavit of merit was set forth in its verified complaint. Petitioner argues further that
assuming arguendo that there was non-compliance with the affidavit of merit requirement, such
defense can no longer be availed of by private respondent Anama as it was not alleged in his Answer
and was only belatedly interposed in his Reply to the Petitioner's Comment on the Petitioner
for Certiorari before the Court of Appeals.
Petitioner is correct insofar as it contends that substantial compliance with the affidavit requirement
may be permissible. There is substantial compliance with the rule requiring that an affidavit of merit to
support the complaint for replevin if the complaint itself contains a statements of every fact required to
be stated in the affidavit of merit and the complaint is verified like an affidavit. On the matter of
replevin, Justice Vicente Francisco's Comment on the Rules of Court, states:
Although the better practice is to keep the affidavit and pleading separate, if
plaintiff's pleading contains a statement of every fact which the statute requires to be shown in
the affidavits, and the pleading is verified by affidavit covering every statement therein, this will
be sufficient without a separate affidavit; but in no event can the pleading supply the absence of
the affidavit unless all that the affidavit is required to contain is embodied in the pleading, and
the pleading is verified in the form required in the case of a separate affidavit. (77 CJS 65 cited
in Francisco, Rules of Court of the Philippines, Vol. IV-A, p. 383)

35

But, as correctly taken note of by the Court of Appeals, petitioner's complaint does not allege all the
facts that should be set forth in an affidavit of merit. Although the complaint alleges that petitioner is
entitled to the possession of subject properties by virtue of the chattel mortgage executed by the
private respondent, upon the latter's default on its obligation, and the defendant's alleged "wrongful
detention" of the same, the said complaint does not state that subject properties were not taken by
virtue of a tax assessment or fine imposed pursuant to law or seized under execution or attachment
or, if they were so seized, that they are exempt from such seizure.
Then too, petitioner stated the value of subject properties at a "probable value of P200,000.00, more
or less". Pertinent rules require that the affidavit of merit should state the actual value of the property
subject of a replevin suit and not just its probable value. Actual value (or actual market value) means
"the price which an article would command in the ordinary course of business, that is to say, when
offered for sale by one willing to sell, but not under compulsion to sell and purchased by another who
is willing to buy, but under no obligation to purchase it".13 Petitioner alleged that the machineries and
equipment involved are valued at P200,000.00 while respondent denies the same, claiming that per
the appraisal report, the market value of the said properties is P1,710,000.00 and their replacement
cost is P2,342,300.00. Petitioner's assertion is belied by the fact that upon taking possession of the
aforesaid properties, it insured the same for P610,593.74 and P450,000.00, separately. It bears
stressing that the actual value of the properties subject of a replevin is required to be in the affidavit
because such actual value will be the basis of the replevin bond required to be posted by the plaintiff.
Therefore, when the petitioner failed to declare the actual value of the machineries and equipment
subject of the replevin suit, there was non-compliance with Section 2, Rule 60 of the Revised Rules of
Court.
It should be noted, however, that the private respondent interposed the defense of lack of affidavit of
merit only in his Reply to the Comment of Citibank on the Petition for Certiorari which respondent filed
with the Court of Appeals. Section 2, Rule 9 of the Revised Rules of Court, provides:
Sec. 2. Defenses and objections not pleaded deemed waived Defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in later
pleading, . . . .
This Rule has been revised and amended, as follows:
Sec. 1. Defenses and objection not pleaded. Defenses and objections not
pleaded in a motion to dismiss or in the answer are deemed waived. However,
when it appears from the pleadings or the evidence on record that the court has
no jurisdiction over the subject matter, that there is another action pending
between the same parties for the same cause, or that the action is barred by a
prior judgment or by statute of limitations, the court shall dismiss the claim.
Thus, although respondent's defense of lack of affidavit of merit is meritorious, procedurally, such a
defense is no longer available for failure to plead the same in the Answer as required by the omnibus
motion rule.

III
Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner is
questionable and/or insufficient. It is averred that, in compliance with Section 2, Rule 60 requiring the
replevin plaintiff to post a bond in double the value of the properties involved, it filed a bond in the
amount P400,000.00 which is twice the amount of P200,000.00 declared in its complaint.
The Court reiterates its findings on the second assignment of errors, particularly on the issue of the
actual of subject properties as against their probable value. Private respondent, at the onset, has put
into issues the value of the said properties. In the Special Defenses contained in his Answer, private
respondent averred:
That while defendant admits that he executed a Chattel Mortgage in favor of
plaintiff, he vigorously denies that the machineries covered therein are worth
P200,000.00. The fact is that plaintiff knew fully well that said chattels are worth
no less than P1,000,000.00, said defendant having acceded to said valuation
upon plaintiff's representation that it would be necessary to speed up the granting
of the loan.
As here was a disagreement on the valuation of the properties in the first place, proper determination
of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived at. Though the rules
specifically require that the needed bond be double the value of the properties, since plaintiff merely
denominated a probable value of P200,000.00 and failed to aver the properties' actual value, which is
claimed to be much greater than that declared by plaintiff, the amount of P400,000.00 would indeed
be insufficient as found by the Court of Appeals. The Rules of Court requires the plaintiff to "give a
bond, executed to the defendant in double the value of the property as stated in the affidavit
. . . ." Hence, the bond should be double the actual value of the properties involved. In this case, what
was posted was merely an amount which was double the probable value as declared by the plaintiff
and, therefore, inadequate should there be a finding that the actual value is actually far greater than
P200,000.00. Since the valuation made by the petitioner has been disputed by the respondent, the
lower court should have determined first the actual value of the properties. It was thus as error for the
said court to approve the bond, which was based merely on the probable value of the properties.
It should be noted that a replevin bond is intended to indemnify the defendant against any loss that he
may suffer by reason of its being compelled to surrender the possession of the disputed property
pending trial of the
action. 14 The same may also be answerable for damages if any when judgment is rendered in favor
of the defendant or the party against whom a writ of replevin was issued and such judgment includes
the return of the property to him. 15 Thus, the requirement that the bond be double the actual value of
the properties litigated upon. Such is the case because the bond will answer for the actual loss to the
plaintiff, which corresponds to the value of the properties sought to be recovered and for damages, if
any.
Petitioner also maintains that, assuming for the sake of argument that its replevin bond was grossly
inadequate or insufficient, the recourse of the respondent should be to post a counterbound or a
redelivery bond as provided under Section 5 of Rule 60.
Sec. 5 and 6, Rule 60 of the Rules of Court, read:
Sec. 5. Return of property. If the defendant objects to the sufficient of the plaintiff's bond, or of
the surety or sureties thereon, he cannot require the return of the property as in this section
provided; but if he does not so object, he may, at any time before the delivery of the property to
the plaintiff, if such delivery be adjudge, and for the payment of such sum to him as may be
recovered against the defendant, and by serving a copy of such bond on the plaintiff or his
attorney.

