THIRD DIVISION
G.R. No. 197802, November 11, 2015
ZUNECA PHARMACEUTICAL, AKRAM ARAIN AND/OR VENUS ARAIN, M.D. DBA
ZUNECA PHARMACEUTICAL, Petitioners, v. NATRAPHARM, INC., Respondent.
RESOLUTION
VILLARAMA, JR., J.:
This is a petition for review1 under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the April 18, 2011 Decision2 and July 21, 2011 Resolution3 of the Court of Appeals
(CA) in the petition for certiorari docketed as CA-G.R. SP No. 103333 granting a permanent
injunction in favor of respondent Natrapharm, Inc. and against petitioner Zuneca
Pharmaceutical.
The facts follow: Respondent is an all-Filipino pharmaceutical company which
manufactures and sells a medicine bearing the generic name "CITICOLINE," which is
indicated for heart and stroke patients. The said medicine is marketed by respondent under
its registered trademark "ZYNAPSE," which respondent obtained from the Intellectual
Property Office (IPO) on September 24, 2007 under Certificate of Trademark Registration No.
4-2007-005596. With its registration, the trademark "ZYNAPSE" enjoys protection for a term
of 10 years from September 24, 2007. 4 In addition, respondent obtained from the Bureau of
Food and Drugs (BFAD) all necessary permits and licenses to register, list and sell its
"ZYNAPSE" medicine in its various forms and dosages.5
Allegedly unknown to respondent, since 2003 or even as early as 2001, petitioners have been
selling a medicine imported from Lahore, Pakistan bearing the generic name
"CARBAMAZEPINE," an anti-convulsant indicated for epilepsy, under the brand name
"ZYNAPS," which trademark is however not registered with the IPO. "ZYNAPS" is pronounced
exactly like "ZYNAPSE."6 Respondent further alleged that petitioners are selling their product
"ZYNAPS" CARBAMAZEPINE in numerous drugstores in the country where its own product
"ZYNAPSE" CITICOLINE is also being sold. 7 Moreover, respondent claimed that the drug
CARBAMAZEPINE has one documented serious and disfiguring side-effect called "Stevens-
Johnson Syndrome," and that the sale of the medicines "ZYNAPSE" and "ZYNAPS" in the
same drugstores will give rise to medicine switching. 8
On October 30, 2007, respondent sent petitioners a cease-and-desist demand letter, pointing
out that:
a. "ZYNAPSE" is the registered trademark of [respondent], and that as such
owner, it has exclusive trademark right under the law to the use thereof
and prevent others from using identical or confusingly similar marks, and
that [petitioners] must stop the use of "ZYNAPS" for being nearly identical
to "ZYNAPSE"; and
b. Because there is confusing similarity between "ZYNAPSE" and "ZYNAPS,"
there is a danger of medicine switching, with the patient on "ZYNAPSE"
medication placed in a more injurious situation given the Steven-Johnson
Syndrome side effect of the "ZYNAPS" CARBAMAZEPINE.9
Petitioners refused to heed the above demand, claiming that they had prior use of the name
"ZYNAPS" since year 2003, having been issued by the BFAD a Certificate of Product
Registration (CPR) on April 15, 2003, which allowed them to sell CARBAMAZEPINE under the
brand name "ZYNAPS."10 On November 29, 2007, respondent filed a complaint against
petitioners for trademark infringement for violation of Republic Act (R.A.) No. 8293, or
the Intellectual Property Code of the Philippines (IPC), with prayer for a temporary restraining
order (TRO) and/or writ of preliminary injunction. To justify the TRO/writ of preliminary
injunction, respondent cited Section 12211 of R.A. No. 8293, under which the registration of
"ZYNAPSE" gives it the exclusive right to use the said name as well as to exclude others from
using the same.12 In addition, respondent argued that under Sections 138 13 and 147.114of the
IPC, certificates of registration are prima facie evidence of the registrant's ownership of the
mark and of the registrant's exclusive right to use the same. 15 Respondent also invoked the
case of Conrad and Company, Inc. v. Court of Appeals16 where it was ruled that an invasion
of a registered mark entitles the holder of a certificate of registration thereof to injunctive
relief.17 In their answer, petitioners argued that they enjoyed prior use in good faith of the
brand name "ZYNAPS," having submitted their application for CPR with the BFAD on October
2, 2001, with the name "ZYNAPS" expressly indicated thereon. The CPR was issued to them
on April 15, 2003. 18Moreover, petitioners averred that under Section 159 19 of the IPC their
right to use the said mark is protected.20 In its December 21, 2007 Order,21 the Regional Trial
Court (RTC) denied respondent's application for a TRO, ruling that even if respondent was
able to first register its mark "ZYNAPSE" with the IPO in 2007, it is nevertheless defeated by
the prior actual use by petitioners of "ZYNAPS" in 2003.
In its March 12, 2008 Order,22 the RTC denied the application for a writ of preliminary
injunction, reiterating the reasons stated in the order denying the application for a TRO:
In this Court's objective evaluation, neither party is, at this point, entitled to any injunctive
solace. Plaintiff, while admittedly the holder of a registered trademark under the IPC, may not
invoke ascendancy or superiority of its CTR [certificate of trademark registration] over the
CPR [certificate of product registration of the BFAD] of the defendants, as the latter
certificate is, in the Court's opinion, evidence of its "prior use". Parenthetically, the plaintiff
would have been entitled to an injunction as against any or all third persons in respect of its
registered mark under normal conditions, that is, in the event wherein Section 159.1 would
not be invoked by such third person. Such is the case however in this litigation. Section 159
of the IPC explicitly curtails the registrant's rights by providing for limitations on those rights
as against a "prior user" under Section 159.1 xxx.23
Via a petition for certiorari with an application for a TRO and/or a writ of preliminary
injunction, respondent questioned before the CA the RTC's denial of the application for a writ
of preliminary injunction. On June 17, 2008, the CA issued a Resolution 24 denying
respondent's application for TRO and/or preliminary injunction for lack of merit. The CA found
no compelling reason to grant the application for TRO and/or preliminary injunction because
there was no showing that respondent had a clear and existing right that will be violated by
petitioners. Respondent moved for reconsideration but was denied by the CA in its July 31,
2008 Resolution. 25 However, contrary to its earlier resolutions denying the application for a
TRO/preliminary injunction, the CA, in its April 18, 2011 Decision, upheld the allegations of
respondent that it is entitled to injunctive relief on the basis of its IPO registration and
permanently enjoined petitioners from the commercial use of "ZYNAPS." The fallo of the CA
Decision reads:
WHEREFORE, premises considered, the Petition for Certiorari is GRANTED. The assailed
Omnibus Order dated 12 March 2008 of the Regional Trial Court, Branch 93 of Quezon City in
Civil Case No. Q-07-61561 is REVERSED and SET ASIDE, and a new one is
entered permanently ENJOINING defendants-respondents, their employees, agents,
representatives, dealers, retailers, and/or assigns, and any and all persons acting in their
behalf, from manufacturing, importing, distributing, selling and/or advertising for sale, or
otherwise using in commerce, the anti-convulsant drug CARBAMAZEPINE under the brand
name and mark "ZYNAPS," or using any other name which is similar or confusingly similar to
petitioner's registered trademark "ZYNAPSE," including filing of application for permits,
license, or certificate of product registration with the Food and Drug Administration and other
government agencies. SO ORDERED.26 (Underscoring and additional emphasis supplied)
Petitioners' motion for reconsideration was denied by the CA in its Resolution dated July 21,
2011. Hence, this petition for review.
1
On December 2, 2011, the RTC rendered a Decision 27 on the merits of the case. It found
petitioners liable to respondent for damages. Moreover, it enjoined the petitioners from using
"ZYNAPS" and ordered all materials related to it be disposed outside the channel of
commerce or destroyed without compensation. 28 Respondent moved to dismiss the present
petition in view of the December 2, 2011 RTC Decision which functions as a full adjudication
on the merits of the main issue of trademark infringement. Respondent contended that the
present petition is moot and academic, it only involving an ancillary writ. 29
As things stand now, this Court can no longer interfere with the preliminary injunctions issued
by the Leyte court in its cases Nos. 2985 and 2990, because such preliminary writs have
already been vacated, being superseded and replaced by the permanent injunction ordered in
the decision on the merits rendered on 21 March 1962. And as to the permanent
injunction, no action can be taken thereon without reviewing the judgment on the
merits, such injunction being but a consequence of the pronouncement that the credits of
Tiongson and Montilla are entitled to priority over that of Casilan.

Petitioners, on the other hand, opposed the motion to dismiss arguing that the December 2,
2011 RTC Decision had not yet attained finality, thus, the present petition had not yet been
rendered moot. The two issues which need to be addressed are:
1) Whether the decision on the merits rendered the issues in this case moot and academic?
and
2) Whether the CA may order a permanent injunction in deciding a petition
for certiorari against the denial of an application for a preliminary injunction issued by the
RTC?
We hold that the issues raised in the instant petition have been rendered moot
and academic given the RTC's December 2, 2011 Decision on the merits of the
case. Rule 58 of the Rules of Court provides for both preliminary and permanent injunction.
Section 1, Rule 58 provides for the definition of preliminary injunction:
SECTION 1. Preliminary injunction defined; classes. 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. (Emphasis supplied)
On the other hand, Section 9 of the same Rule defines a permanent injunction in this wise:
SEC. 9. When final injunction granted. If after the trial of the action it appears that the
applicant is entitled to have the act or acts complained of permanently enjoined, the court
shall grant a final injunction perpetually restraining the party or person enjoined from the
commission or continuance of the act or acts or confirming the preliminary mandatory
injunction. (Emphasis supplied)
Since the court below had the power and right to determine such question of
preference, its judgment is not without, nor in excess of, jurisdiction; and even
assuming that its findings are not correct, they would, at most, constitute errors
of law, and not abuses of discretion, correctible by certiorari . The obvious remedy
for petitioner Casilan was a timely appeal from the judgment on the merits to the
Court of Appeals, the amount involved being less than P200,000. But the judgment has
become final and unappealable and can not be set aside through certiorari proceedings.
(Emphasis supplied )
Here, this Court is being asked to determine whether the CA erred by issuing a permanent
injunction in a case which questioned the propriety of the denial of an ancillary writ. But with
the RTC's December 2, 2011 Decision on the case for "Injunction, Trademark Infringement,
Damages and Destruction," the issues raised in the instant petition have been rendered moot
and academic. We note that the case brought to the CA on a petition for certiorari merely
involved the RTC's denial of respondent's application for a writ of preliminary injunction, a
mere ancillary writ. Since a decision on the merits has already been rendered and which
includes in its disposition a permanent injunction, the proper remedy is an appeal36 from the
decision in the main case.
WHEREFORE, in light of all the foregoing, the petition is hereby DENIED for being moot and
academic.
SO ORDERED.

A writ of preliminary injunction is generally based solely on initial and incomplete

evidence.30 The evidence submitted during the hearing on an application for a writ of
preliminary injunction is not conclusive or complete for only a sampling is needed to give the
trial court an idea of the justification for the preliminary injunction pending the decision of the
case on the merits.31 As such, the findings of fact and opinion of a court when issuing the writ
of preliminary injunction are interlocutory in nature and made even before the trial on the
merits is commenced or terminated.32

By contrast a permanent injunction, based on Section 9, Rule 58 of the Rules of Court, forms
part of the judgment on the merits and it can only be properly ordered only on final
judgment. A permanent injunction may thus be granted after a trial or hearing on the merits
of the case and a decree granting or refusing an injunction should not be entered until after a
hearing on the merits where a verified answer containing denials is filed or where no answer
is required, or a rule to show cause is equivalent to an answer. 33

As such a preliminary injunction, like any preliminary writ and any interlocutory order, cannot
survive the main case of which it is an incident; because an ancillary writ of preliminary
injunction loses its force and effect after the decision in the main petition.In Casilan v.
Ybaez,35 this Court stated:

