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PRELIMINARY ATTACHMENT

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RULE 57 - PRELIMINARY ATTACHMENT

 

It is evident that the questioned writ of attachment was anchored upon Section 1(d), Rule 57 of the Revised Rules of Court, to wit -

"SECTION 1. Grounds upon which attachment may issue. - A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:

x x x x x x x x x.

(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 concealing or disposing of the property for the taking, detention or conversion of which the action is brought;

x x x x x x x x x."

In Liberty Insurance Corporation vs. Court of Appeals,10 [G.R. No. 104405, 222 SCRA 37, 45 [1993].] this Court, discussing Section 1(d), Rule 57, cautioned as follows --

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case. (Republic v. Gonzales, 13 SCRA 633).

From the foregoing, therefore, the alleged inducement by the DPWH officials upon private respondent as well as the circumstances surrounding the execution of the joint venture agreement, both appear immaterial as they were not committed upon contracting the obligation sued upon but occurred long after the obligation has been established.

The fact that petitioners have paid a substantial amount of money to private respondent cannot save the day for them either. As per their own accounting, such payments were for accounts payable for labor supplied, construction materials and cash advances.11 [See Petition, p. 8; Rollo, p. 18.] It is not denied that no payment of profits has been given to private respondent, which is precisely what it is suing for.

Finally, considering that the writ of preliminary attachment has been issued on account of allegations of fraud in contracting the obligation upon which the action is brought petitioners' efforts to have the writ of preliminary attachment dissolved on the ground that it was improperly or irregularly issued is in vain. Indeed, in Liberty Insurance Corporation, supra, which cited Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480), we ruled -

"x x x, when the preliminary attachment is issued upon a ground which is at the same time the applicant's cause of action: e.g., x x x an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, 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 therein had been improperly or irregularly issued - the reason being that the hearing on such motion for dissolution of the writ would be tantamount to a trial on the merits. In other words, the merits of the action would be ventilated at a mere hearing of a motion; instead of the regular trial. Therefore, when the writ of attachment is of this nature, the only way it can be dissolved is by a counterbond."

Justice Ynares-Santiago, First Division, FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners, vs. THE COURT OF APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding Judge, Branch 139, Regional Trial Court, NCJR, Makati City, Metro Manila, and LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, respondents [G.R. No. 123358. February 1, 2000]  

 

Section 1, Rule 57 of the 1997 Rules of Court. 8 [SECTION 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 or 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 the 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; or

(f)  In an action against a party who does not reside and is not found in the Philippines, or on whom summons may be served by publication.

In the meantime, on January 23, 1995, the Supreme Court en banc issued its decision in the consolidated cases of Republic vs. Sandiganbayan (First Division), 240 SCRA 376 (1995). The decision included the nullification of the resolution of the Sandiganbayan that lifted the writ of sequestration of LBLC properties in G.R. No. 109314. Hence, the Court effectively confirmed the validity of the writ of sequestration over said properties. Peter A. Sabido's motion for reconsideration was denied. Finally, an entry of judgment was issued on April 22, 1997, in G.R. No. 109314.

Petitioner contends that the RTC of Lianga has no jurisdiction over the subject matter of the case inasmuch as the same are under sequestration by the PCGG. Citing Baseco vs. PCGG, 150 SCRA 181 (1987), petitioner asserts that the sequestered assets have been placed under custodia legis of the PCGG pending the final determination by the Sandiganbayan that said assets are in fact ill-gotten. Hence, the RTC has no jurisdiction to order the attachment of said sequestered properties.

Private respondent, however avers that his original complaint was for a sum of money. It was a demand for payment of a valid obligation owed to him by LBLC. He adds that it would be unfair and unjust to declare the entire RTC proceedings regarding his claim for sum of money null and void. Misä act

Private respondent further claims that the attachment order of the trial court was issued after the Sandiganbayan had lifted the writ of sequestration against LBLC. But petitioner asserts that this order of the Sandiganbayan was reversed by the Supreme Court in a banc decision 8 [Republic vs. Sandiganbayan (First Division), 240 SCRA 376 (1995).] dated January 23, 1995, resolving several consolidated cases for which G.R. No. 109314 was included. Petitioner stresses that said reversal had become final and executory on April 22, 1997.