36

Sec. 6. Disposition of property by officer. If within five (5) days after the taking of the property
by the officer, the defendant does not object to the sufficiecy of the bond, or of the surety or
sureties thereon, or require the return of the property as provided in the last preceding section;
or if the defendant so objects, and the plaintiff's first or new bond is approved; or if the defendant
so require, and his bond is object to and found insufficient and he does not forthwith file an
approved bond, the property shall be delivered to the plaintiff, the officer must return it to the
defendant.
The Court held in a prior case 16 that the remedies provided under Section 5, Rule 60, are alternative
remedies. ". . . If a defendant in a replevin action wishes to have the property taken by the sheriff
restored to him, he should, within five days from such taking, (1) post a counter-bond in double the
value of said property, and (2) serve plaintiff with a copy thereof, both requirements as well as
compliance therewith within the five-day period mentioned being mandatory." 17 This course of
action is available to the defendant for as long as he does not object to the sufficiency of the plaintiff's
bond.
Conformably, a defendant in a replevin suit may demand the return of possession of the property
replevined by filing a redelivery bond executed to the plaintiff in double the value of the property as
stated in the plaintiff's affidavit within the period specified in Section 5 and 6.
Alternatively, "the defendant may object to the sufficiency of the plaintiff's bond, or of the surety or
sureties thereon;" but if he does so, "he cannot require the return of the property" by posting a
counter-bond pursuant to Section 5 and 6. 18
In the case under consideration, the private respondent did not opt to cause redelivery of
the properties to him by filing a counter-bond precisely because he objected to the
sufficiency of the bond posted by plaintiff. Therefore, he need not file a counter-bond or
redelivery bond. When such objection was not given due course in the court below
when, instead of requiring the plaintiff to post a new bond, the court approved the bond in
the amount of P400,000.00, claimed by respondent to be insufficient, and ordered the
seizure of the properties recourse to a petition for certiorari before the Court of Appeals
assailing such order is proper under the circumstances.
IV
As its fourth assignment of errors, petitioner contends that the Court of Appeals made an error of
judgment in finding that the petitioner did not comply with the provisions of Section 5, Rule 59 by
failing to post a receiver's bond. Petitioner contends that although it is in agreement with the Court of
Appeals that a receiver's bond is separate and distinct from a replevin bond, under the circumstances
it was not required to file a receiver's bond because it did not assume receivership over the
properties. It is further argued that assuming that it did assume receivership, the Chattel Mortgage
expressly provides, that:
In case the MORTGAGEE institutes proceedings, judicially or otherwise, for the
foreclosure of this Chattel Mortgage, or to enforce any of its rights hereunder, the
MORTGAGEE shall be entitled as a matter of right to the appointment of a
receiver, without bond, of the mortgaged properties and of such properties, real
or personal, claims and rights of the MORTGAGOR as shall be necessary or
proper to enable the said receiver to property control and dispose of the
mortgaged properties. 19
The order of the trial court dated March 24, 1975 provided, among others, that the properties shall be
under joint management for a period of ten days, after which period "the bank, by virtue of the
stipulations under the chattel mortgage, becomes the Receiver to perform all the obligations as such
Receiver" and "in the event that the bank decides not to take over the receivership, the joint
management continues." 20

From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume
receivership. A letter21 dated April 1, 1975 sent by petitioner to the private respondent, reads:

Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered
immediately to the plaintiff. 23 This is because a possessor has every right to respected in its
possession and may not be deprived of it without due process. 24
5
As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of Appeals, 25

Anama Engineering Service Group

The reason why the law does not allow the creditor to possess himself of the
mortgaged property with violence and against the will of the debtor is to be found
in the fact that the creditor's right of possession is conditioned upon the fact of
default, and the existence of this fact may naturally be the subject of controversy.
The debtor, for instance, may claim in good faith, and rightly or wrongly, that the
debt is paid, or that for some other reason the alleged default is nonexistent. His
possession in this situation is as fully entitled to protection as that of any other
person, and in the language of Article 446 of the Civil Code, he must be
respected therein. To allow the creditor to seized the property against the will of
the debtor would make the former to a certain extent both judge and executioner
in his own cause a thing which is inadmissible in the absence of unequivocal
agreement in the contract itself or express provision to the effect in the statute.

114 R. Lagmay Street

San Juan, Rizal
Attention: Mr. Douglas Anama
Gentlemen:
Pursuant to the Court order, we have decided to take over your machine shop as
Receiver.
We are hereby appointing Mr. Artemio T. Gonzales as our representative.

WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No pronouncement as to costs.
SO ORDERED.