2
FIRST DIVISION
BF HOMES, INC. and THEPHILIPPINE G.R. No. 171624
WATERWORKS AND CONSTRUCTION CORP., December 6, 2010
- versus - MANILA ELECTRIC COMPANY,
DECISION
LEONARDO-DE CASTRO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision[1] dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826, nullifying
and setting aside (1) the Order[2] dated November 21, 2003 of the Regional Trial Court (RTC),
Branch 202 of Las Pias City, in Civil Case No. 03-0151, thereby dissolving the writ of
injunction against respondent Manila Electric Company (MERALCO); and (2) the
Resolution[3] dated February 7, 2006 of the Court of Appeals denying the Motion for
Reconsideration of petitioners BF Homes, Inc. (BF Homes) and Philippine Waterworks and
Construction Corporation (PWCC).
MERALCO is a corporation duly organized and existing under Philippine laws
engaged in the distribution and sale of electric power in Metro Manila. On the other hand, BF
Homes and PWCC are owners and operators of waterworks systems delivering water to over
12,000 households and commercial buildings in BF Homes subdivisions in Paraaque City, Las
Pias City, Caloocan City, and Quezon City. The water distributed in the waterworks systems
owned and operated by BF Homes and PWCC is drawn from deep wells using pumps run by
electricity supplied by MERALCO. On June 23, 2003, BF Homes and PWCC filed a Petition
[With Prayer for the Issuance of Writ of Preliminary Injunction and for the Immediate
Issuance of Restraining Order] against MERALCO before the RTC, docketed as Civil Case No.
03-0151.
In their Petition before the RTC, BF Homes and PWCC invoked their right to refund
based on the ruling of this Court in Republic v. Manila Electric Company[4]:
7. It is of judicial notice that on November 15, 2002, in G.R. No.
141314, entitled Republic of the Philippines vs. Manila Electric Company ,
and G.R. No. 141369, entitled Lawyers Against Monopoly and Poverty
(LAMP) et al. vs. Manila Electric Compnay (MERALCO) , (both cases shall
hereafter be referred to as MERALCO Refund cases, for brevity), the
Supreme Court ordered MERALCO to refund its customers, which shall be
credited against the customers future consumption, the excess average
amount of P0.167 per kilowatt hour starting with the customers billing
cycles beginning February 1998. The dispositive portion of the Supreme
Court Decision in the MERALCO Refund cases reads:
WHEREFORE, in view of the foregoing, the
instant petitions are GRANTED and the decision of the
Court of Appeals in C.A. G.R. SP No. 46888 is
REVERSED.Respondent MERALCO is authorized to
adopt a rate adjustment in the amount of P0.017
kilowatthour, effective with respect to MERALCOs
billing cycles beginning February 1994. Further, in
accordance with the decision of the ERB dated
February 16, 1998, the excess average amount
of P0.167 per kilowatt hour starting with the applicants
billing cycles beginning February 1998 is ordered to be
refunded to MERALCOs customers or correspondingly
credited in their favor for future consumption.
8. The Motion for Reconsideration filed by MERALCO in the
MERALCO Refund cases was DENIED WITH FINALITY (the uppercase
letters were used by the Supreme Court) in the Resolution of the Supreme
Court dated April 9, 2003.
9. The amount that MERALCO was mandated to refund to [BF
Homes and PWCC] pursuant to the MERALCO Refund cases is in the
amount of P11,834,570.91.[5]
BF Homes and PWCC then alleged in their RTC Petition that:
10. On May 20, 2003, without giving any notice whatsoever,
MERALCO disconnected electric supply to [BF Homes and PWCCs] sixteen
(16) water pumps located in BF Homes in Paraaque, Caloocan, and
Quezon City, which thus disrupted water supply in those areas.
11. On June 4, 2003, [BF Homes and PWCC] received by
facsimile transmission a letter from MERALCO, x x x, in which MERALCO
demanded to [BF Homes and PWCC] the payment of electric bills
amounting to P4,717,768.15.
12. [MERALCO] replied in a letter dated June 11, 2003, x x x,
requesting MERALCO to apply the P4,717,768.15 electric bill against
the P11,834,570.91 that MERALCO was ordered to refund to [BF Homes
and PWCC] pursuant to the MERALCO Refund cases. x x x
13. Displaying the arrogance that has become its distinction,
MERALCO, in its letter dated June 16, 2003, x x x, denied [BF Homes and
PWCCs] request alleging that it has not yet come up with the schedule for
the refund of large amounts, such as those of [BF Homes and PWCC].
14. Even while MERALCO was serving its reply-letter to [BF
Homes and PWCC], MERALCO, again, without giving any notice, cut off
power supply to [BF Homes and PWCCs] five (5) water pumps located in
BF Homes Paraaque and BF Resort Village, in Pamplona, Las Pias City.
15. In its letter dated June 4, 2003 (Annex A), MERALCO
threatened to cut off electric power connections to all of [BF Homes and
PWCCs] water pumps if [BF Homes and PWCC] failed to pay their bills
demanded by MERALCO by June 20, 2003. [6]
BF Homes and PWCC thus cited the following causes of action for their RTC
Petition:
16. In refusing to apply [MERALCOs] electric bills against the
amounts that it was ordered to refund to [BF Homes and PWCC] pursuant
to the MERALCO Refund cases and in making the implementation of the
refund ordered by the Supreme Court dependent upon its own will and
caprice, MERALCO acted with utmost bad faith.
17. [BF Homes and PWCC] are clearly entitled to the remedies
under the law to compel MERALCO to consider [BF Homes and PWCCs]
electric bills fully paid by the amounts which MERALCO was ordered to
3
 refund to [BF Homes and PWCC] pursuant to the MERALCO Refund cases,
to enjoin MERALCO to reconnect electric power to all of [BF Homes and
PWCCs] water pumps, and to order MERALCO to desist from further
cutting off power connection to [BF Homes and PWCCs] water pumps.
18. MERALCOs unjust and oppressive acts have cast dishonor
upon [BF Homes and PWCCs] good name and besmirched their reputation
for which [BF Homes and PWCC] should be indemnified by way of moral
damages in the amount of not less than P1,000,000.00.
19. As an example for the public good, to dissuade others from
emulating MERALCOs unjust, oppressive and mercenary conduct,
MERALCO should be directed to pay [BF Homes and PWCC] exemplary
damages of at least P1,000,000.00.
20. MERALCOs oppressive and inequitable conduct forced [BF
Homes and PWCC] to engage the services of counsel to defend their rights
and thereby incur litigation expenses in the amount of at
least P500,000.00 for which [BF Homes and PWCC] should be indemnified.
[7]
BF Homes and PWCC additionally prayed that the RTC issue a writ of preliminary injunction
and restraining order considering that:
21. As indicated in its letter dated June 4, 2003 (Annex A),
unless seasonably restrained, MERALCO will cut off electric power
connections to all of [BF Homes and PWCCs] water pumps on June 20,
2003.
22. Part of the reliefs herein prayed for is to restrain MERALCO
from cutting off electric power connections to [BF Homes and PWCCs]
water pumps.
23. Unless MERALCOS announced intention to cut off electric
power connections to [BF Homes and PWCCs] water pumps is restrained,
[BF Homes and PWCC] will suffer great and irreparable injury because
they would not [be] able to supply water to their customers.
24. [BF Homes and PWCC] therefore pray that a writ for
preliminary injunction be issued upon posting of a bond in an amount as
will be determined by this Honorable Court.
25. [BF Homes and PWCC] further pray that, in the meantime
and immediately upon the filing of the above captioned Petition, a
restraining order be issued before the matter of preliminary injunction can
be heard.[8]
On August 15, 2003, MERALCO filed before the RTC its Answer with Counterclaims
and Opposition to the Application for Writ of Preliminary Injunction [9] of BF Homes and PWCC.
According to MERALCO:
2.2. Both petitioners BF Homes, Incorporated and Philippine
Waterworks Corporation are admittedly the registered customers of
[MERALCO] by virtue of the service contracts executed between them
under which the latter undertook to supply electric energy to the former
for a fee. The following twenty-three (23) Service Identification Nos.
(SINs) are registered under the name of BF Homes, Incorporated: x x x.
While the following twenty-one (21) Service Identification Nos. (SINs) are
registered under the name of Philippine Waterworks Construction
Corporation: x x x
2.4. The service contracts as well as the terms and conditions of
[MERALCOs] service as approved by BOE [Board of Energy], now ERC
[Energy Regulatory Commission], provide in relevant parts, that [BF
Homes and PWCC] agree as follows:
DISCONTINUANCE OF SERVICE:
The Company reserves the right to discontinue
service in case the customer is in arrears in the
payment of bills or for failure to pay the adjusted
bills in those cases where the meter stopped or failed
to register the correct amount of energy consumed, or
for failure to comply with any of these terms and
conditions, or in case of or to prevent fraud upon the
Company. Before disconnection is made in the case of,
or to prevent fraud, the Company may adjust the bill of
said customer accordingly and if the adjusted bill is not
paid, the Company may disconnect the same.
(Emphasis supplied)
2.5. This contractual right of [MERALCO] to discontinue electric
service for default in the payment of its regular bills is sanctioned and
approved by the rules and regulations of ERB (now the ERC). This right is
necessary and reasonable means to properly protect and enable
[MERALCO] to perform and discharge its legal and contractual obligation
under its legislative franchise and the law. Cutting off service for non-
payment by the customers of the regular monthly electric bills is the only
practical way a public utility, such as [MERALCO], can ensure and maintain
efficient service in accordance with the terms and conditions of its
legislative franchise and the law.
2.14. Instead of paying their unpaid electric bills and before [MERALCO]
could effect its legal and contractual right to disconnect [BF Homes and
PWCCs] electric services, [BF Homes and PWCC] filed the instant petition
to avoid payment of [MERALCOs] valid and legal claim for regular monthly
electric bills.
2.15. [BF Homes and PWCCs] unpaid regular bills totaled
P6,551,969.55 covering the May and June 2003 electric bills. x x x
2.17. [BF Homes and PWCC] knew that [MERALCO] is already in
the process of implementing the decision of the Supreme Court as to the
refund case. But this refund has to be implemented in accordance with the
guidelines and schedule to be approved by the ERC. Thus [BF Homes and
PWCCs] filing of the instant petition is merely to evade payment of their
unpaid electric bills to [MERALCO].[10]
4

Hence, MERALCO sought the dismissal of the RTC Petition of BF Homes and PWCC
on the following grounds:
3.1 The Honorable Court has no jurisdiction to award the relief
prayed for by [BF Homes and PWCC] because:
a) The petition is in effect preempting or defeating the power
of the ERC to implement the decision of the Supreme Court.
b) [MERALCO] is a utility company whose business activity is
wholly regulated by the ERC. The latter, being the
regulatory agency of the government having the authority
over the respondent, is the one tasked to approve the
guidelines, schedules and details of the refund.
c) The decision of the Supreme Court, dated November 15,
2002, clearly states that respondent is directed to make the
refund to its customers in accordance with the decision of
the ERC (formerly ERB) dated February 16, 1998. Hence,
[MERALCO] has to wait for the schedule and details of the
refund to be approved by the ERC before it can comply with
the Supreme Court decision.
3.2. [MERALCO] has the right to disconnect the electric
service to [BF Homes and PWCC] in that:
a) The service contracts between [MERALCO] and [BF Homes
and PWCC] expressly authorize the former to discontinue
and disconnect electric services of the latter for their failure
to pay the regular electric bills rendered.
b) It is [MERALCOs] legal duty as a public utility to furnish its
service to the general public without arbitrary discrimination
and, consequently, [MERALCO] is obligated to discontinue
and disconnect electric services to [BF Homes and PWCC]
for their refusal or failure to pay the electric energy actually
used by them.[11]
For its compulsory counterclaims, MERALCO prayed that the RTC orders BF Homes
and PWCC to pay MERALCO P6,551,969.55 as actual damages (representing the unpaid
electric bills of BF Homes and PWCC for May and June 2003), P1,500,000.00 as exemplary
damages, P1,500,000.00 as moral damages, and P1,000,000.00 as attorneys fees.
Lastly, MERALCO opposed the application for writ of preliminary injunction of BF
Homes and PWCC because:
I [MERALCO] HAS THE LEGAL AND CONTRACTUAL RIGHT TO DEMAND
PAYMENT OF THE ELECTRIC BILLS AND, IN CASE OF NON-PAYMENT, TO
DISCONTINUE THE ELECTRIC SERVICES OF [BF HOMES and PWCC]
II [BF HOMES and PWCC] HAVE NO CLEAR RIGHT WHICH WARRANTS
PROTECTION BY INJUNCTIVE PROCESS
After hearing,[12] the RTC issued an Order on November 21, 2003 granting the application of
BF Homes and PWCC for the issuance of a writ of preliminary injunction. The RTC found that
the records showed that all requisites for the issuance of said writ were sufficiently satisfied
by BF Homes and PWCC. The RTC stated in its Order:
Albeit, this Court respects the right of a public utility company like
MERALCO, being a grantee of a legislative franchise under Republic Act
No. 9029, to collect overdue payments from its subscribers or customers
for their respective consumption of electric energy, such right must,
however, succumb to the paramount substantial and constitutional rights
of the public to the usage and enjoyment of waters in their
community. Thus, there is an urgent need for the issuance of a writ of
preliminary injunction in order to prevent social unrest in the community
for having been deprived of the use and enjoyment of waters flowing
through [BF Homes and PWCCs] water pumps.[13]
The RTC decreed in the end:
WHEREFORE, in the light of the foregoing, [BF Homes and PWCCs] prayer
for the issuance of a writ of preliminary injunction is hereby
GRANTED. Respondent Manila Electric Company is permanently restrained
from proceeding with its announced intention to cut-off electric power
connection to [BF Homes and PWCCs] water pumps unless otherwise
ordered by this Court.Further, [BF Homes and PWCC] are hereby ordered
to post a bond in the amount of P500,000 to answer for whatever injury
or damage that may be caused by reason of the preliminary injunction. [14]
The Motion for Reconsideration of MERALCO of the aforementioned Order was denied by the
RTC in another Order issued on January 9, 2004. [15] The RTC reiterated its earlier finding that
all the requisites for the proper issuance of an injunction had been fully complied with by BF
Homes and PWCC, thus:
Records indubitably show that all the requisites for the proper
issuance of an injunction have been fully complied with in the instant
case.
It should be noted that a disconnection of power supply would
obviously cause irreparable injury because the pumps that supply water to
the BF community will be without electricity, thereby rendering said
community without water. Water is a basic and endemic necessity of
life. This is why its enjoyment and use has been constitutionally
safeguarded and protected.Likewise, a community without water might
create social unrest, which situation this Court has the mandate to
prevent. There is an urgent and paramount necessity for the issuance of
the injunctive writ to prevent serious damage to the guaranteed rights of
[BF Homes and PWCC] and the residents of the community to use and
enjoy water.[16]
The RTC resolved the issue on jurisdiction raised by MERALCO, as follows:
As to the jurisdictional issue raised by respondent MERALCO, it
can be gleaned from a re-evaluation and re-assessment of the records
that this Court has jurisdiction to delve into the case. This Court gave both
parties the opportunity to be heard as they introduced evidence on the
propriety of the issuance of the injunctive writ. It is well-settled that no
grave abuse of discretion could be attributed to its issuance where a party
was not deprived of its day in court as it was heard and had exhaustively
presented all its arguments and defenses. (National Mines and Allied
Workers Union vs. Valero, 132 SCRA 578, 1984. )[17]
5
Aggrieved, MERALCO filed with the Court of Appeals a Petition for Certiorari under
Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 82826. MERALCO sought
the reversal of the RTC Orders dated November 21, 2003 and January 9, 2004
granting a writ of preliminary injunction in favor of BF Homes and PWCC. MERALCO
asserted that the RTC had no jurisdiction over the application of BF Homes and
PWCC for issuance of such a writ. In its Decision dated October 27, 2005, the Court
of Appeals agreed with MERALCO that the RTC had no jurisdiction to issue a writ of
preliminary injunction in Civil Case No. 03-0151, as said trial court had no
jurisdiction over the subject matter of the case to begin with. It ratiocinated in this
wise:
For one, it cannot be gainsaid that the ERC has original and exclusive
jurisdiction over the case. Explicitly, Section 43(u) of Republic Act No.
9136, otherwise known as the Electric Power Industry Reform Act, (RA
9136), states that the ERC shall have the original and exclusive jurisdiction
over all cases contesting rates, fees, fines and penalties imposed by the
ERC in the exercise of its powers, functions and responsibilities and over
all cases involving disputes between and among participants or players in
the energy sector. Section 4(o) of Rule 3 of the Implementing Rules and
Regulations of RA 9136 likewise provides that the ERC shall also be
empowered to issue such other rules that are essential in the discharge of
its functions as an independent quasi-judicial body.
For another, the respondent judge, instead of presiding over the case,
should have dismissed the same and yielded jurisdiction to the ERC
pursuant to the doctrine of primary jurisdiction. It is plain error on the part
of the respondent judge to determine, preliminary or otherwise, a
controversy involving a question which is within the jurisdiction of an
administrative tribunal, especially so where the question demands the
exercise of sound administrative discretion.
Needless to state, the doctrine of primary jurisdiction applies where the
administrative agency, as in the case of ERC, exercises its quasi-judicial
and adjudicatory function. Thus, in cases involving specialized disputes,
the practice has been to refer the same to an administrative agency of
special competence pursuant to the doctrine of primary jurisdiction. The
courts will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the resolution
of that question by the administrative tribunal, where the question
demands the exercise of sound administrative discretion requiring the
special knowledge, experience and services of the administrative tribunal
to determine technical and intricate matters of fact, and a uniformity of
ruling is essential to comply with the premises of the regulatory statute
administered.
Verily, the cause of action of [BF Homes and PWCC] against [MERALCO]
originates from the Meralco Refund Decision as it involves the perceived
right of the former to compel the latter to set-off or apply their refund to
their present electric bill. The issue delves into the right of the private
respondents to collect their refund without submitting to the approved
schedule of the ERC, and in effect give unto themselves preferential right
over other equally situated consumers of [MERALCO]. Perforce, the ERC,
as can be gleaned from the afore-stated legal provisions, has primary,
original and exclusive jurisdiction over the said controversy.
Indeed, the respondent judge glaringly erred in enjoining the right of
[MERALCO] to disconnect its services to [BF Homes and PWCC] on the
premise that the court has jurisdiction to apply the provisions on
compensation or set-off in this case. Although [MERALCO] recognizes the
right of [BF Homes and PWCC] to the refund as provided in the Meralco
Refund Decision, it is the ERC which has the authority to implement the
same according to its approved schedule, it being a dispute arising from
the exercise of its jurisdiction.
Moreover, it bears to stress that the Meralco Refund Decision was brought
into fore by the Decision dated 16 February 1998 of the ERC (then Energy
Regulatory Board) granting refund to [MERALCOs] consumers. Being the
agency of origin, the ERC has the jurisdiction to execute the
same. Besides, as stated, it is empowered to promulgate rules that are
essential in the discharge of its functions as an independent quasi-judicial
body.[18]
The dispositive portion of the judgment of the appellate court reads:
WHEREFORE, the foregoing considered, the instant petition is
hereby GRANTED and the assailed Orders REVERSED and SET
ASIDE. Accordingly, the writ of injunction against [MERALCO] is
hereby DISSOLVED. No costs.[19]
In a Resolution dated February 7, 2006, the Court of Appeals denied the Motion for
Reconsideration of BF Homes and PWCC for failing to raise new and persuasive and
meritorious arguments.
Now, BF Homes and PWCC come before this Court via the instant Petition, raising
the following assignment of errors:
1. The Court of Appeals ERRED in saying that the respondent judge
committed grave abuse of discretion by issuing the disputed writ of
injunction pending the merits of the case including the issue of
subject matter jurisdiction.
2. The Court of Appeals ERRED in saying that the ERC under the
doctrine of primary jurisdiction has the original and EXCLUSIVE
jurisdiction to take cognizance of a petition for injunction to prevent
electrical disconnection to a customer entitled to a refund.
3. The Court of Appeals ERRED in NOT SAYING that the ERC as a
quasi-judicial body under RA 9136 has no power to issue any
injunctive relief or remedy to prevent disconnection.
4. The Court of Appeals ERRED in not resolving the issue as to the
violation of MERALCO of a standing injunction order while the case
remains undecided.[20]
At the core of the Petition is the issue of whether jurisdiction over the subject
matter of Civil Case No. 03-0151 lies with the RTC or the Energy Regulatory Commission
(ERC). If it is with the RTC, then the said trial court also has jurisdiction to issue the writ of
preliminary injunction against MERALCO. If it is with the ERC, then the RTC also has no
jurisdiction to act on any incidents in Civil Case No. 03-0151, including the application for
issuance of a writ of preliminary injunction of BF Homes and PWCC therein.
6