Petitioner cannot therefore deny that nine days after the trial court issued the order of receivership, it
informed he private respondent that it would, as it did, assume receivership.
The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership were not
complied with by the petitioner, particularly the filing or posting of a bond and the taking of an oath.
It should be noted that under the old Rules of Court which was in effect at the time this case was still
at trial stage, a bond for the appointment of a receiver was not generally required of the applicant,
except when the application was ex parte. 22 Therefore, petitioner was not absolutely required to file a
bond. Besides, as stipulated in the chattel mortgage contract between the parties, petitioner, as the
mortgagee, is entitled to the appointment of a receiver without a bond.
However, the Court of Appeals was right in finding a defect in such assumption of receiver in that the
requirement of taking an oath has not been complied with Section 5, Rule 59, states:
Sec. 5. Oath and bond of receiver. Before entering upon his duties, the
receiver must be sworn to perform them faithfully, and must file a bond, executed
to such person and in such sum as the court or judge may direct, to the effect
that he will faithfully discharge the duties of receiver in the action and obey the
orders of the court therein.
Consequently, the trail court erred in allowing the petitioner to assume receivership over the machine
shop of private respondent without requiring the appointed receiver to take an oath.
V
In light of the foregoing, the answer to the fifth assignment of errors is in the negative. For
erroneously issuing thealias writ of seizure without inquiring into the sufficiency of the replevin bond
and for allowing petitioner to assume receivership without the requisite oath, the Court of Appeals
aptly held that the trial court acted with grave abuse of discretion in dealing with situation.

G.R. No. 93540 December 13, 1999

FULGENCIO S. FACTORAN, JR., Secretary, Department of Environment and Natural Resources, VICENTE A.
ROBLES and NESTOR GAPUZAN, petitioners,

37

vs.
COURT OF APPEALS (Third Division), Hon. BENIGNO T. DAYAW, as, Judge, Regional Trial Court of Quezon
City, Branch 80, JESUS SY and LILY FRANCISCO UY, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision and Resolution of the Court of Appeals dated March
30, 1990 and May 18, 1990, respectively, dismissing petitioners' charge that Honorable Benigno T. Dayaw, Presiding
Judge of Branch 80 of the Regional Trial Court (RTC) of Quezon City, committed grave abuse of discretion in
ordering them to deliver to private respondents the six-wheeler truck and its cargo, some 4,000 board feet of narra
lumber which were confiscated by the Department of Environment and Natural Resources (DENR) and forfeited in
favor of the government. 1
The antecedent facts:
On August 9, 1988, two (2) police officers of the Marikina Police Station, Sub-Station III, intercepted a six-wheeler
truck, with Plate No. NJT-881, carrying 4,000 board feet of narra lumber as it was cruising along the Marcos
Highway. They apprehended the truck driver, private respondent Jesus Sy, and brought the truck and its cargo to the
Personnel Investigation Committee/Special Actions and Investigation Division (PIC/SAID) of the DENR Office in
Quezon City. There, petitioner Atty. Vecente Robies of the PIC/SAID investigated them, and discovered the following
discrepancies in the documentaion of the narra lumber: 2

On March 20, 1989, the scheduled date of the auction sale, private respondents filed an Ex-Parte Motion for
Release and Return of Goods and Documents (Replevin) supported by an Affidavit for Issuance of Writ of Replevin
and Preliminary Injunction and a Replevin Bond in the amount of P180,000.00. 11 The trial court granted the writ of
replevin on the same day and directed the petitioners "to deliver the . . . [n]arra lumber, original documents and truck
with plate no. NJT 881 to the custody of the plaintiffs and/or their representative . . . . 12
On March 22, 1989, the trial court issued a writ of seizure. However, petitioners refused to comply therewith. 13David
G. Brodett, Sheriff of Branch 80 of the RTC of Quezon City (hereinafter referred to as the Sheriff) reported that
petitioners prevented him from removing the subject properties from the DENR Compound and transferring them to
the Mobil Unit Compound of the Quezon City Police Force. To avoid any unwarranted confrontation between them,
he just agreed to a constructive possession of the properties in question. 14
In the afternoon of the same day, petitioners filed a Manifestation stating their intention to file a counterbond under
Rule 60 of the Rules of Court to stay the execution of the writ of seizure and to post a cash bond in the amount of
P180,000.00. But the trial court did not oblige petitioners for they failed to serve a copy of the Manifestation on
private respondents. Petitioners then immediately made the required service and tendered the cash counterbond in
the amount of P180,000.00, but it was refused, petitioners' Manifestation having already been set for hearing on
March 30, 1989. 15
On March 27, 1989, petitioners made another attempt to post a counterbond which was, however, denied for the
same reason. 16

a. What were declared in the documents (Certificate of Timber Origin, Auxiliary Invoices and various
Certifications) were narra flitches, while the cargo of the truck consisted of narra lumber;

On the same day, private respondents filed a motion to declare petitioners in contempt for disobeying the writ of
seizure. 17 The trial court gave petitioners twenty-four (24) hours to answer the motion. Hearing thereon was
scheduled on March 30, 1989.

b. As appearing in the documents, the Plate Numbers of the truck supposed to carry the forest products bear
the numbers BAX-404, PEC-492 OR NSN-267, while the Plate Number of the truck apprehended is NVT-881;

However, on March 29, 1989, petitioners filed with the Court of Appeals a Petition for Certiorari, Prohibition and/or
Mandamus to annul the Orders of the trial court dated March 20, 1989 and March 27, 1989. 18

c. Considering that the cargo is lumber, the transport should have been accompanied by a Certificate of Lumber
Origin, scale sheet of said lumber and not by a Certificate of Timber Origin, which merely covers only transport
of logs and flitches;

On March 30, 1989, the Court of Appeals granted petitioners temporary relief in the form of a temporary restraining
order (TRO).