BF Homes and PWCC argued that due to the threat of MERALCO to disconnect
electric services, BF Homes and PWCC had no other recourse but to seek an injunctive
remedy from the RTC under its general jurisdiction. The merits of Civil Case No. 03-0151 was
not yet in issue, only the propriety of issuing a writ of preliminary injunction to prevent an
irreparable injury. Even granting that the RTC has no jurisdiction over the subject matter of
Civil Case No. 03-0151, the ERC by enabling law has no injunctive power to prevent the
disconnection by MERALCO of electric services to BF Homes and PWCC.
The Petition has no merit.
Settled is the rule that jurisdiction is conferred only by the Constitution or the law.
[21]
Republic v. Court of Appeals[22] also enunciated that only a statute can confer jurisdiction
on courts and administrative agencies.
Related to the foregoing and equally well-settled is the rule that the nature of an
action and the subject matter thereof, as well as which court or agency of the government
has jurisdiction over the same, are determined by the material allegations of the complaint in
relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for relief is
not part of the petition of the cause of action; nor does it enlarge the cause of action stated
or change the legal effect of what is alleged. In determining which body has jurisdiction over
a case, the better policy is to consider not only the status or relationship of the parties but
also the nature of the action that is the subject of their controversy. [23]
In Manila Electric Company v. Energy Regulatory Board,[24] the Court traced the
legislative history of the regulatory agencies which preceded the ERC, presenting a summary
of these agencies, the statutes or issuances that created them, and the extent of the
jurisdiction conferred upon them, viz:
1. The first regulatory body, the Board of Rate Regulation (BRR),
was created by virtue of Act No. 1779. Its regulatory mandate under
Section 5 of the law was limited to fixing or regulating rates of every
public service corporation.
2. In 1913, Act No. 2307 created the Board of Public Utility
Commissioners (BPUC) to take over the functions of the BRR. By express
provision of Act No. 2307, the BPUC was vested with jurisdiction,
supervision and control over all public utilities and their properties and
franchises.
3. On November 7, 1936, Commonwealth Act (C.A.) No. 146, or
the Public Service Act (PSA), was passed creating the Public Service
Commission (PSC) to replace the BPUC. Like the BPUC, the PSC was
expressly granted jurisdiction, supervision and control over public services,
with the concomitant authority of calling on the public force to exercise its
power, to wit:
SEC. 13. Except as otherwise provided herein,
the Commission shall have general supervision and
regulation of, jurisdiction and control over, all
public utilities, and also over their property, property
rights, equipment, facilities and franchises so far as
may be necessary for the purpose of carrying out the
provisions of this Act, and in the exercise of its
authority it shall have the necessary powers and the
aid of the public force x x x.
Section 14 of C.A. No. 146 defines the term public
service or public utility as including every individual, copartnership,
association, corporation or joint-stock company, . . . that now or hereafter
may own, operate, manage or control within the Philippines, for hire or
compensation, any common carrier, x x x, electric light, heat, power, x x
x, when owned, operated and managed for public use or service within
the Philippines x x x. Under the succeeding Section 17(a), the PSC has the
power even without prior hearing
(a) To investigate, upon its own initiative, or
upon complaint in writing, any matter concerning any
public service as regards matters under its jurisdiction;
to require any public service to furnish safe, adequate
and proper service as the public interest may require
and warrant, to enforce compliance with any standard,
rule, regulation, order or other requirement of this Act
or of the Commission, x x x.
4. Then came Presidential Decree (P.D.) No. 1, reorganizing the
national government and implementing the Integrated Reorganization
Plan. Under the reorganization plan, jurisdiction, supervision and control
over public services related to electric light, and power heretofore vested
in the PSC were transferred to the Board of Power and Waterworks
(BOPW).
Later, P.D. No. 1206 abolished the BOPW. Its powers and
function relative to power utilities, including its authority to grant
provisional relief, were transferred to the newly-created Board of Energy
(BOE).
5. On May 8, 1987, then President Corazon C. Aquino
issued E.O. No. 172 reconstituting the BOE into the ERB, transferring the
formers functions and powers under P.D. No. 1206 to the latter and
consolidating in and entrusting on the ERB all the regulatory and
adjudicatory functions covering the energy sector . Section 14 of E.O. No.
172 states that (T)he applicable provisions of [C.A.] No. 146, as amended,
otherwise known as the Public Service Act; x x x and [P.D.] No. 1206, as
amended, creating the Department of Energy, shall continue to have full
force and effect, except insofar as inconsistent with this Order. [25]
Thereafter, on June 8, 2001, Republic Act No. 9136, known as the Electric Power
Industry Reform Act of 2001 (EPIRA), was enacted, providing a framework for restructuring
the electric power industry. One of the avowed purposes of the EPIRA is to establish a strong
and purely independent regulatory body. The Energy Regulatory Board (ERB) was abolished
and its powers and functions not inconsistent with the provision of the EPIRA were expressly
transferred to the ERC.[26]
The powers and functions of the ERB not inconsistent with the EPIRA were
transferred to the ERC by virtue of Sections 44 and 80 of the EPIRA, which read:
7
 Sec. 44. Transfer of Powers and Functions. The powers and
functions of the Energy Regulatory Board not inconsistent with the
provisions of this Act are hereby transferred to the ERC.The foregoing
transfer of powers and functions shall include all applicable funds and
appropriations, records, equipment, property and personnel as may be
necessary.
Sec. 80. Applicability and Repealing Clause. The applicability
provisions of Commonwealth Act No. 146, as amended, otherwise known
as the Public Service Act. Republic Act 6395, as amended, revising the
charter of NPC; Presidential Decree 269, as amended, referred to as the
National Electrification Decree; Republic Act 7638, otherwise known as the
Department of Energy Act of 1992; Executive Order 172, as amended,
creating the ERB; Republic Act 7832 otherwise known as the Anti-
Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994;
shall continue to have full force and effect except insofar as they are
inconsistent with this Act.
The provisions with respect to electric power of Section 11(c) of
Republic Act 7916, as amended, and Section 5(f) of Republic Act 7227, are
hereby repealed or modified accordingly. Presidential Decree No. 40 and
all laws, decrees, rules and regulations, or portions thereof, inconsistent
with this Act are hereby repealed or modified accordingly.
In addition to the foregoing, the EPIRA also conferred new powers upon the ERC
under Section 43, among which are:
SEC. 43. Functions of the ERC. The ERC shall promote
competition, encourage market development, ensure customer choice and
penalize abuse of market power in the restructured electricity industry. In
appropriate cases, the ERC is authorized to issue cease and desist order
after due notice and hearing. Towards this end, it shall be responsible for
the following key functions in the restructured industry:
xxxx
(f) In the public interest, establish and enforce a methodology
for setting transmission and distribution wheeling rates and retail rates for
the captive market of a distribution utility, taking into account all relevant
considerations, including the efficiency or inefficiency of the regulated
entities. The rates must be such as to allow the recovery of just and
reasonable costs and a reasonable return on rate base (RORB) to enable
the entity to operate viably. The ERC may adopt alternative forms of
internationally-accepted rate-setting methodology as it may deem
appropriate. The rate-setting methodology so adopted and applied must
ensure a reasonable price of electricity. The rates prescribed shall be non-
discriminatory. To achieve this objective and to ensure the complete
removal of cross subsidies, the cap on the recoverable rate of system
losses prescribed in Section 10 of Republic Act No. 7832, is hereby
amended and shall be replaced by caps which shall be determined by the
ERC based on load density, sales mix, cost of service, delivery voltage and
other technical considerations it may promulgate. The ERC shall determine
such form of rate-setting methodology, which shall promote efficiency. x x
x.
(u) The ERC shall have the original and exclusive jurisdiction
over all cases contesting rates, fees, fines and penalties imposed by the
ERC in the exercise of the abovementioned powers, functions and
responsibilities and over all cases involving disputes between and among
participants or players in the energy sector.
All notices of hearings to be conducted by the ERC for the
purpose of fixing rates or fees shall be published at least twice for two
successive weeks in two (2) newspapers of nationwide circulation.
A careful review of the material allegations of BF Homes and PWCC in their Petition
before the RTC reveals that the very subject matter thereof is the off-setting of the amount
of refund they are supposed to receive from MERALCO against the electric bills they are to
pay to the same company. This is squarely within the primary jurisdiction of the ERC.
The right of BF Homes and PWCC to refund, on which their claim for off-setting
depends, originated from the MERALCO Refund cases. In said cases, the Court (1) authorized
MERALCO to adopt a rate adjustment in the amount of P0.017 per kilowatthour, effective
with respect to its billing cycles beginning February 1994; and (2) ordered MERALCO to
refund to its customers or credit in said customers favor for future consumption P0.167 per
kilowatthour, starting with the customers billing cycles that begin February 1998, in
accordance with the ERB Decision dated February 16, 1998.
It bears to stress that in the MERALCO Refund cases, this Court only affirmed the
February 16, 1998 Decision of the ERB (predecessor of the ERC) fixing the just and
reasonable rate for the electric services of MERALCO and granting refund to MERALCO
consumers of the amount they overpaid. Said Decision was rendered by the ERB in the
exercise of its jurisdiction to determine and fix the just and reasonable rate of power utilities
such as MERALCO.
Presently, the ERC has original and exclusive jurisdiction under Rule 43(u) of the
EPIRA over all cases contesting rates, fees, fines, and penalties imposed by the ERC in the
exercise of its powers, functions and responsibilities, and over all cases involving disputes
between and among participants or players in the energy sector. Section 4(o) of the EPIRA
Implementing Rules and Regulation provides that the ERC shall also be empowered to issue
such other rules that are essential in the discharge of its functions as in independent quasi-
judicial body.
Indubitably, the ERC is the regulatory agency of the government having the
authority and supervision over MERALCO. Thus, the task to approve the guidelines,
schedules, and details of the refund by MERALCO to its consumers, to implement the
judgment of this Court in the MERALCO Refund cases, also falls upon the ERC. By filing their
Petition before the RTC, BF Homes and PWCC intend to collect their refund without
submitting to the approved schedule of the ERC, and in effect, enjoy preferential right over
the other equally situated MERALCO consumers.
Administrative agencies, like the ERC, are tribunals of limited jurisdiction and, as
such, could wield only such as are specifically granted to them by the enabling statutes.In
relation thereto is the doctrine of primary jurisdiction involving matters that demand the
special competence of administrative agencies even if the question involved is also judicial in
nature. Courts cannot and will not resolve a controversy involving a question within the
jurisdiction of an administrative tribunal, especially when the question demands the sound
exercise of administrative discretion requiring special knowledge, experience and services of
the administrative tribunal to determine technical and intricate matters of fact. The court
8
cannot arrogate into itself the authority to resolve a controversy, the jurisdiction of which is
initially lodged with the administrative body of special competence. [27]

Since the RTC had no jurisdiction over the Petition of BF Homes and PWCC in Civil
Case No. 03-0151, then it was also devoid of any authority to act on the application of BF
Homes and PWCC for the issuance of a writ of preliminary injunction contained in the same
Petition. The ancillary and provisional remedy of preliminary injunction cannot exist except
only as an incident of an independent action or proceeding. [28]

Incidentally, BF Homes and PWCC seemed to have lost sight of Section 8 of

Executive Order No. 172 which explicitly vested on the ERB, as an incident of its principal
function, the authority to grant provisional relief, thus:

Section 8. Authority to Grant Provisional Relief. The Board may,

upon the filing of an application, petition or complaint or at any stage
thereafter and without prior hearing, on the basis of supporting papers
duly verified or authenticated, grant provisional relief on motion of a party
in the case or on its own initiative, without prejudice to a final decision
after hearing, should the Board find that the pleadings, together with such
affidavits, documents and other evidence which may be submitted in
support of the motion, substantially support the provisional
order: Provided, That the Board shall immediately schedule and conduct a
hearing thereon within thirty (30) days thereafter, upon publication and
notice to all affected parties.

The aforequoted provision is still applicable to the ERC as it succeeded the ERB, by
virtue of Section 80 of the EPIRA. A writ of preliminary injunction is one such provisional relief
which a party in a case before the ERC may move for.

Lastly, the Court herein already declared that the RTC not only lacked the
jurisdiction to issue the writ of preliminary injunction against MERALCO, but that the RTC
actually had no jurisdiction at all over the subject matter of the Petition of BF Homes and
PWCC in Civil Case No. 03-0151. Therefore, in addition to the dissolution of the writ of
preliminary injunction issued by the RTC, the Court also deems it appropriate to already order
the dismissal of the Petition of BF Homes and PWCC in Civil Case No. 03-0151 for lack of
jurisdiction of the RTC over the subject matter of the same. Although only the matter of the
writ of preliminary injunction was brought before this Court in the instant Petition, the Court
is already taking cognizance of the issue on the jurisdiction of the RTC over the subject
matter of the Petition. The Court may motu proprio consider the issue of jurisdiction. The
Court has discretion to determine whether the RTC validly acquired jurisdiction over Civil Case
No. 03-0151 since, to reiterate, jurisdiction over the subject matter is conferred only by
law. Jurisdiction over the subject matter cannot be acquired through, or waived by, any act
or omission of the parties. Neither would the active participation of the parties nor estoppel
operate to confer jurisdiction on the RTC where the latter has none over a cause of action.
[29]
Indeed, when a court has no jurisdiction over the subject matter, the only power it has is
to dismiss the action.[30]

WHEREFORE, the instant Petition for Review is DENIED. The Decision dated
October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826 is AFFIRMED with
the MODIFICATION that the Regional Trial Court, Branch 202 of Las Pias City,
is ORDERED to dismiss the Petition [With Prayer for the Issuance of Writ of Preliminary
Injunction and for the Immediate Issuance of Restraining Order] of BF Homes, Inc. and
Philippine Waterworks and Construction Corporation in Civil Case No. 03-0151. Costs against
BF Homes, Inc. and Philippine Waterworks and Construction Corporation. SO ORDERED.

9
FIRST DIVISION
G.R. No. 203240, March 18, 2015
NORTHERN ISLANDS, CO., INC., Petitioner, v. SPOUSES DENNIS AND
CHERYLIN* GARCIA, DOING BUSINESS UNDER THE NAME AND STYLE ECOLAMP
MULTI RESOURCES,, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated January 19, 2012 and
the Resolution3 dated August 24, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 97448,
ordering the Regional Trial Court of Quezon City, Branch 215 (RTC) to appoint a
commissioner to determine the value of the attached properties of respondents Spouses
Dennis and Cherylin Garcia (respondents), and to discharge any excessive attachment found
thereby.
The Facts
On September 23, 2005, petitioner Northern Islands Co., Inc. (petitioner) filed a
Complaint4 with application for a writ of preliminary attachment, before the RTC against
respondents, docketed as Civil Case No. Q-05-53699 (Main Case), which was subsequently
amended5 on October 25, 2005. 6 It alleged that: (a) from March to July 2004, petitioner
caused the delivery to respondents of various appliances in the aggregate amount of
P8,040,825.17;7 (b) the goods were transported, shipped, and delivered by Sulpicio Lines,
Inc., and were accepted in good order and condition by respondents representatives; 8 (c)
the parties agreed that the goods delivered were payable within 120 days, and that the
unpaid amounts would earn interest at a rate of eighteen percent (18%) per annum; 9 (d)
however, the value of the goods were not paid by respondents despite repeated
demands;10 and (e) respondents fraudulently asserted that petitioner had no proof that they
had indeed received the quantity of the subject goods. 11
In connection with the application for a writ of preliminary attachment, petitioner posted a
bond, through Visayan Surety and Insurance Corporation, in the amount of ?8,040,825.17.
On November 7, 2005, the RTC issued the writ sought for. 12 Instead of filing an answer,
respondents filed on November 11, 2001, an Urgent Motion for Extension of Time to File
Proper Pleading and Motion for Discovery (Production and Inspection) 13 (November 11, 2001
Motion), asking the RTC to allow them to photocopy and personally examine the original
invoices, delivery cargo receipts, and bills of lading attached to the Amended Complaint,
claiming that they could not come up with an intelligent answer without being presented
with the originals of such documents.14
Thereafter, or on January 11, 2006, respondents filed a Motion to Discharge Excess
Attachment,15alleging that the attachment previously ordered by the RTC exceeded by
P9,232,564.56 given that the estimated value of the attached properties, including the
garnished bank accounts, as assessed by their appraiser, Gaudioso W. Lapaz (Lapaz),
amounted to P17,273,409.73, while the attachment bond is only in the amount of
P8,040,825.17.16
In an Order17 dated February 28, 2006, the RTC denied the November 11, 2001 Motion, and,
instead, directed respondents to file their answer, which the latter complied with through the
filing of their Answer Ad Cautelam Ex Abudante with Compulsory Counterclaim18 on April 3,
2006. Despite this, respondents again filed a Motion for Leave of Court to File Motion for
Discovery (Production and Inspection) 19 (Motion for Discovery) on April 7, 2006. 20
The RTC Ruling
In an Order21 dated June 21, 2006, the RTC, among others, denied the Motion to Discharge
Excess Attachment, finding that the appraisal made by Lapaz was not reflective of the true
valuation of the properties, adding too that the bond posted by petitioner stands as sufficient
security for whatever damages respondents may sustain by reason of the attachment. 22 On
the other hand, the RTC granted the Motion for Discovery in accordance with Rule 27 of the
Rules of Court, despite petitioners claim that it did not have the originals of the documents
being sought.23 However, no production or inspection was conducted on July 10, 2006 as the
RTC directed since respondents received the copy of the above order only on July 11, 2006. 24
On July 25, 2006, respondents filed a Motion for Partial Reconsideration of the Order dated
June 21, 2006, specifically assailing the denial of their Motion to Discharge Excess
Attachment. In this relation, they prayed that the RTC refer to a commissioner, pursuant to
Rule 32 of the Rules of Court, the factual determination of the total aggregate amount of
respondents attached properties so as to ascertain if the attachment was excessive. Also,
they prayed that the order for production and inspection be modified and that petitioner be
ordered to produce the original documents anew for their inspection and copying. 25
The foregoing motion was, however, denied by the RTC in an Order 26 dated August 23, 2006
for lack of merit. Thus, respondents elevated the matter to the CA via petition
for certiorari and mandamus,27docketed as CA-G.R. SP No. 97448 (Certiorari Case). In the
interim, the RTC rendered a Decision 28 dated September 21, 2011 in the Main Case.
Essentially, it dismissed petitioners Amended Complaint due to the absence of any evidence
to prove that respondents had agreed to the pricing of the subject goods. 29
The RTCs September 21, 2011 Decision was later appealed 30 by petitioner before the CA on
October 27, 2011. Finding that the Notice of Appeal was seasonably filed, with the payment
of the appropriate docket fees, the RTC, in an Order 31 dated January 25, 2012, ordered the
elevation of the entire records of the Main Case to the CA. The appeal was then raffled to the
CAs Eighth Division, and docketed as CA-G.R. CV No. 98237. On the other hand, records
do not show that respondents filed any appeal.32
The CA Ruling in the Certiorari Case
Meanwhile, the CA, in a Decision 33 dated January 19, 2012, partly granted
the certiorari petition of respondents, ordering the RTC to appoint a commissioner as
provided under Rule 32 of the Rules of Court as well as the subsequent discharge of any
excess attachment if so found therein, and, on the other hand, denying respondents Motion
for Discovery.34
It held that: (a) on the issue of attachment, trial by commissioners under Rule 32 of the
Rules of Court was proper so that the parties may finally settle their conflicting
valuations;35 and (b) on the matter of discovery, petitioner could not be compelled to produce
the originals sought by respondents for inspection since they were not in the formers
possession.36 Aggrieved, petitioner filed a Motion for Partial Reconsideration 37 on February 13,
2012 but was, however, denied in a Resolution 38 dated August 24, 2012, hence, the present
petition.
The Issues Before the Court
The issues presented for the Courts resolution are: ( a) whether the RTC had lost jurisdiction
over the matter of the preliminary attachment after petitioner appealed the decision in the
Main Case, and thereafter ordered the transmittal of the records to the CA; and ( b) whether
the CA erred in ordering the appointment of a commissioner and the subsequent discharge of
any excess attachment found by said commissioner.
The Courts Ruling: The petition is meritorious.
Section 9, Rule 41 of the Rules of Court provides that in appeals by notice of appeal, the
court loses jurisdiction over the case upon the perfection of the appeals filed in
10
due time and the expiration of the time to appeal of the other parties.

In this case, petitioner had duly perfected its appeal of the RTCs September 21, 2011
Decision resolving the Main Case through the timely filing of its Notice of Appeal dated
October 27, 2011, together with the payment of the appropriate docket fees. The RTC, in an
Order39 dated January 25, 2012, had actually confirmed this fact, and thereby ordered the
elevation of the entire records to the CA. Meanwhile, records do not show that respondents
filed any appeal, resulting in the lapse of its own period to appeal therefrom. Thus, based on
Section 9, Rule 41, it cannot be seriously doubted that the RTC had already lost jurisdiction
over the Main Case.

With the RTCs loss of jurisdiction over the Main Case necessarily comes its loss of jurisdiction
over all matters merely ancillary thereto. Thus, the propriety of conducting a trial by
commissioners in order to determine the excessiveness of the subject preliminary
attachment, being a mere ancillary matter to the Main Case, is now mooted by its
supervening appeal in CA-G.R. CV No. 98237.

Note that in Sps. Olib v. Judge Pastoral,40 the Court, in view of the nature of a preliminary
attachment, definitively ruled that the attachment itself cannot be the subject of a separate
action independent of the principal action because the attachment was only an incident of
such action, viz.:
Attachment is defined as a provisional remedy by which the property of an adverse party is
taken into legal custody, either at the commencement of an action or at any time thereafter,
as a security for the satisfaction of any judgment that may be recovered by the plaintiff or
any proper party.

It is an auxiliary remedy and cannot have an independent existence apart from the main suit
or claim instituted by the plaintiff against the defendant. Being merely ancillary to a
principal proceeding, the attachment must fail if the suit itself cannot be
maintained as the purpose of the writ can no longer be justified.

The consequence is that where the main action is appealed, the attachment which may have
been issued as an incident of that action, is also considered appealed and so also removed
from the jurisdiction of the court a quo. The attachment itself cannot be the subject of
a separate action independent of the principal action because the attachment was
only an incident of such action.41 (Emphases supplied)

That being said, it is now unnecessary to discuss the other issues raised herein. In fine, the
petition is granted and the assailed CA rulings are set aside.

WHEREFORE, the petition is GRANTED. The Decision dated January 19, 2012 and the
Resolution dated August 24, 2012 of the Court of Appeals in CA-G.R. SP No. 97448 are
hereby SET ASIDE.

SO ORDERED.