d. The log Sale Purchase Agreement presented is between DSM Golden Cup International as the seller and
Bonamy Enterprises as the buyer/consignee and not with Lily Francisco Lumber and Hardware. 3
which are in violation of Bureau of Forestry Development (BFD) Circular No. 10. The said BFD Circular requires
possession or transportation of lumber to be supported by the following documents: (1) Certificate of Lumber Origin
(CLO) which shall be issued only be the District Forester, or in his absence, the Assistant District Forester; (2) Sales
Invoice; (3) Delivery Receipt; and (4) Tally Sheets. 4 Such omission is punishable under Sec. 68 of Presidential
Decree (P.D.) No. 705 otherwise known as the Revised Forestry Code. 5 Thus, petitioner Atty. Robles issued a
temporary seizure order and seizure receipt for the narra lumber and the six-wheeler truck. 6
On January 20, 1989, petitioner Fulgencio S. Factoran, then Secretary of Environment and Natural Resources
(hereinafter referred to as petitioner Secretary) issued an order for the confiscation of the narra lumber and the sixwheeler truck. 7
Private respondents neither asked for reconsideration of nor appealed, the said order to the Office of the President.
Consequently, the confiscated narra lumber and six-wheeler truck were forfeited in favor of the government. They
were subsequently advertised to be sold at public auction on March 20, 1989. 8
On March 17, 1989, private respondents filed a complaint with prayer for the issuance of writs of replevin and
preliminary injunction and/or temporary restraining order for the recovery of the confiscated lumber and six-wheeler
truck, and to enjoin the planned auction sale of the subject narra lumber, respectively. 9 Said complaint was
docketed as Civil Case No. Q-89-2045 and raffled to Branch 80 of the RTC of Quezon City.
On the same day, the trial court issued an Order directing petitioners to desist from proceeding with the planned
auction sale and setting the hearing for the issuance of the writ of preliminary injunction on March 27, 1989. 10

38

On September 11, 1989, the Court of Appeals converted the TRO into a writ of preliminary injunction upon filing by
petitioners of a bond in the amount of P180,000.00. 19
However, on March 30, 1990, the Court of Appeals lifted the writ of preliminary injunction and dismissed the petition.
It declared that as the complaint for replevin filed by private respondents complied with the requirements of an
affidavit and bond under Secs. 1 and 2 of Rule 60 of the Revised Rules of court, issuance of the writ of replevin was
mandatory. 20
As for the contempt charges against petitioners, the Court of Appeals believed the same were sufficiently based on
a written charge by private respondents and the report submitted by the Sheriff. 21
On April 25, 1990, petitioners filed a motion for reconsideration of the foregoing decision. However, that motion was
denied by the Court of Appeals in its Resolution dated May 18, 1990. 22
Hence this petition.
On the one hand, petitioners contend, thus:
(1) Confiscated lumber cannot be subject of replevin. 23
(2) Petitioners not compelled to criminally prosecute private respondents but may opt only to confiscate
lumber. 24
(3) Private respondent charged criminally in court. 25 and
(4) Writ of Replevin issued in contravention of PD #605. 26
On the other hand, private respondents argue that:
(1) The respondent Judge had jurisdiction to take cognizance of the complaint for recovery of personal
property and, therefore, had jurisdiction to issue the necessary orders in connection therewith. 27
(2) The issuance of the order for the delivery of personal property upon application, affidavit and filing of
replevin bond by the plaintiff is mandatory and not discretionary, hence, no abuse of discretion can be
committed by the trial court in the issuance thereof. 28

(3) The Order of March 20, 1989 was in accordance with Section 4, Rule 60 of the Rules of Court and is,
therefore, valid. 29
(4) The private respondents have not been proven to have violated Section 68 of the Revised Forestry
Code. 30
(5) The petitioners do not have the authority to keep private respondents' property for an indefinite
period, more so, to dispose of the same without notice and hearing or without due process. 31
(6) Contrary to the allegation of petitioners, no formal investigation was conducted by the PIC with
respect to the subject lumber in this case. 32
(7) The alleged Order dated January 20, 1989 of the petitioner Secretary Fulgencio Factoran, Jr. of the
DENR is not valid and does not make the issuance of the order of replevin illegal. 33 and
(8) The subject properties were not in custody of the law and may be replevied. 34

(b) That the property is wrongfully detained by the defendant, alleging the cause of detention
thereof to his best knowledge, information, and belief;
(c) That it has not been taken for a tax assessment or fine pursuant to law, or seized under
an execution, or an attachment against the property of the plaintiff, or, if so seized, that it is
exempt from such seizure; and
(d) The actual value of the property.
xxx xxx xxx

At the outset we observe that herein respondents never appealed the confiscation order of petitioner Secretary to
the Office of the President as provided for in Sec. 8 of P.D. No. 705 which reads:
All actions and decisions of the Director are subject to review, motu propio or upon appeal of any person
aggrieved thereby, by the Department Head whose decision shall be final and executory after the lapse
of thirty (30) days from receipt by the aggrieved party of said decision unless appealed to the President .
. . . The decision of the Department Head may not be reviewed by the courts except through a special
civil action for certiorari and prohibition.
The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity and
convenience, should not entertain suits unless the available administrative remedies have first been
resorted to and the proper authorities have been given an appropriate opportunity to act and correct their
alleged errors, if any, committed in the administrative forum. 35 As to the application of this doctrine in
cases involving violations of P.D. No. 705, our ruling in Paat v. Court of Appeals, is apropos:
Moreover, it is important to point out that the enforcement of forestry laws, rules and regulations
and the protection, development and management of forest lands fall within the primary and
special responsibilities of the Department of Environment and Natural Resources. By the very
nature of its function, the DENR should be given a free hand unperturbed by judicial intrusion to
determine a controversy which is well within its jurisdiction. The assumption by the trial court,
therefore, of the replevin suit filed by the private respondents constitutes an encroachment into the
domain of the administrative agency's prerogative. The doctrine of primary jurisdiction does not
warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over
which is initially lodged with an administrative body of special competence. In Felipe
Ismael, Jr. and Co. vs. Deputy Executive Secretary, which was reiterated in the recent case
of Concerned Officials of MWSS vs.Vasquez, this Court held:
Thus, while the administration grapples with the complex and multifarious problems caused
by unbridled exploitation of these resources, the judiciary will stand clear. A long line of
cases establish the basic rule that the courts will not interfere in matters which are
addressed to the sound discretion of government agencies entrusted with the regulation of
activities coming under the special technical knowledge and training of such agencies. 36
However, petitioners did not file a motion to dismiss based on the ground of non-exhaustion of administrative
remedies. Thus, it is deemed waived. 37
Nonetheless, the petition is impressed with merit.
First. A writ of replevin does not just issue as a matter of course upon the applicant's filing of a bond and affidavit, as
the Court of Appeals has wrongly put it. The mere filing of an affidavit, sans allegations therein that satisfy the
requirements of Sec. 2, Rule 60 of the Revised Rules of Court, cannot justify the issuance of a writ of replevin. Said
provision reads:
Affidavit and bond. Upon applying for such order the plaintiff must show by his own
affidavit or that of some other person who personally knows the facts:
(a) That the plaintiff is the owner of the property claimed, particularly describing it, or entitled
to the possession thereof;