11
SECOND DIVISION
[G.R. No. 133303. February 17, 2005]
BERNARDO VALDEVIESO, petitioner, vs. CANDELARIO DAMALERIO AND AUREA C.
DAMALERIO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review under Rule 45 of the Rules of Court, seeking
to set aside the 25 September 1997 Decision and the 10 February 1998 Resolution of the
Court of Appeals in CA-G.R. SP No. 43082 entitled, Candelario Damalerio and Aurea
Damalerio v. Honorable Antonio S. Alano, et al.[1]
There is no dispute as to the following facts:
On 05 December 1995, Bernardo Valdevieso (petitioner) bought from spouses Lorenzo
and Elenita Uy a parcel of land consisting of 10,000 square meters, more or less, located at
Bo. Tambler, General Santos City, and covered by Transfer Certificate of Title (TCT) No. T-
30586.[2] The deed of sale was not registered, nor was the title of the land transferred to
petitioner.[3] On 07 December 1995, the said property was immediately declared by petitioner
for taxation purposes as Tax Declaration No. l6205 with the City Assessors Office. [4] It came
to pass that on 19 April 1996, spouses Candelario and Aurea Damalerio (respondents) filed
with the Regional Trial Court (RTC) of General Santos City, a complaint for a sum of money
against spouses Lorenzo and Elenita Uy docketed as Civil Case No. 5748 with application for
the issuance of a Writ of Preliminary Attachment. [5]
On 23 April 1996, the trial court issued a Writ of Preliminary Attachment by virtue of
which the property, then still in the name of Lorenzo Uy but which had already been sold to
petitioner, was levied. The levy was duly recorded in the Register of Deeds of General Santos
City and annotated upon TCT No. T-30586. [6] On 06 June 1996, TCT No. T-30586 in the name
of Lorenzo Uy was cancelled and, in lieu thereof, TCT No. T-74439 was issued in the name of
petitioner.[7] This new TCT carried with it the attachment in favor of respondents. On 14
August 1996, petitioner filed a third-party claim in Civil Case No. 5748 to discharge or annul
the attachment levied on the property covered by TCT No. T-74439 on the ground that the
said property belongs to him and no longer to Lorenzo and Elenita Uy. [8]
In a resolution dated 21 October 1996, the trial court ruled for the petitioner.
[9]
Citing Manliguez v. Court of Appeals[10] and Santos v. Bayhon,[11] it held that the levy of the
property by virtue of attachment is lawful only when the levied property indubitably belongs
to the defendant. Applying the rulings in the cited cases, it opined that although defendant
Lorenzo Uy remained the registered owner of the property attached, yet the fact was that he
was no longer the owner thereof as it was already sold earlier to petitioner, hence, the writ of
attachment was unlawful. Respondents sought reconsideration thereof which was denied by
the trial court in a resolution dated 03 January 1997. [12]
From the unfavorable resolution of the trial court in the third-party claim, respondents
appealed to the Court of Appeals. The appellate court reversed the resolution and by
judgment promulgated on 25 September 1997, it declared that an attachment or levy of
execution, though posterior to the sale, but if registered before the sale is registered, takes
precedence over the sale.[13] The writ of attachment in favor of the respondents, being
recorded ahead of the sale to petitioner, will therefore take precedence. Petitioner moved for
reconsideration but this was denied by the Court of Appeals in its Resolution of 10 February
1998.[14] Hence, this Petition for Review on Certiorari.
The sole issue in this case is whether or not a registered writ of attachment
on the land is a superior lien over that of an earlier unregistered deed of sale.
Petitioner maintains that he has a superior right over the questioned property because
when the same was attached on 23 April 1996, this property was no longer owned by
spouses Uy against whom attachment was issued as it was already sold to petitioner on 05
December 1995. The ownership thereof was already transferred to petitioner pursuant to
Article 1477[15] in relation to Article 1498[16] of the Civil Code.
Dismissing the allegation that he slept on his rights by not immediately registering at
least an adverse claim based on his deed of sale, petitioner avers that he promptly worked
out for the transfer of registration in his name. The slight delay in the registration, he claims
was not due to his fault but attributable to the process involved in the registration of property
such as the issuance of the Department of Agrarian Reform clearance which was effected
only after compliance with several requirements. Considering the peculiar facts and
circumstances obtaining in this case, petitioner submits it would be in accord with justice and
equity to declare him as having a superior right to the disputed property than the
respondents.
Respondents maintain the contrary view. They aver that registration of a deed of sale is
the operative act which binds the land and creates a lien thereon. Before the registration of
the deed, the property is not bound insofar as third persons are concerned. Since the writ of
attachment in favor of respondents was registered earlier than the deed of sale to petitioner,
respondents were of the belief that their registered writ of attachment on the subject
property enjoys preference and priority over petitioners earlier unregistered deed of sale over
the same property. They also contend that Articles 1477 and 1498 of the Civil Code as cited
by petitioner are not applicable to the case because said provisions apply only as between the
parties to the deed of sale.
These provisions do not apply to, nor bind, third parties, like respondents, because
what affects or binds third parties is the registration of the instrument in the Register of
Deeds. Furthermore, respondents argue that petitioner cannot invoke equity in his favor
unless the following conditions are met: (a) the absence of specific provision of a law on the
matter; and (b) if the person who invokes it is not guilty of delay. Both conditions have not
been met, however, since there is a law on the subject matter, i.e., Section 51 of Presidential
Decree No. 1529, and that petitioner allegedly slept on his rights by not immediately
registering an adverse claim based on his deed of sale.
We agree with the respondents. The law applicable to the facts of this case is
Section 51 of P.D. No. 1529. Said Section provides:
Sec. 51. Conveyance and other dealings by registered owner. - An owner of registered land
may convey, mortgage, lease, charge, or otherwise deal with the same in accordance with
existing laws. He may use such forms of deeds, mortgages, leases or other voluntary
instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary
instrument, except a will purporting to convey or affect registered land, shall take effect as a
conveyance or bind the land, but shall operate only as a contract between the parties and as
evidence of authority to the Register of Deeds to make registration.
The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, and in all cases under this Decree, the registration shall be made in
the office of the Register of Deeds for the province or city where the land lies. It is to be
noted that though the subject land was deeded to petitioner as early as 05 December 1995, it
was not until 06 June 1996 that the conveyance was registered, and, during that
interregnum, the land was subjected to a levy on attachment. It should also be observed
that, at the time of the attachment of the property on 23 April 1996, the spouses Uy were still
the registered owners of said property. Under the cited law, the execution of the deed of sale
in favor of petitioner was not enough as a succeeding step had to be taken, which was the
12
registration of the sale from the spouses Uy to him. Insofar as third persons are concerned,
what validly transfers or conveys a persons interest in real property is the registration of the
deed. Thus, when petitioner bought the property on 05 December 1995, it was, at that point,
no more than a private transaction between him and the spouses Uy. It needed to be
registered before it could bind third parties, including respondents. When the registration
finally took place on 06 June 1996, it was already too late because, by then, the levy in favor
of respondents, pursuant to the preliminary attachment ordered by the General Santos City
RTC, had already been annotated on the title.

The settled rule is that levy on attachment, duly registered, takes preference over a
prior unregistered sale.[17] This result is a necessary consequence of the fact that the property
involved was duly covered by the Torrens system which works under the fundamental
principle that registration is the operative act which gives validity to the transfer or creates a
lien upon the land.[18] The preference created by the levy on attachment is not diminished
even by the subsequent registration of the prior sale. This is so because an attachment is a
proceeding in rem.[19] It is against the particular property, enforceable against the whole
world. The attaching creditor acquires a specific lien on the attached property which nothing
can subsequently destroy except the very dissolution of the attachment or levy itself. [20] Such
a proceeding, in effect, means that the property attached is an indebted thing and a virtual
condemnation of it to pay the owners debt.[21] The lien continues until the debt is paid, or sale
is had under execution issued on the judgment, or until the judgment is satisfied, or the
attachment discharged or vacated in some manner provided by law.

Thus, in the registry, the attachment in favor of respondents appeared in the nature of
a real lien when petitioner had his purchase recorded. The effect of the notation of said lien
was to subject and subordinate the right of petitioner, as purchaser, to the lien. Petitioner
acquired ownership of the land only from the date of the recording of his title in the register,
and the right of ownership which he inscribed was not absolute but a limited right, subject to
a prior registered lien of respondents, a right which is preferred and superior to that of
petitioner.[22]

Anent petitioners reliance on the rulings laid down in Manliguez v. Court of

Appeals and Santos v. Bayhon, we find the same to be misplaced. These cases did not deal at
all with the dilemma at hand, i.e. the question of whether or not a registered writ of
attachment on land is superior to that of an earlier unregistered deed of sale. In Santos, what
was involved were machinery and pieces of equipment which were executed upon pursuant
to the favorable ruling of the National Labor Relations Commission. A third party claimed that
the machinery were already sold to her, but it does not appear in the facts of the case if such
sale was ever registered. Manliguez is similar to Santos, except that the former involved
buildings and improvements on a piece of land. To stress, in both cited cases, the registration
of the sale, if any, of the subject properties was never in issue.

As to petitioners invocation of equity, we cannot, at this instance, yield to such principle

in the presence of a law clearly applicable to the case. We reiterate that this Court, while
aware of its equity jurisdiction, is first and foremost, a court of law. [23] While equity might tilt
on the side of one party, the same cannot be enforced so as to overrule positive provisions of
law in favor of the other.[24] Equity cannot supplant or contravene the law.[25] The rule must
stand no matter how harsh it may seem. Dura lex sed lex.

WHEREFORE, the appealed Decision of the Court of Appeals in CA-G.R. SP No. 43082
dated 25 September 1997, and its Resolution dated 10 February 1998, are hereby AFFIRMED.
No costs. SO ORDERED.