39

Wrongful detention by the defendant of the properties sought in an action for replevin must be satisfactorily
established. If only a mechanistic averment thereof is offered, the writ should not be issued.
In the case at bar, the subject narra lumber and six-wheeler truck were confiscated by petitioner Secretary pursuant
to Section 68-A of P.D. No. 705, as amended by Executive Order (E.O.) No. 277, to wit:
Sec. 68-A. Administrative Authority of the Department Head or His Duly Authorized
Representative to Order Confiscation. In all cases of violations of this Code or other forest
laws, rules and regulations, the Department Head or his duly authorized representative, may
order the confiscation of any forest products illegally cut, gathered, removed, or possessed
or abandoned, and all conveyances used either by land, water, or air in the commission of
the offense and to dispose of the same in accordance with pertinent laws, regulations or
policies on the matter. 38
As the petitioner Secretary's administrative authority to confiscate is clearly provided by law, the taking of
the subject properties is not wrongful and does not warrant the issuance of a writ of replevin prayed for
by private respondents.
Second. Issuance of the confiscation order by petitioner Secretary was a valid exercise of his power under Sec. 68A of P.D. No. 705. By virtue of said order, the narra lumber and six-wheeler truck of private respondents were held
in custodia legis and hence, beyond the reach of replevin.
Property lawfully taken by virtue of legal process is deemed to be in custodia legis. 39 When a thing is in official
custody of a judicial or executive officer in pursuance of his execution of a legal writ, replevin will not lie to recover
it. 40Otherwise, there would be interference with the possession before the function of law had been performed as to
the process under which the property was taken. 41 So basic is this doctrine that it found inclusion in the 1997
amendments introduced to the Rules of Civil Procedure. Thus, Sec. 2(c), Rule 60 of the 1997 Rules of Civil
Procedure provides that:
Affidavit and bond. Upon applying for such order the plaintiff must show by his own
affidavit or that of some other person who personally knows the facts:
xxx xxx xxx
(c) That the property has not been distrained or taken for a tax assessment or fine pursuant
to law, or seized under a writ of execution, or preliminary attachment or otherwise placed
under custodia legis, or if so seized, that it is exempt from such seizure or custody; . . .
xxx xxx xxx. 42
Third. Petitioner Secretary's authority to confiscate forest products under Sec. 68-A of P.D. No. 705 is distinct from
and independent of the confiscation of forest products in a criminal action provided for in Section 68 of P.D. No. 705.
Thus, in Paat, we held that:
. . . precisely because of the need to make forestry laws "more responsive to present
situations and realities" and in view of the "urgency to conserve the remaining resources of
the country," that the government opted to add Section 68-A. This amendatory provision is

an administrative remedy totally separate and distinct from criminal proceedings. . . . . The
preamble of EO 277 that added Section 68-A to PD 705- is most revealing:
WHEREAS, there is an urgency to conserve the remaining forest resources of the
country for the benefit and welfare of the present and future generations of Filipinos;
WHEREAS, our forest resources may be effectively conserved and protected through
the vigilant enforcement and implementation of our forestry laws, rules and regulations;
WHEREAS, the implementation of our forestry laws suffers from technical difficulties,
due to certain inadequacies in the Penal provisions of the Revised Forestry Code of
the Philippines; and
WHEREAS, to overcome this [sic] difficulties, there is a need to penalize certain acts
more responsive to present situations and realities;
It is interesting to note that Section 68-A is a new provision authorizing the DENR to
confiscate, not only "conveyances" but forest products as well. On the other hand,
confiscation of forest products by the "court" in a criminal action has long been provided for
in Section 68. If as private respondents insist, the power of confiscation cannot be exercised
except only through the court under Section 68, then Section 68-A would have no purpose at
all. Simply put, Section 68-A would not have provided any solution to the problem perceived
in EO 277, . . . . 43

Undoubtedly, private respondents were afforded an opportunity to be heard before the order of confiscation was
issued. There was no formal or trial type hearing but the same is not, in all instances, essential in administrative
proceedings. It is settled that due process is satisfied when the parties are afforded fair and reasonable opportunity
to explain their side of the controversy or an opportunity to move for a reconsideration of the action or ruling
complained of. 48
Moreover, respondents claim that the order of confiscation was antedated and not the product of the investigation
supposedly conducted by the PIC of the DENR. However, they proffer no proof to support that allegation. On the
other hand, there is the legal presumption that official duty has been regularly performed. The presumption of
regularity in the performance of official duties is even particularly strong with respect to administrative agencies like
the DENR which are vested with quasi-judicial powers in enforcing the laws affecting their respective fields of
activity, the proper regulation of which requires of them such technical mastery of all relevant conditions obtaining in
the nation. 49
Finally. The writ of seizure and the writ of replevin were issued by the trial court in grave abuse of its discretion.
Thus, disobedience thereto cannot constitute indirect contempt of court which presupposes that the court order
thereby violated was valid and legal. Without a lawful order having been issued, no contempt of court could be
committed. 50

Fourth. Sec. 80 of P.D. No. 705 which requires delivery of the seized forest products within six (6) hours from the
time of the seizure to the appropriate official designated by law to conduct preliminary investigations applies only to
criminal prosecutions provided for in Sec. 68, and not to administrative confiscation provided for in Section 68-A.

WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of Appeals dated March 30,
1990 and its Resolution dated May 18, 1990 in CA-G.R. SP No. 17194 are hereby SET ASIDE and REVERSED.
Respondent Presiding Judge Benigno T. Dayaw, of the Regional Trial Court of Quezon City, is PERMANENTLY
ENJOINED from enforcing the Orders dated March 20, 1989 and March 22, 1989 in Civil Case No. Q-89-2045, or if
said orders have already been enforced, the said respondent Judge is directed to render judgment of forfeiture on
the replevin bond filed by private respondents. Finally, the said respondent Judge is PERMANENTLY ENJOINED
from further acting on the Motion for Contempt filed by private respondents against the petitioners.

Sec. 80 of P.D. No. 705 provides:

Costs against private respondents.

Sec. 68-A was added precisely to supplant the inadequacies and supplement criminal enforcement of
forestry laws.

Sec. 80. Arrest; Institution of criminal actions. A forest officer or employee of the Bureau
shall arrest even without a warrant any person who has committed or is committing in his
presence any of the offenses defined in this Chapter. He shall also seize and confiscate, in
favor of the Government, the tools and equipment used in committing the offense, and the
forest products cut, gathered or taken by the offender in the process of committing the
offense. The arresting officer or employee shall thereafter deliver within six (6) hours from the
time of arrest and seizure, the offender and the confiscated forest products, tools and
equipment to, and file the proper complaint with, the appropriate official designated by law to
conduct preliminary investigations and file informations in court.
xxx xxx xxx
The title of Sec. 80 "Arrest; Institution of Criminal Actions" bespeaks this intendment of the law.
The fact, too, that Secs. 68 and 80 were co-existing prior to the introduction of Sec. 68-A, proves that
Sec. 80 applies to the criminal prosecutions subject of Sec. 68 and not to the administrative confiscation
subject of Sec. 68-A. Sec. 68-A, therefore, should not be interpreted in relation to Sec. 80 as to require
that criminal charges be filed with and seized forest products be immediately delivered to, the fiscal in
case of administrative confiscation, for this renders nugatory the purpose sought to be achieved thereby.
Statutes should always be construed in the light of the object to be achieved and the evil or mischief to
be suppressed, and they should be given such interpretation as will advance the object, suppress the
mischief, and secure the benefits intended. 44
Fifth. Nothing in the records supports private respondents' allegation that their right to due process was violated as
no investigation was conducted prior to the confiscation of their properties.
On the contrary, by private respondents' own admission, private respondent Sy who drove the six-wheeler truck was
properly investigated by petitioner Atty. Robles at the PIC/SAID Office of the DENR. Thereafter, private respondent
Sy and his witnesses were given full opportunity to explain the deficiencies in the documents. 45Private respondents
categorically stated that they made a "continuous and almost daily follow-up and plea . . . with the PIC for the return
of the truck and lumber . . . ." 46 Finally in a letter dated December 30, 1989, private respondent Lily Francisco Uy
requested petitioner Secretary for "immediate resolution and release of the impounded narra sawn lumber." 47

40

SO ORDERED.

SECOND DIVISION
G.R. No. 183018

Thereafter, Young filed an Answer alleging that as a former employee of Advent, he had the option to
purchase the subject car at book value pursuant to the company car plan and to offset the value of
the car with the proceeds of his retirement pay and stock option plan. Young sought the (1) execution
of a deed of sale over the subject car; and (2) determination and payment of the net amount due him
as retirement benefits under the stock option plan.

August 3, 2011

ADVENT CAPITAL AND FINANCE CORPORATION, Petitioner,

vs.
ROLAND YOUNG, Respondent.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 28 December 2007 Decision2 and 15 May 2008 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 96266. The Court of Appeals set aside the 24 March 2006 and 5
July 2006 Orders4 of the Regional Trial Court of Makati City, Branch 147, and directed petitioner
Advent Capital and Finance Corporation to return the seized vehicle to respondent Roland Young.
The Court of Appeals denied the motion for reconsideration.
The Antecedents
The present controversy stemmed from a replevin suit instituted by petitioner Advent Capital and
Finance Corporation (Advent) against respondent Roland Young (Young) to recover the possession of
a 1996 Mercedes Benz E230 with plate number UMN-168, which is registered in Advents name.5
Prior to the replevin case, or on 16 July 2001, Advent filed for corporate rehabilitation with the
Regional Trial Court of Makati City, Branch 142 (rehabilitation court). 6
On 27 August 2001, the rehabilitation court issued an Order (stay order) which states that "the
enforcement of all claims whether for money or otherwise, and whether such enforcement is by court
action or otherwise, against the petitioner (Advent), its guarantors and sureties not solidarily liable
with it, is stayed."7

Advent filed a Reply with a motion to dismiss Youngs counterclaim, alleging that the counterclaim did
not arise from or has no logical relationship with the issue of ownership of the subject car.
After issues have been joined, the parties entered into pre-trial on 2 April 2004, which resulted in the
issuance of a pre-trial order of even date reciting the facts and the issues to be resolved during the
trial.
On 28 April 2005, the trial court issued an Order dismissing the replevin case without prejudice for
Advents failure to prosecute. In the same order, the trial court dismissed Youngs counterclaim
against Advent for lack of jurisdiction. The order pertinently reads:
It appears that as of July 28, 2003, subject motor vehicle has been turned over to the plaintiff, thru its
authorized representative, and adknowledged by the parties respective counsels in separate
Manifestations filed. To date, no action had been taken by the plaintiff in the further prosecution of this
case. Accordingly, this case is ordered dismissed without prejudice on the ground of failure to
prosecute.
Anent plaintiffs Motion to Dismiss defendant Youngs counterclaim for benefits under the retirement
and stock purchase plan, the Court rules as follows: The only issue in this case is who is entitled to
the possession of the subject motor vehicle. This issue may have a connection, but not a necessary
connection with defendants rights under the retirement plan and stock purchase plan as to be
considered a compulsory counterclaim.
xxx
Notably, defendants claim is basically one for benefits under and by virtue of his employment with the
plaintiff, and the subject vehicle is merely an incident in that claim. Said claim is properly ventilated,
as it is resolvable by, the Rehabilitation Court which has jurisdiction and has acquired jurisdiction, to
the exclusion of this Court. Accordingly, plaintiffs Motion To Dismiss defendant Youngs counterclaim
is granted.11

On 5 November 2001, Young filed his Comment to the Petition for Rehabilitation, claiming, among
others, several employee benefits allegedly due him as Advents former president and chief executive
officer.