13
SECOND DIVISION
G.R. No. L-48756 September 11, 1982
K.O. GLASS CONSTRUCTION CO., INC., petitioner, vs. THE HONORABLE MANUEL
VALENZUELA, Judge of the Court of First Instance of Rizal, and ANTONIO D.
PINZON, respondents.
CONCEPCION, JR., J.:
Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the
respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal,
entitled: Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O.
Glass, defendants, and for the release of the amount of P37,190.00, which had been
deposited with the Clerk of Court, to the petitioner.
On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by Antonio
D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to be the agreed
rentals of his truck, as well as the value of spare parts which have not been returned to him
upon termination of the lease. In his verified complaint, the plaintiff asked for an attachment
against the property of the defendant consisting of collectibles and payables with the
Philippine Geothermal, Inc., on the grounds that the defendant is a foreigner; that he has
sufficient cause of action against the said defendant; and that there is no sufficient security
for his claim against the defendant in the event a judgment is rendered in his favor. 1
Finding the petition to be sufficient in form and substance, the respondent Judge ordered the
issuance of a writ of attachment against the properties of the defendant upon the plaintiff's
filing of a bond in the amount of P37,190.00. 2 Thereupon, on November 22, 1977, the
defendant Kenneth O. Glass moved to quash the writ of attachment on the grounds that
there is no cause of action against him since the transactions or claims of the plaintiff were
entered into by and between the plaintiff and the K.O. Glass Construction Co., Inc., a
corporation duly organized and existing under Philippine laws; that there is no ground for the
issuance of the writ of preliminary attachment as defendant Kenneth O. Glass never intended
to leave the Philippines, and even if he does, plaintiff can not be prejudiced thereby because
his claims are against a corporation which has sufficient funds and property to satisfy his
claim; and that the money being garnished belongs to the K.O. Glass Corporation Co., Inc.
and not to defendant Kenneth O. Glass. 3 By reason thereof, Pinzon amended his complaint to
include K.O. Glass Construction Co., Inc. as co-defendant of Kenneth O. Glass. 4
On January 26, 1978, the defendants therein filed a supplementary motion to discharge
and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed in
support of the motion for preliminary attachment was not sufficient or wanting in law for the
reason that: (1) the affidavit did not state that the amount of plaintiff's claim was above all
legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised Rules of Court;
(2) the affidavit did not state that there is no other sufficient security for the claim sought to
be recovered by the action as also required by said Sec. 3; and (3) the affidavit did not
specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the respondent Judge
denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with the
Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which amount
shall remain so deposited to await the judgment to be rendered in the case. 6
On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and
asked the court for the release of the same amount deposited with the Clerk of Court, 7 but,
the respondent Judge did not order the release of the money deposited. 8 Hence, the present
recourse. As prayed for, the Court issued a temporary restraining order, restraining the
respondent Judge from further proceeding with the trial of the case. We find merit in the
petition. The respondent Judge gravely abused his discretion in issuing the writ of
preliminary attachment and in not ordering the release of the money which had been
deposited with the Clerk of Court for the following reasons:
First, there was no ground for the issuance of the writ of preliminary attachment. Section 1,
Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance of a
writ of preliminary attachment, reads, as follows:
Sec. 1. Grounds upon which attachment may issue . A plaintiff or any proper party
may, at the commencement of the action or at any time thereafter, have the property
of the adverse party attached as security for the satisfaction of any judgment that may
be recovered in the following cases:
(a) In an action for the recovery of money or damages on a cause of action arising
from contract, express or implied, against a party who is about to depart from the
Philippines with intent to defraud his creditor;
(b) In an action for money or property embezzled or fraudulently misapplied or
converted to his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by
any other person in a fiduciary capacity, or for a willful violation of duty;
(c) In an action to recover the possession of personal property unjustly detained, when
the property, or any part thereof, has been concealed, removed, or disposed of to
prevent its being found or taken by the applicant or an officer;
(d) In an action against the party who has been guilty of a fraud in contracting the debt
or incurring the obligation upon which the action is brought, or in concealing or
disposing of the property for the taking, detention or conversion of which the action is
brought;
(e) In an action against a party who has removed or disposed of his property, or is
about to do so, with intent to defraud his creditors;
(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication.
In ordering the issuance of the controversial writ of preliminary attachment, the respondent
Judge said and We quote:
The plaintiff filed a complaint for a sum of money with prayer for Writ of Preliminary
Attachment dated September 14, 1977, alleging that the defendant who is a foreigner
may, at any time, depart from the Philippines with intent to defraud his creditors
including the plaintiff herein; that there is no sufficient security for the claim sought to
be enforced by this action; that the amount due the plaintiff is as much as the sum for
which an order of attachment is sought to be granted; and that defendant has
sufficient leviable assets in the Philippines consisting of collectibles and payables due
from Philippine Geothermal, Inc., which may be disposed of at any time, by defendant
if no Writ of Preliminary Attachment may be issued. Finding said motion and petition to
be sufficient in form and substance. 10
Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who)
may, at any time, depart from the Philippines with intent to defraud his creditors including
the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The
pertinent portion of the complaint reads, as follows:
15. Plaintiff hereby avers under oath that defendant is a foreigner and that said
defendant has a valid and just obligation to plaintiff in the total sum of P32,290.00
arising out from his failure to pay (i) service charges for the hauling of construction
materials; (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of
the missing/destroyed spare parts of said leased unit; hence, a sufficient cause of action
exists against said defendant. Plaintiff also avers under o ath that there is no sufficient
security for his claim against the defendant in the event a judgment be rendered in favor
of the plaintiff. however, defendant has sufficient assets in the Philippines in the form of
14
 collectible and payables due from the Philippine Geothermal, Inc. with office address at
Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if not
timely attached, may be disposed of by defendants and would render ineffectual the
reliefs prayed for by plaintiff in this Complaint. 11
In his Amended Complaint, Pinzon alleged the following:
15. Plaintiff hereby avers under oath that defendant GLASS is an American citizen who
controls most, if not all, the affairs of defendant CORPORATION. Defendants
CORPORATION and GLASS have a valid and just obligation to plaintiff in the total sum of
P32,290.00 arising out for their failure to pay (i) service charges for hauling of construction
materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and (iii) total cost of the
missing/destroyed spare parts of said leased unit: hence, a sufficient cause of action exist
against said defendants. Plaintiff also avers under oath that there is no sufficient security
for his claim against the defendants in the event a judgment be rendered in favor of the
plaintiff. however, defendant CORPORATION has sufficient assets in the Philippines in the
form of collectibles and payables due from the Philippine Geothermal., Inc. with office
address at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which properties, if
not timely attached, may be disposed of by defendants and would render ineffectual the
reliefs prayed for by plaintiff in this Complaint. 12
There being no showing, much less an allegation, that the defendants are about to depart
from the Philippines with intent to defraud their creditor, or that they are non-resident aliens,
the attachment of their properties is not justified.
Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules,
an affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case is
one of those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security 'or
the claim sought to be enforced by the action, and (d) the amount due to the applicant for
attachment 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. Section 3,
Rule 57 of the Revised Rules of Court reads. as follows:
Section 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 person who personally
knows the facts, that a sufficient cause of action exists that the case is one of those
mentioned in Section 1 hereof; that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to the applicant, or the
value of the property the possession of which he is entitled to recover, is as much as the
sum for which the order is granted above all legal counterclaims. The affidavit, and the
bond required by the next succeeding section, must be duly filed with the clerk or judge of
the court before the order issues.
In his affidavit, Pinzon stated the following:
I, ANTONIO D. PINZON Filipino, of legal age, married and with residence and postal
address at 1422 A. Mabini Street, Ermita, Manila, subscribing under oath, depose and
states that.
1. On October 6,1977,I filed with the Court of First Instance of Rizal, Pasay City Branch,
a case against Kenneth O. Glass entitled 'ANTONIO D. PINZON vs. KENNETH O. GLASS',
docketed as Civil Case No. 5902-P;
2. My Complaint against Kenneth O. Glass is based on several causes of action, namely:
(i) On February 15, 1977, we mutually agreed that I undertake to haul his construction
materials from Manila to his construction project in Bulalo, Bay, Laguna and vice-versa,
for a consideration of P50.00 per hour; (ii) Also, on June 18, 1977, we entered into a
separate agreement whereby my Isuzu cargo truck will be leased to him for a
consideration of P4,000.00 a month payable on the 15th day of each month;
(iii) On September 7, 1977, after making use of my Isuzu truck, he surrendered the
same without paying the monthly rentals for the leased Isuzu truck and the peso
equivalent of the spare parts that were either destroyed or misappropriated by him;
3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me the total sum of
P32,290.00 representing his obligation arising from the hauling of his construction
materials, monthly rentals for the lease Isuzu truck and the peso equivalent of the spare
parts that were either destroyed or misappropriated by him;
4. I am executing this Affidavit to attest to the truthfulness of the foregoing and in
compliance with the provisions of Rule 57 of the Revised Rules of Court. 13
While Pinzon may have stated in his affidavit that a sufficient cause of action exists against
the defendant Kenneth O. Glass, he did not state therein that "the case is one of those
mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought
to be enforced by the action; and that the amount due to the applicant is as much as the
sum for which the order granted above all legal counter-claims." It has been held that the
failure to allege in the affidavit the requisites prescribed for the issuance of a writ of
preliminary attachment, renders the writ of preliminary attachment issued against the
property of the defendant fatally defective, and the judge issuing it is deemed to have acted
in excess of his jurisdiction. 14
Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00 to
answer for any judgment that may be rendered against the defendant. Upon receipt of the
counter-bond the respondent Judge should have discharged the attachment pursuant to
Section 12, Rule 57 of the Revised Rules of Court which reads, as follows:
Section 12. Discharge of attachment upon giving counterbond .At any time after an
order of attachment has been granted, the party whose property has been attached, or
the person appearing on his behalf, may upon reasonable notice to the applicant, apply
to the judge who granted the order, or to the judge of the court in which the action is
pending, for an order discharging the attachment wholly or in part on the security given.
The judge shall, after hearing, order the discharge of the attachment if a cash deposit is
made or a counterbond executed to the attaching creditor is filed, on behalf of the
adverse party, with the clerk or judge of the court where the application is made, in an
amount equal to the value of the property attached as determined by the judge, to
secure the payment of any judgment that the attaching creditor may recover in the
action. Upon the filing of such counter-bond, copy thereof shall forthwith be served on
the attaching creditor or his lawyer. Upon the discharge of an attachment in accordance
with the provisions of this section the property attached, or the proceeds of any sale
thereof, shall be delivered to the party making the deposit or giving the counter-bond, or
the person appearing on his behalf, the deposit or counter-bond aforesaid standing in
the place of the property so released. Should such counter-bond for any reason be found
to be, or become, insufficient, and the party furnishing the same fail to file an additional
counter-bond the attaching creditor may apply for a new order of attachment.
The filing of the counter-bond will serve the purpose of preserving the defendant's property
and at the same time give the plaintiff security for any judgment that may be obtained
against the defendant. 15 WHEREFORE, the petition is GRANTED and the writ prayed for is
issued. The orders issued by the respondent Judge on October 11, 19719, January 26, 1978,
and February 3, 1978 in Civil Case No. 5902-P of the Court of First Instance of Rizal, insofar
as they relate to the issuance of the writ of preliminary attachment, should be as they are
hereby ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith
release the garnished amount of P37,190.00 to the petitioner. The temporary restraining
order, heretofore issued, is hereby lifted and set aside. Costs against the private respondent
Antonio D. Pinzon. SO ORDERED.
15
EN BANC
G.R. No. 93262 December 29, 1991
DAVAO LIGHT & POWER CO., INC., petitioner, vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or QUEENSLAND
TOURIST INN, and TEODORICO ADARNA, respondents.
NARVASA, J.:p
Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-G.R.
Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power
Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and set aside the writ of
preliminary attachment issued by the Regional Trial Court of Davao City 2 in Civil Case No.
19513-89 on application of the plaintiff (Davao Light & Power Co.), before the service of
summons on the defendants (herein respondents Queensland Co., Inc. and Adarna).
Following is the chronology of the undisputed material facts culled from the Appellate
Tribunal's judgment of May 4, 1990.
1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a
verified complaint for recovery of a sum of money and damages against Queensland Hotel,
etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint contained
an ex parte application for a writ of preliminary attachment.
2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued
an Order granting the ex parte application and fixing the attachment bond at P4,600,513.37.
3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ of
attachment issued.
4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of
attachment and a copy of the attachment bond, were served on defendants Queensland and
Adarna; and pursuant to the writ, the sheriff seized properties belonging to the latter.
5. On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge the
attachment for lack of jurisdiction to issue the same because at the time the order of
attachment was promulgated (May 3, 1989) and the attachment writ issued (May 11, 1989),
the Trial Court had not yet acquired jurisdiction over the cause and over the persons of the
defendants.
6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge
attachment.
7. On September 19, 1989, the Trial Court issued an Order denying the motion to discharge.
This Order of September 19, 1989 was successfully challenged by Queensland and Adarna in
a special civil action of certiorari instituted by them in the Court of Appeals. The Order was,
as aforestated, annulled by the Court of Appeals in its Decision of May 4, 1990. The Appellate
Court's decision closed with the following disposition:
. . . the Orders dated May 3, 1989 granting the issuance of a writ of
preliminary attachment, dated September 19, 1989 denying the motion to
discharge attachment; dated November 7, 1989 denying petitioner's
motion for reconsideration; as well as all other orders emanating
therefrom, specially the Writ of Attachment dated May 11, 1989 and
Notice of Levy on Preliminary Attachment dated May 11, 1989, are hereby
declared null and void and the attachment hereby ordered DISCHARGED.
The Appellate Tribunal declared that
. . . While it is true that a prayer for the issuance of a writ of preliminary
attachment may be included m the complaint, as is usually done, it is
likewise true that the Court does not acquire jurisdiction over the person
of the defendant until he is duly summoned or voluntarily appears, and
adding the phrase that it be issued "ex parte" does not confer said
jurisdiction before actual summons had been made, nor retroact
jurisdiction upon summons being made. . . .
It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in
attachment," the "critical time which must be identified is . . . when the trial court
acquires authority under law to act coercively against the defendant or his
property . . .;" and that "the critical time is the of the vesting of jurisdiction in the
court over the person of the defendant in the main case."
Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks in
the present appellate proceedings. The question is whether or not a writ of preliminary
attachment may issue ex parte against a defendant before acquisition of jurisdiction of the
latter's person by service of summons or his voluntary submission to the Court's authority.
The Court rules that the question must be answered in the affirmative and that consequently,
the petition for review will have to be granted.
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 the
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 this period should be
defendant on, or held in suspension until, the actual obtention of jurisdiction over the
defendant's 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 hereof.
An action or proceeding is commenced by the filing of the complaint or other initiatory
pleading. 4
By that act, the jurisdiction of the court over the subject matter or nature of the action or
proceeding is invoked or called into activity; 5 and it is thus that the court acquires
jurisdiction over said subject matter or nature of the action. 6 And it is by that self-same act
of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) by
which he signifies his submission to the court's power and authority that jurisdiction is
acquired by the court over his person. 7 On the other hand, jurisdiction over the person of
the defendant is obtained, as above stated, by the service of summons or other coercive
process upon him or by his voluntary submission to the authority of the court. 8
The events that follow the filing of the complaint as a matter of routine are well known. After
the complaint is filed, summons issues to the defendant, the summons is then transmitted to
the sheriff, and finally, service of the summons is effected on the defendant in any of the
ways authorized by the Rules of Court.
There is thus ordinarily some appreciable interval of time between the day of the filing of the
complaint and the day of service of summons of the defendant. During this period, different
acts may be done by the plaintiff or by the Court, which are unquestionable validity and
propriety. Among these, for example, are the appointment of a guardian ad litem, 9 the grant
of authority to the plaintiff to prosecute the suit as a pauper litigant, 10 the amendment of
the complaint by the plaintiff as a matter of right without leave of court, 11 authorization by
the Court of service of summons by publication, 12 the dismissal of the action by the plaintiff
on mere notice. 13
This, too, is true with regard to the provisional remedies of preliminary attachment,
preliminary injunction, receivership or replevin. 14 They may be validly and properly applied
for and granted even before the defendant is summoned or is heard from.
16
A preliminary attachment may be defined, paraphrasing the Rules of Court, as the provisional
remedy in virtue of which a plaintiff or other party may, at the commencement of the action
or at any time thereafter, have the property of the adverse party taken into the custody of
the court as security for the satisfaction of any judgment that may be recovered. 15 It is a
remedy which is purely statutory in respect of which the law requires a strict construction of
the provisions granting it. 16 Withal no principle, statutory or jurisprudential, prohibits its
issuance by any court before acquisition of jurisdiction over the person of the defendant.
Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at
any time thereafter." 17
The phase, "at the commencement of the action," obviously refers to the date of the filing of
the complaint which, as above pointed out, is the date that marks "the commencement of
the action;" 18 and the reference plainly is to a time before summons is served on the
defendant, or even before summons issues. What the rule is saying quite clearly is that after
an action is properly commenced by the filing of the complaint and the payment of all
requisite docket and other fees the plaintiff may apply for and obtain a writ of preliminary
attachment upon 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.
In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for
preliminary attachment is not generally necessary unless otherwise directed by the Trial Court
in its discretion. 20 And in Filinvest Credit Corporation v. Relova, 21 the Court declared that
"(n)othing in the Rules of Court makes notice and hearing indispensable and mandatory
requisites for the issuance of a writ of attachment." The only pre-requisite is that the Court
be satisfied, upon consideration of "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 . . . (Rule 57), that there is no other sufficient security for the
claim sought to be enforced by the action, and that the amount due to the applicant, or the
value of the property the possession of which he is entitled to recover, is as much as the sum
for which the order (of attachment) is granted above all legal counterclaims." 22 If the court
be so satisfied, the "order of attachment shall be granted," 23 and the writ shall issue upon
the applicant's posting of "a bond executed to the adverse party in an amount to be fixed by
the judge, not exceeding the plaintiffs 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." 24
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18,
1989, 25 this Court had occasion to emphasize the postulate that no hearing is required on
an application for preliminary attachment, with notice to the defendant, for the reason that
this "would defeat the objective of the remedy . . . (since 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." As observed by a former member of this Court, 26 such
a procedure would warn absconding debtors-defendants of the commencement of the suit
against them and the probable seizure of their properties, and thus give them the advantage
of time to hide their assets, leaving the creditor-plaintiff holding the proverbial empty bag; it
would place the creditor-applicant in danger of losing any security for a favorable judgment
and thus give him only an illusory victory.
Withal, ample modes of recourse against a preliminary attachment are secured by law to the
defendant. The relative ease with which a preliminary attachment may be obtained is
matched and paralleled by the relative facility with which the attachment may legitimately be
prevented or frustrated. These modes of recourse against preliminary attachments granted
by Rule 57 were discussed at some length by the separate opinion in Mindanao Savings &
Loans Asso. Inc. v. CA., supra.
That separate opinion stressed that there are two (2) ways of discharging an
attachment: first, by the posting of a counterbond; and second, by a showing of its improper
or irregular issuance.
1.0. The submission of a counterbond is an efficacious mode of lifting an attachment already
enforced against property, or even of preventing its enforcement altogether.
1.1. When property has already been seized under attachment, the attachment may be
discharged upon counterbond in accordance with Section 12 of Rule 57.
Sec. 12. Discharge of attachment upon giving counterbond. At any time after an order
of attachment has been granted, the party whose property has been attached or the
person appearing in his behalf, may, upon reasonable notice to the applicant, apply to
the judge who granted the order, or to the judge of the court in which the action is
pending, for an order discharging the attachment wholly or in part on the security
given . . . in an amount equal to the value of the property attached as determined by the
judge to secure the payment of any judgment that the attaching creditor may recover in
the action. . . .
1.2. But even before actual levy on property, seizure under attachment may be prevented
also upon counterbond. The defendant need not wait until his property is seized before
seeking the discharge of the attachment by a counterbond. This is made possible by Section
5 of Rule 57.
Sec. 5. Manner of attaching property. The officer executing the order
shall without delay attach, to await judgment and execution in the action,
all the properties of the party against whom the order is issued in the
province, not exempt from execution, or so much thereof as may be
sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued,
or gives a counter-bond executed to the applicant, in an amount sufficient
to satisfy such demand besides costs, or in an amount equal to the value
of the property which is about to be attached, to secure payment to the
applicant of any judgment which he may recover in the action. . . .
2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or
discharged on the ground that it has been irregularly or improperly issued, in accordance with
Section 13 of Rule 57. Like the first, this second mode of lifting an attachment may be
resorted to even before any property has been levied on. Indeed, it may be availed of after
property has been released from a levy on attachment, as is made clear by said Section
13, viz.:
Sec. 13. Discharge of attachment for improper or irregular issuance. The party whose
property has been attached may also, at any time either BEFORE or AFTER the release of the
attached property, or before any attachment shall have been actually levied , upon reasonable
notice to the attaching creditor, apply to the judge who granted the order, or to the judge of
the court in which the action is pending, for an order to discharge the attachment on the
ground that the same was improperly or irregularly issued. If the motion be made on
affidavits on the part of the party whose property has been attached, but not otherwise, the
attaching creditor may oppose the same by counter-affidavits or other evidence in addition to
that on which the attachment was made. . . . (Emphasis supplied)
This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The
attachment debtor cannot be deemed to have waived any defect in the issuance of the
17
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 . . . would require presentation of evidence in a fullblown trial on the
merits, and cannot easily be settled in a pending incident of the case." 27
It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings
& Loans Asso. Inc. v. C.A., supra., 28 to wit:
(a) When an attachment may not be dissolved by a showing of its irregular or improper
issuance:
. . . (W)hen the preliminary attachment is issued upon a ground which is at the same time
the applicant's cause of action; e.g., "an action for money or property embezzled or
fraudulently misapplied or converted to his own use by a public officer, or an officer of a
corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment
as such, or by any other person in a fiduciary capacity, or for a willful violation of duty." (Sec.
1 [b], Rule 57), or "an action against a party who has been guilty of fraud m contracting the
debt or incurring the obligation upon which the action is brought" (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a motion to dissolve the attachment under Section 13 of Rule
57 by offering to show the falsity of the factual averments in the plaintiff's application and
affidavits on which the writ was based and consequently that the writ based thereon had
been improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) the reason
being that the hearing on such a motion for dissolution of the writ would be tantamount to a
trial of the merits of the action. In other words, the merits of the action would be ventilated
at a mere hearing of a motion, instead of at the regular trial. Therefore, when the writ of
attachment is of this nature, the only way it can be dissolved is by a counterbond (G.B. Inc.
v. Sanchez, 98 Phil. 886).
(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond:
. . . The dissolution of the preliminary attachment upon security given, or a showing of its
irregular or improper issuance, does not of course operate to discharge the sureties on
plaintiff's own attachment bond. The reason is simple. That bond is "executed to the adverse
party, . . . conditioned that the . . . (applicant) 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" (SEC. 4, Rule 57).
Hence, until that determination is made, as to the applicant's entitlement to the attachment,
his bond must stand and cannot be with-drawn.
With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58),
receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the
same: they may also issue ex parte. 29
It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant, as above indicated issuance of summons, order
of attachment and writ of attachment (and/or appointments of guardian ad litem, or grant of
authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the
complaint by the plaintiff as a matter of right without leave of court 30 and however valid
and proper they might otherwise be, these do not and cannot bind and affect the defendant
until and unless jurisdiction over his person is eventually obtained by the court, either by
service on him of summons or other coercive process or his voluntary submission to the
court's authority. Hence, when the sheriff or other proper officer commences implementation
of the writ of attachment, it is essential that he serve on the defendant not only a copy of the
applicant's affidavit and attachment bond, and of the order of attachment, as explicity
required by Section 5 of Rule 57, but also the summons addressed to said defendant as well
as a copy of the complaint and order for appointment of guardian ad litem, if any, as also
explicity directed by Section 3, Rule 14 of the Rules of Court.
Service of all such documents is indispensable not only for the acquisition of jurisdiction over
the person of the defendant, but also upon considerations of fairness, to apprise the
defendant of the complaint against him, of the issuance of a writ of preliminary attachment
and the grounds therefor and thus accord him the opportunity to prevent attachment of his
property by the posting of a counterbond in an amount equal to the plaintiff's claim in the
complaint pursuant to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal
of the complaint itself on any of the grounds set forth in Rule 16, or demonstrating the
insufficiency of the applicant's affidavit or bond in accordance with Section 13, Rule 57.
It was on account of the failure to comply with this fundamental requirement of service of
summons and the other documents above indicated that writs of attachment issued by the
Trial Court ex parte were struck down by this Court's Third Division in two (2) cases,
namely: Sievert v. Court of Appeals, 31 and BAC Manufacturing and Sales Corporation
v. Court of Appeals, et al. 32
In contrast to the case at bar where the summons and a copy of the complaint, as well as
the order and writ of attachment and the attachment bond were served on the defendant
in Sievert, levy on attachment was attempted notwithstanding that only the petition for
issuance of the writ of preliminary attachment was served on the defendant, without any
prior or accompanying summons and copy of the complaint; and in BAC Manufacturing and
Sales Corporation, neither the summons nor the order granting the preliminary attachment or
the writ of attachment itself was served on the defendant "before or at the time the levy was
made."
For the guidance of all concerned, the Court reiterates and reaffirms the proposition that
writs of attachment may properly issue ex parte provided that the Court is satisfied that the
relevant requisites therefor 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.
WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals is
hereby REVERSED, and the order and writ of attachment issued by Hon. Milagros C. Nartatez,
Presiding Judge of Branch 8, Regional Trial Court of Davao City in Civil Case No. 19513-89
against Queensland Hotel or Motel or Queensland Tourist Inn and Teodorico Adarna are
hereby REINSTATED. Costs against private respondents.
SO ORDERED.
THIRD DIVISION
PHILIPPINE COMMERCIAL G.R. No. 175587
INTERNATIONAL BANK,
- versus - JOSEPH ANTHONY M. ALEJANDRO,
18
September 21, 2007
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This petition for review assails the May 31, 2006 Decision [1] of the Court of Appeals in CA-G.R.
CV No. 78200 affirming the August 30, 2000 Decision [2] of the Regional Trial Court of Makati,
which granted respondent Joseph Anthony M. Alejandros claim for damages arising from
petitioner Philippine Commercial International Banks (PCIB) invalid garnishment of
respondents deposits.
On October 23, 1997, petitioner filed against respondent a complaint [3] for sum of money with
prayer for the issuance of a writ of preliminary attachment. Said complaint alleged that on
September 10, 1997, respondent, a resident of Hong Kong, executed in favor of petitioner a
promissory note obligating himself to pay P249,828,588.90 plus interest. In view of the
fluctuations in the foreign exchange rates which resulted in the insufficiency of the deposits
assigned by respondent as security for the loan, petitioner requested the latter to put up
additional security for the loan. Respondent, however, sought a reconsideration of said
request pointing out petitioners alleged mishandling of his account due to its failure to carry
out his instruction to close his account as early as April 1997, when the prevailing rate of
exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50. [4] It appears that the
amount of P249,828,588.90 was the consolidated amount of a series of yen loans granted by
petitioner to respondent during the months of February and April 1997. [5]
In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs
(e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent
fraudulently withdrew his unassigned deposits notwithstanding his verbal promise to PCIB
Assistant Vice President Corazon B. Nepomuceno not to withdraw the same prior to their
assignment as security for the loan; and (2) that respondent is not a resident of the
Philippines. The application for the issuance of a writ was supported with the affidavit of
Nepomuceno.[6]
On October 24, 1997, the trial court granted the application and issued the writ ex
parte[7] after petitioner posted a bond in the amount of P18,798,734.69, issued by Prudential
Guarantee & Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank
deposits of respondent with Rizal Commercial Banking Corporation (RCBC) were
garnished. On October 27, 1997, respondent, through counsel, filed a manifestation
informing the court that he is voluntarily submitting to its jurisdiction. [8]
Subsequently, respondent filed a motion to quash[9] the writ contending that the withdrawal
of his unassigned deposits was not fraudulent as it was approved by petitioner. He also
alleged that petitioner knew that he maintains a permanent residence at Calle Victoria,
Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati City at the Law
Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, [10] where he is a partner. In
both addresses, petitioner regularly communicated with him through its representatives.
Respondent added that he is the managing partner of the Hong Kong branch of said Law
Firm; that his stay in Hong Kong is only temporary; and that he frequently travels back to
the Philippines. On December 24, 1997, the trial court issued an order quashing the writ and
holding that the withdrawal of respondents unassigned deposits was not intended to defraud
petitioner. It also found that the representatives of petitioner personally transacted with
respondent through his home address in Quezon City and/or his office in Makati City. It thus
concluded that petitioner misrepresented and suppressed the facts regarding respondents
residence considering that it has personal and official knowledge that for purposes of service
of summons, respondents residence and office addresses are located in the Philippines. The
dispositive portion of the courts decision is as follows:
WHEREFORE, the URGENT MOTION TO QUASH, being
meritorious, is hereby GRANTED, and the ORDER of 24 October 1997 is
hereby RECONSIDERED and SET ASIDE and the WRIT OF attachment of
the same is hereby DISCHARGED. SO ORDERED.[11]
With the denial[12] of petitioners motion for reconsideration, it elevated the case to the Court
of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the petition
was dismissed for failure to prove that the trial court abused its discretion in issuing the
aforesaid order.[13] Petitioner filed a motion for reconsideration but was denied on October 28,
1999.[14] On petition with this Court, the case was dismissed for late filing in a minute
resolution (G.R. No. 140605) dated January 19, 2000.[15]Petitioner filed a motion for
reconsideration but was likewise denied with finality on March 6, 2000.[16]
Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25
Million[17] on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under
JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful garnishment of his
deposits. He presented evidence showing that his P150,000.00 RCBC check payable to his
counsel as attorneys fees, was dishonored by reason of the garnishment of his deposits. He
also testified that he is a graduate of the Ateneo de Manila University in 1982 with a double
degree of Economics and Management Engineering and of the University of the Philippines in
1987 with the degree of Bachelor of Laws. Respondent likewise presented witnesses to prove
that he is a well known lawyer in the business community both in the Philippines and in Hong
Kong.[18] For its part, the lone witness presented by petitioner was Nepomuceno who claimed
that she acted in good faith in alleging that respondent is a resident of Hong Kong.[19]
On August 30, 2000, the trial court awarded damages to respondent in the amount of P25
Million without specifying the basis thereof, thus:
WHEREFORE, premises above considered, and defendant having
duly established his claim in the amount of P25,000,000.00, judgment is
hereby rendered ordering Prudential Guarantee & [Assurance] Co., which
is solidarily liable with plaintiff to pay defendant the full amount of bond
under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond
No. HO-46764-97], dated 24 October 1997 in the amount
of P18,798,734.69. And, considering that the amount of the bond is
insufficient to fully satisfy the award for damages, plaintiff is hereby
ordered to pay defendant the amount of P6,201,265.31. SO ORDERED.[20]
The trial court denied petitioners motion for reconsideration on October 24, 2000.[21]
Petitioner elevated the case to the Court of Appeals which affirmed the findings of
the trial court. It held that in claiming that respondent was not a resident of the Philippines,
petitioner cannot be said to have been in good faith considering that its knowledge of
respondents Philippine residence and office address goes into the very issue of the trial courts
jurisdiction which would have been defective had respondent not voluntarily appeared before
it.
The Court of Appeals, however, reduced the amount of damages awarded to
petitioner and specified their basis. The dispositive portion of the decision of the Court of
Appeals states:
WHEREFORE, the appeal is PARTIALLY GRANTED and the
decision appealed from is hereby MODIFIED. The award of damages in
the amount of P25,000,000.00 is deleted. In lieu thereof, Prudential
19
 Guarantee & [Assurance, Inc.], which is solidarily liable with appellant
[herein petitioner], is ORDERED to pay appellee [herein
respondent] P2,000,000.00 as nominal damages; P5,000,000.00 as moral
damages; and P1,000,000.00 as attorneys fees, to be satisfied against the
attachment bond under Prudential Guarantee & Assurance, Inc. JCL (4)
No. 01081. SO ORDERED.[22]
Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals denied
petitioners motion for reconsideration but granted that of respondents by ordering petitioner