On 10 June 2005, Young filed a motion for partial reconsideration of the dismissal order with respect
to his counterclaim.

On 6 November 2002, the rehabilitation court approved the rehabilitation plan submitted by Advent.
Included in the inventory of Advents assets was the subject car which remained in Youngs
possession at the time.

On 8 July 2005, Young filed an omnibus motion, praying that Advent return the subject car and pay
him P1.2 million in damages "(f)or the improper and irregular seizure" of the subject car, to be
charged against the replevin bond posted by Advent through Stronghold.

Youngs obstinate refusal to return the subject car, after repeated demands, prompted Advent to file
the replevin case on 8 July 2003. The complaint, docketed as Civil Case No. 03-776, was raffled to
the Regional Trial Court of Makati City, Branch 147 (trial court).

On 24 March 2006, the trial court issued an Order denying Youngs motion for partial
reconsideration, viz:

After Advents posting of P3,000,000 replevin bond, which was double the value of the subject car at
the time, through Stronghold Insurance Company, Incorporated (Stronghold), the trial court issued a
Writ of Seizure8directing the Sheriff to seize the subject car from Young. Upon receipt of the Writ of
Seizure, Young turned over the car to Advent,9 which delivered the same to the rehabilitation
receiver.10

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In the instant case, defendant, in his counterclaim anchored her [sic] right of possession to the
subject vehicle on his alleged right to purchase the same under the company car plan. However,
considering that the Court has already declared that it no longer has jurisdiction to try defendants
counterclaim as it is now part of the rehabilitation proceedings before the corporate court concerned,
the assertions in the Motion for Reconsiderations (sic) will no longer stand.

On the other hand, the plaintiff did not file a Motion for Reconsideration of the same Order, dismissing
the complaint for failure to prosecute, within the reglementary period. Hence, the same has attained
finality.
Defendant alleged that the dismissal of the case resulted in the dissolution of the writ. Nonetheless,
the Court deems it proper to suspend the resolution of the return of the subject vehicle. In this case,
the subject vehicle was turned over to plaintiff by virtue of a writ of replevin validly issued, the latter
having sufficiently shown that it is the absolute/registered owner thereof. This was not denied by the
defendant. Plaintiffs ownership includes its right of possession. The case has been dismissed without
a decision on the merits having been rendered. Thus, to order the return of the vehicle to one who is
yet to prove his right of possession would not be proper.
Accordingly, the Motion for Partial Reconsideration is denied.12
On 8 June 2006, Young filed a motion to resolve his omnibus motion.

"Indeed, logic and equity demand that the writ of replevin be cancelled. Being provisional and
ancillary in character, its existence and efficacy depended on the outcome of the case. The case
having been dismissed, so must the writs existence and efficacy be dissolved. To let the writ stand
even after the dismissal of the case would be adjudging Olympia as the prevailing party, when
precisely, no decision on the merits had been rendered. The case having been dismissed, it is as if no
case was filed at all and the parties must revert to their status before the litigation."
Indeed, as an eminent commentator on Remedial Law expounds:
"The plaintiff who obtains possession of the personal property by a writ of replevin does not acquire
absolute title thereto, nor does the defendant acquire such title by rebonding the property, as they
only hold the property subject to the final judgment in the action." (I Regalado, Remedial Law
Compendium, Eighth Revised Edition, p. 686)
Reversion of the parties to the status quo ante is the consequence ex proprio vigore of the dismissal
of the case. Thus, in Laureano vs. Court of Appeals (324 SCRA 414), it was held:

In an Order dated 5 July 2006, the trial court denied the motion to resolve, to wit:
In the instant case, the Court suspended the resolution of the return of the vehicle to defendant
Roland Young. It should be noted that the writ of replevin was validly issued in favor of the plaintiff
and that it has sufficiently established ownership over the subject vehicle which includes its right to
possess. On the other hand, the case (Olympia International vs. Court of Appeals) cited by defendant
finds no application to this case, inasmuch as in the former the Court has not rendered judgment
affirming plaintiffs (Olympia) right of possession on the property seized. Moreover, the Court, in the
Order dated April 28, 2005, has already denied defendants counterclaim upon which he based his
right of possession on the ground of lack of jurisdiction. Accordingly, the Court reiterates its previous
ruling that to order the return of the subject vehicle to defendant Young, who is yet to prove his right of
possession before the Rehabilitation Court would not be proper.
WHEREFORE, there being no new and substantial arguments raised, the Motion to Resolve is
denied.13

"(A)lthough the commencement of a civil action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the same
position as though no action had been commenced at all."
By the same token, return of the subject car to petitioner pending rehabilitation of Advent does not
constitute enforcement of claims against it, much more adjudication on the merits of petitioners
counterclaim. In other words, an order for such return is not a violation of the stay order, which was
issued by the rehabilitation court on August 27, 2001. x x x
Corollarily, petitioners claim against the replevin bond has no connection at all with the rehabilitation
proceedings. The claim is not against the insolvent debtor (Advent) but against bondsman,
Stronghold. Such claim is expressly authorized by Sec. 10, Rule 60, in relation to Sec. 20, Rule 57,
id., x x x14
The dispositive portion of the Court of Appeals decision reads:

Young filed a petition for certiorari and mandamus with the Court of Appeals seeking to annul the trial
courts Orders of 24 March 2006 and 5 July 2006.
The Court of Appeals Ruling
In his petition before the Court of Appeals, Young argued mainly that the trial court committed grave
abuse of discretion amounting to lack or excess of jurisdiction in (1) not directing the return of the
subject vehicle to him; (2) refusing to hold a hearing to determine the damages to be recovered
against the replevin bond; and (3) dismissing his counterclaim.
The Court of Appeals ruled in favor of Young and annulled the assailed rulings of the trial court. The
Court of Appeals held:
It is noteworthy that the case was dismissed by the court a quo for failure of Advent to prosecute the
same. Upon dismissal of the case, the writ of seizure issued as an incident of the main action (for
replevin) became functus officio and should have been recalled or lifted. Since there was no
adjudication on the merits of the case, the issue of who between Advent and petitioner has the better
right to possess the subject car was not determined. As such, the parties should be restored to their
status immediately before the institution of the case.
The Supreme Courts ruling in Olympia International, Inc. vs. Court of Appeals (supra) squarely
applies to the present controversy, to wit:

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WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The orders of the
Regional Trial Court dated March 24, 2006 and July 5, 2006 are ANNULLED and SET ASIDE in so far
as they suspended resolution of petitioners motion for, and/or disallowed, the return of the subject
car to petitioner. Accordingly, respondent Advent Capital and Finance Corporation is directed to return
the subject car to petitioner.
The Regional Trial Court of Makati City (Branch 147) is directed to conduct a hearing on, and
determine, petitioners claim for damages against the replevin bond posted by Stronghold Insurance
Co.
SO ORDERED.15
Advent filed a motion for reconsideration, which was denied by the Court of Appeals in a Resolution
dated 15 May 2008.
The Issue
The main issue in this case is whether the Court of Appeals committed reversible error in (1) directing
the return of the seized car to Young; and (2) ordering the trial court to set a hearing for the
determination of damages against the replevin bond.

The Courts Ruling

The petition is partially meritorious.

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

On returning the seized vehicle to Young

We agree with the Court of Appeals in directing the trial court to return the seized car to Young since
this is the necessary consequence of the dismissal of the replevin case for failure to prosecute
without prejudice. Upon the dismissal of the replevin case for failure to prosecute, the writ of seizure,
which is merely ancillary in nature, became functus officio and should have been lifted. There was no
adjudication on the merits, which means that there was no determination of the issue who has the
better right to possess the subject car. Advent cannot therefore retain possession of the subject car
considering that it was not adjudged as the prevailing party entitled to the remedy of replevin.
Contrary to Advents view, Olympia International Inc. v. Court of Appeals16 applies to this case. The
dismissal of the replevin case for failure to prosecute results in the restoration of the parties status
prior to litigation, as if no complaint was filed at all. To let the writ of seizure stand after the dismissal
of the complaint would be adjudging Advent as the prevailing party, when precisely no decision on the
merits had been rendered. Accordingly, the parties must be reverted to their status quo ante. Since
Young possessed the subject car before the filing of the replevin case, the same must be returned to
him, as if no complaint was filed at all.
Advents contention that returning the subject car to Young would constitute a violation of the stay
order issued by the rehabilitation court is untenable. As the Court of Appeals correctly concluded,
returning the seized vehicle to Young is not an enforcement of a claim against Advent which must be
suspended by virtue of the stay order issued by the rehabilitation court pursuant to Section 6 of the
Interim Rules on Corporate Rehabilitation (Interim Rules).17 The issue in the replevin case is who has
better right to possession of the car, and it was Advent that claimed a better right in filing the replevin
case against Young. In defense, Young claimed a better right to possession of the car arising from
Advents car plan to its executives, which he asserts entitles him to offset the value of the car against
the proceeds of his retirement pay and stock option plan.
Young cannot collect a money "claim" against Advent within the contemplation of the Interim Rules.
The term "claim" has been construed to refer to debts or demands of a pecuniary nature, or the
assertion to have money paid by the company under rehabilitation to its creditors.18 In the replevin
case, Young cannot demand that Advent pay him money because such payment, even if valid, has
been "stayed" by order of the rehabilitation court. However, in the replevin case, Young can raise
Advents car plan, coupled with his retirement pay and stock option plan, as giving him a better right
to possession of the car. To repeat, Young is entitled to recover the subject car as a necessary
consequence of the dismissal of the replevin case for failure to prosecute without prejudice.
On the damages against the replevin bond
Section 10, Rule 60 of the Rules of Court19 governs claims for damages on account of improper or
irregular seizure in replevin cases. It provides that in replevin cases, as in receivership and injunction
cases, the damages to be awarded upon the bond "shall be claimed, ascertained, and granted" in
accordance with Section 20 of Rule 57 which reads:

Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching obligee
not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully
satisfy the award.
The above provision essentially allows the application to be filed at any time before the judgment
becomes executory.20 It should be filed in the same case that is the main action,21 and with the court
having jurisdiction over the case at the time of the application.22
In this case, there was no application for damages against Stronghold resulting from the issuance of
the writ of seizure before the finality of the dismissal of the complaint for failure to prosecute. It
appears that Young filed his omnibus motion claiming damages against Stronghold after the dismissal
order issued by the trial court on 28 April 2005 had attained finality. While Young filed a motion for
partial reconsideration on 10 June 2005, it only concerned the dismissal of his counterclaim, without
any claim for damages against the replevin bond. It was only on 8 July 2005 that Young filed an
omnibus motion seeking damages against the replevin bond, after the dismissal order had already
become final for Advents non-appeal of such order. In fact, in his omnibus motion, Young stressed
the finality of the dismissal order.23 Thus, Young is barred from claiming damages against the replevin
bond.
In Jao v. Royal Financing Corporation,24 the Court held that defendant therein was precluded from
claiming damages against the surety bond since defendant failed to file the application for damages
before the termination of the case, thus:
The dismissal of the case filed by the plaintiffs-appellees on July 11, 1959, had become final and
executory before the defendant-appellee corporation filed its motion for judgment on the bond on
September 7, 1959. In the order of the trial court, dismissing the complaint, there appears no
pronouncement whatsoever against the surety bond. The appellee-corporation failed to file its proper
application for damages prior to the termination of the case against it. It is barred to do so now. The
prevailing party, if such would be the proper term for the appellee-corporation, having failed to file its
application for damages against the bond prior to the entry of final judgment, the bondsman-appellant
is relieved of further liability thereunder.
Since Young is time-barred from claiming damages against the replevin bond, the dismissal order
having attained finality after the application for damages, the Court of Appeals erred in ordering the
trial court to set a hearing for the determination of damages against the replevin bond.
WHEREFORE, the Court GRANTS the petition IN PART. The Court SETS ASIDE the portion in the
assailed decision of the Court of Appeals in CA-G.R. SP No. 96266 ordering the trial court to set a
hearing for the determination of damages against the replevin bond.
SO ORDERED.

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

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