to pay additional P5Million as exemplary damages.[23] Hence, the instant petition.
At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled
to a writ of attachment because respondent is a resident of the Philippines and that his act of
withdrawing his deposits with petitioner was without intent to defraud, can no longer be
passed upon by this Court. More importantly, the conclusions of the court that petitioner bank
misrepresented that respondent was residing out of the Philippines and suppressed the fact
that respondent has a permanent residence in Metro Manila where he may be served with
summons, are now beyond the power of this Court to review having been the subject of a
final and executory order. Said findings were sustained by the Court of Appeals in CA-G.R. SP
No. 50784 and by this Court in G.R. No. 140605.
The rule on conclusiveness of judgment, which obtains under the premises, precludes the
relitigation of a particular fact or issue in another action between the same parties even if
based on a different claim or cause of action. The judgment in the prior action operates as
estoppel as to those matters in issue or points controverted, upon the determination of which
the finding or judgment was rendered. The previous judgment is conclusive in the second
case, as to those matters actually and directly controverted and determined. [24] Hence, the
issues of misrepresentation by petitioner and the residence of respondent for purposes of
service of summons can no longer be questioned by petitioner in this case.
The core issue for resolution is whether petitioner bank is liable for damages for the
improper issuance of the writ of attachment against respondent. We rule in the
affirmative. Notwithstanding the final judgment that petitioner is guilty of misrepresentation
and suppression of a material fact, the latter contends that it acted in good faith. Petitioner
also contends that even if respondent is considered a resident of the Philippines, attachment
is still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he
(respondent) is a resident who is temporarily out of the Philippines upon whom service of
summons may be effected by publication.
Petitioners contentions are without merit. While the final order of the trial
court which quashed the writ did not categorically use the word bad faith in characterizing
the representations of petitioner, the tenor of said order evidently considers the latter to have
acted in bad faith by resorting to a deliberate strategy to mislead the court. Thus
In the hearings of the motion, and oral arguments of counsels
before the Court, it appears that plaintiff BANK through its contracting
officers Vice President CORAZON B. NEPOMUCENO and Executive Vice
President JOSE RAMON F. REVILLA, personally transacted with defendant
mainly through defendants permanent residence in METRO-MANILA,
either in defendants home address in Quezon City or his main business
address at the ROMULO MABANTA BUENAVENTURA SAYOC & DELOS
ANGELES in MAKATI and while at times follow ups were made through
defendants temporary home and business addresses in Hongkong. It is
therefore clear that plaintiff could not deny their personal and official
knowledge that defendants permanent and official residence for purposes
of service of summons is in the Philippines. In fact, this finding is further
confirmed by the letter of Mr. JOHN GOKONGWEI, JR. Chairman,
Executive Committee of plaintiff BANK, in his letter dated 6 October
1997 on the subject loan to defendant of the same law firm was
addressed to the ROMULO LAW FIRM in MAKATI.
[Anent the] second ground of attachment x x x [t]he Court finds
that the amount withdrawn was not part of defendants peso deposits
assigned with the bank to secure the loan and as proof that the
withdrawal was not intended to defraud plaintiff as creditor is that plaintiff
approved and allowed said withdrawals. It is even noted that when the
Court granted the prayer for attachment it was mainly on the first ground
under Section 1(f) of Rule 57 of the 1997 Rules of Civil Procedure, that
defendant resides out of the Philippines.
On the above findings, it is obvious that plaintiff already knew
from the beginning the deficiency of its second ground for attachment
[i.e.,] disposing properties with intent to defraud his creditors, and
therefore plaintiff had to resort to this misrepresentation that defendant
was residing out of the Philippines and suppressed the fact that
defendants permanent residence is in METRO MANILA where he could be
served with summons.
On the above findings, and mainly on the misrepresentations
made by plaintiff on the grounds for the issuance of the attachment in the
verified complaint, the Court concludes that defendant has duly proven its
grounds in the MOTION and that plaintiff is not entitled to the attachment.
[25]
Petitioner is therefore barred by the principle of conclusiveness of judgment from
again invoking good faith in the application for the issuance of the writ. Similarly, in the case
of Hanil Development Co., Ltd. v. Court of Appeals,[26] the Court debunked the claim of good
faith by a party who maliciously sought the issuance of a writ of attachment, the bad faith of
said party having been previously determined in a final decision which voided the assailed
writ. Thus
Apropos the Application for Judgment on the Attachment Bond,
Escobar claims in its petition that the award of attorneys fees and
injunction bond premium in favor of Hanil is [contrary] to law and
jurisprudence. It contends that no malice or bad faith may be imputed to
it in procuring the writ.
Escobars protestation is now too late in the day. The question of
the illegality of the attachment and Escobars bad faith in obtaining it has
long been settled in one of the earlier incidents of this case. The Court of
Appeals, in its decision rendered on February 3, 1983 in C.A.-G.R. No. SP-
14512, voided the challenged writ, having been issued with grave abuse
of discretion. Escobars bad faith in procuring the writ cannot be doubted.
Its Petition for the Issuance of Preliminary Attachment made such
damning allegations that: Hanil was already able to secure a complete
release of its final collection from the MPWH; it has moved out some of its
heavy equipments for unknown destination, and it may leave the country
anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that after
20
 personal verification by (Escobar) of (Hanils) equipment in Cagayan de
Oro City, it appears that the equipments were no longer existing from
their compound. All these allegations of Escobar were found to be totally
baseless and untrue.
Even assuming that the trial court did not make a categorical pronouncement of
misrepresentation and suppression of material facts on the part of petitioner, the factual
backdrop of this case does not support petitioners claim of good faith. The facts and
circumstances omitted are highly material and relevant to the grant or denial of writ of
attachment applied for.
Finally, there is no merit in petitioners contention that respondent can be
considered a resident who is temporarily out of the Philippines upon whom service of
summons may be effected by publication, and therefore qualifies as among those against
whom a writ of attachment may be issued under Section 1, paragraph (f), Rule 57 of the
Rules of Court which provides:
(f) In an action against a party x x x on whom summons
may be served by publication.
In so arguing, petitioner attempts to give the impression that although it
erroneously invoked the ground that respondent does not reside in the Philippines, it should
not be made to pay damages because it is in fact entitled to a writ of attachment had it
invoked the proper ground under Rule 57. However, even on this alternative ground,
petitioner is still not entitled to the issuance of a writ of attachment.
The circumstances under which a writ of preliminary attachment may be issued are
set forth in Section 1, Rule 57 of the Rules of Court, to wit:
SEC. 1. Grounds upon which attachment may issue . At the
commencement of the action or at any time before entry of judgment, a
plaintiff or any proper party may have the property of the adverse party
attached as security for the satisfaction of any judgment that may be
recovered in the following cases:
(a) In an action for the recovery of a specified amount of money
or damages, other than moral and exemplary, on a cause of action arising
from law, contract, quasi-contract, delict or quasi-delict against a party
who is about to depart from the Philippines with intent to defraud his
creditors;
(b) In an action for money or property embezzled or fraudulently
misapplied or converted to his own use by a public officer, or an officer of
a corporation or an attorney, factor, broker, agent, or clerk, in the course
of his employment as such, or by any other person in a fiduciary capacity,
or for a willful violation of duty;
(c) In an action to recover the possession of personal property
unjustly or fraudulently taken, detained, or converted, when the property,
or any part thereof, has been concealed, removed, or disposed of to
prevent its being found or taken by the applicant or an authorized person;
(d) In an action against a party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the action is
brought, or in the performance thereof;
(e) In an action against a party who has removed or disposed of
his property, or is about to do so, with intent to defraud his creditors;
(f) In an action against a party who resides out of
the Philippines, or on whom summons may be served by
publication.
The purposes of preliminary attachment are: (1) to seize the property of the debtor
in advance of final judgment and to hold it for purposes of satisfying said judgment, as in the
grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) to
acquire jurisdiction over the action by actual or constructive seizure of the property in
those instances where personal or substituted service of summons on the
defendant cannot be effected, as in paragraph (f) of the same provision. [27]
Corollarily, in actions in personam, such as the instant case for collection of sum of
money,[28] summons must be served by personal or substituted service, otherwise the court
will not acquire jurisdiction over the defendant. In case the defendant does not reside and is
not found in the Philippines (and hence personal and substituted service cannot be effected),
the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to
convert the action into a proceeding in rem or quasi in rem by attaching the property of the
defendant.[29] Thus, in order to acquire jurisdiction in actions in personam where defendant
resides out of and is not found in the Philippines, it becomes a matter of course for the court
to convert the action into a proceeding in rem or quasi in rem by attaching the defendants
property. The service of summons in this case (which may be by publication coupled with the
sending by registered mail of the copy of the summons and the court order to the last known
address of the defendant), is no longer for the purpose of acquiring jurisdiction but for
compliance with the requirements of due process.[30]
However, where the defendant is a resident who is temporarily out of
the Philippines, attachment of his/her property in an action in personam, is not always
necessary in order for the court to acquire jurisdiction to hear the case.
Section 16, Rule 14 of the Rules of Court reads:
Sec. 16. Residents temporarily out of the Philippines. When an
action is commenced against a defendant who ordinarily resides within
the Philippines, but who is temporarily out of it, service may, by leave of
court, be also effected out of the Philippines, as under the preceding
section.
The preceding section referred to in the above provision is Section 15 which
provides for extraterritorial service (a) personal service out of the Philippines, (b)
publication coupled with the sending by registered mail of the copy of the summons and the
court order to the last known address of the defendant; or (c) in any other manner which the
court may deem sufficient.
In Montalban v. Maximo,[31] however, the Court held that substituted service of
summons (under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of
service of summons that will confer jurisdiction on the court over the person of residents
temporarily out of the Philippines. Meaning, service of summons may be effected by (a)
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leaving copies of the summons at the defendants residence with some person of suitable
discretion residing therein, or (b) by leaving copies at the defendants office or regular place
of business with some competent person in charge thereof. [32] Hence, the court may acquire
jurisdiction over an action in personam by mere substituted service without need of attaching
the property of the defendant.
The rationale in providing for substituted service as the normal mode of service for
residents temporarily out of the Philippines, was expounded in Montalban v. Maximo,[33] in
this wise:
A man temporarily absent from this country leaves a definite place of residence, a
dwelling where he lives, a local base, so to speak, to which any inquiry about him
may be directed and where he is bound to return. Where one temporarily absents
himself, he leaves his affairs in the hands of one who may be reasonably expected
to act in his place and stead; to do all that is necessary to protect his interests; and
to communicate with him from time to time any incident of importance that may
affect him or his business or his affairs. It is usual for such a man to leave at his
home or with his business associates information as to where he may be contacted
in the event a question that affects him crops up.
Thus, in actions in personam against residents temporarily out of the Philippines,
the court need not always attach the defendants property in order to have authority to try
the case. Where the plaintiff seeks to attach the defendants property and to resort to the
concomitant service of summons by publication, the same must be with prior leave, precisely
because, if the sole purpose of the attachment is for the court to acquire
jurisdiction, the latter must determine whether from the allegations in the complaint,
substituted service (to persons of suitable discretion at the defendants residence or to a
competent person in charge of his office or regular place of business) will suffice, or whether
there is a need to attach the property of the defendant and resort to service of summons by
publication in order for the court to acquire jurisdiction over the case and to comply with the
requirements of due process.
In the instant case, it must be stressed that the writ was issued by the trial court
mainly on the representation of petitioner that respondent is not a resident of the Philippines.
[34]
Obviously, the trial courts issuance of the writ was for the sole purpose of acquiring
jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed that
respondent has a residence in Quezon City and an office in Makati City, the trial court, if only
for the purpose of acquiring jurisdiction, could have served summons by substituted service
on the said addresses, instead of attaching the property of the defendant. The rules on the
application of a writ of attachment must be strictly construed in favor of the defendant. For
attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which
exposes the debtor to humiliation and annoyance. [35] It should be resorted to only when
necessary and as a last remedy.
It is clear from the foregoing that even on the allegation that respondent is a
resident temporarily out of the Philippines, petitioner is still not entitled to a writ of
attachment because the trial court could acquire jurisdiction over the case by substituted
service instead of attaching the property of the defendant. The misrepresentation of
petitioner that respondent does not reside in the Philippines and its omission of his local
addresses was thus a deliberate move to ensure that the application for the writ will be
granted. In light of the foregoing, the Court of Appeals properly sustained the finding of the
trial court that petitioner is liable for damages for the wrongful issuance of a writ of
attachment against respondent.
Anent the actual damages, the Court of Appeals is correct in not awarding the same
inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a
well settled rule that one who has been injured by a wrongful attachment can recover
damages for the actual loss resulting therefrom. But for such losses to be recoverable, they
must constitute actual damages duly established by competent proofs, which are, however,
wanting in the present case.[36]
Nevertheless, nominal damages may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing that right,
and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for
the purpose of indemnification for a loss but for the recognition and vindication of a
right. Indeed, nominal damages are damages in name only and not in fact. [37] They are
recoverable where some injury has been done but the pecuniary value of the damage is not
shown by evidence and are thus subject to the discretion of the court according to the
circumstances of the case.[38]
In this case, the award of nominal damages is proper considering that the right of
respondent to use his money has been violated by its garnishment. The amount of nominal
damages must, however, be reduced from P2 million to P50,000.00 considering the short
period of 2 months during which the writ was in effect as well as the lack of evidence as to
the amount garnished.
Likewise, the award of attorneys fees is proper when a party is compelled to incur
expenses to lift a wrongfully issued writ of attachment. The basis of the award thereof is also
the amount of money garnished, and the length of time respondents have been deprived of
the use of their money by reason of the wrongful attachment. [39] It may also be based upon
(1) the amount and the character of the services rendered; (2) the labor, time and trouble
involved; (3) the nature and importance of the litigation and business in which the services
were rendered; (4) the responsibility imposed; (5) the amount of money and the value of the
property affected by the controversy or involved in the employment; (6) the skill and the
experience called for in the performance of the services; (7) the professional character and
the social standing of the attorney; (8) the results secured, it being a recognized rule that an
attorney may properly charge a much larger fee when it is contingent than when it is not. [40]
All the aforementioned weighed, and considering the short period of time it took to
have the writ lifted, the favorable decisions of the courts below, the absence of evidence as
to the professional character and the social standing of the attorney handling the case and
the amount garnished, the award of attorneys fees should be fixed not at P1 Million, but only
at P200,000.00.
The courts below correctly awarded moral damages on account of petitioners
misrepresentation and bad faith; however, we find the award in the amount of P5 Million
excessive. Moral damages are to be fixed upon the discretion of the court taking into
consideration the educational, social and financial standing of the parties. [41] Moral damages
are not intended to enrich a complainant at the expense of a defendant. [42] They are awarded
only to enable the injured party to obtain means, diversion or amusements that will serve to
obviate the moral suffering he has undergone, by reason of petitioners culpable action. Moral
damages must be commensurate with the loss or injury suffered.Hence, the award of moral
damages is reduced to P500,000.00.
Considering petitioners bad faith in securing the writ of attachment, we sustain the
award of exemplary damages by way of example or correction for public good. This should
deter parties in litigations from resorting to baseless and preposterous allegations to obtain
writs of attachments. While as a general rule, the liability on the attachment bond is limited
22
to actual (or in some cases, temperate or nominal) damages, exemplary damages may be
recovered where the attachment was established to be maliciously sued out. [43] Nevertheless,
the award of exemplary damages in this case should be reduced from P5M to P500,000.00.

Finally, contrary to the claim of petitioner, the instant case for damages by reason
of the invalid issuance of the writ, survives the dismissal of the main case for sum of
money. Suffice it to state that the claim for damages arising from such wrongful attachment
may arise and be decided separately from the merits of the main action. [44]

WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision
of the Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial International Bank is ordered to pay respondent
Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal
damages, P200,000.00 as attorneys fees; and P500,000.00 as moral damages,
and P500,000.00 as exemplary damages, to be satisfied against the attachment bond issued
by Prudential Guarantee & Assurance Inc.,[45] under JCL (4) No. 01081, Bond No. HO-46764-
97. No pronouncement as to costs. SO ORDERED.

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