In PAGCOR vs. CA, 275 SCRA 433-434 (1997), involving ownership by Philippine Casino Operators Corporation (PCOC) over several gaming and office equipment during the time that PCOC was under a sequestration by PCGG, the Court ruled:

"We disagree with the RTC and the CA on the issue of jurisdiction. While there can be no dispute that PCOC was sequestered, the fact of sequestration alone did not automatically oust the RTC of jurisdiction to decide upon the question of ownership of the subject gaming and office equipment. The PCGG must be a party to the suit in order that the Sandiganbayan's exclusive jurisdiction may be correctly invoked. This is deducible from no less than E.O. No. 14, the 'Peña' and 'Nepomuceno' cases relied upon by both subordinate courts. Note that in Section 2 of E.O. No. 14 which provides:

‘Sec. 2. The Presidential Commission on Good Government shall file all such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof.’

it speaks of the PCGG as party-plaintiff. On the other hand, the PCGG was impleaded as co-defendant in both the 'Peña' and 'Nepomuceno' cases. But here, the PCGG does not appear in either capacity, as the complaint is solely between PAGCOR and respondents PCOC and Marcelo. The 'Peña' and 'Nepomuceno’ cases which recognize the independence of the PCGG and the Sandiganbayan in sequestration cases, therefore, cannot be invoked in the instant case so as to divest the RTC of its jurisdiction, under Section 19 of B.P. Blg. 129, over PAGCOR's action for recovery of personal property."

In the case at bar, the claim of private respondent Hung Ming Kuk is for a sum of money arising from a debt incurred by LBLC. Under a contract, private respondent had extended cash advances and supplied LBLC hardware materials, auto spare parts, and rendered services, for cutting and hauling logs. The total claim amounts to P18,031,563.78. Following Section 19 of B.P. Blg. 129, as amended by R.A. No. 7691 on March 25, 1994, the complaint falls within the jurisdiction of the Regional Trial Court, viz: Sâ djad

"Sec. 19. Jurisdiction in civil cases. -- Regional Trial Courts shall exercise exclusive original jurisdiction:

x x x

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred thousand pesos (P200,000)."

Petitioner relies, however, on the case of PCGG vs. Peña, 159 SCRA 556 (1988) and asserts that the controversy of LBLC or a sequestered company falls within the exclusive jurisdiction of the Sandiganbayan and not of the trial court.

In the Peña case, the trial court issued a temporary restraining order which prevented PCGG from enforcing the memorandum of then PCGG Commissioner Mary Concepcion Bautista. Her memorandum denied complainant's authority to sign and manage the funds of the sequestered company. The Supreme Court ruled that the trial court had no jurisdiction over PCGG being a co-equal body, and therefore, the regional trial courts may not interfere with and restrain the PCGG or set aside the order and actions of its Commissioner.

In contrast, the case now before us concerns receivables of the private respondent arising out of a legitimate business contract to supply goods and services in favor of LBLC. When a collection suit was filed against LBLC by its supplier, Hung Ming Kuk, evidently PCGG could not be the proper party to defend against such claim. More so, because when PCGG had not taken over the LBLC's business operations. Sppedscâ

We note that PCGG is not an owner but a conservator. It can exercise only powers of administration over property sequestered, frozen or provisionally taken over. Even resort to the provisional remedies should entail the least possible interference with business operations or activities so that, in the event that the accusation that the business enterprise is "ill-gotten" be not proven, it may be returned to its rightful owner as far as possible in the same condition as it was at the time of sequestration. 9 [Baseco vs. PCGG, 150 SCRA 181, 186 (1987).]

The holding in Peña which confers exclusive jurisdiction on the Sandiganbayan in sequestration cases cannot also be relied upon by petitioner in this case. We hold that the Regional Trial Court has jurisdiction over the complaint for payment of money allegedly averred by LBLC to private respondent.

We now move to the ancillary issue of whether or not the provisional remedy of attachment issued by the trial court in favor of the private respondent is valid.

It bears recalling that when the Sandiganbayan ordered that the writ of sequestration be lifted, PCGG filed a special civil action for certiorari to contest that order. The Supreme Court ruled in favor of PCGG when it granted the latter's petition to declare the lifting of the writ of sequestration by the Sandiganbayan null and void. 

Justice Quisumbing, Second Division, People v. Hon. Saludares and Hung Ming Kuk [G.R. No. 111174. March 9, 2000]

 

Third Issue: Validity of Attachment

Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree with the Court of Appeals that this issue is now moot and academic. As previously discussed, F/B Lourdes was an asset of the partnership and that it was placed in the name of petitioner, only to assure payment of the debt he and his partners owed. The nets and the floats were specifically manufactured and tailor-made according to their own design, and were bought and used in the fishing venture they agreed upon. Hence, the issuance of the Writ to assure the payment of the price stipulated in the invoices is proper. Besides, by specific agreement, ownership of the nets remained with Respondent Philippine Fishing Gear, until full payment thereof.

Justice Panganiban, Third Division, LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC, respondent.  [G.R. No. 136448. November 3, 1999]

 

In this petition, the lone issue presented for the consideration of this Court is:

"WHETHER OR NOT PRIVATE RESPONDENT WHICH COMMENCED AN ARBITRATION PROCEEDING UNDER THE AUSPICES OF THE PHILIPPINE CLEARING HOUSE CORPORTION (PCHC) MAY SUBSEQUENTLY FILE A SEPARATE CASE IN COURT OVER THE SAME SUBJECT MATTER OF ARBITRATION DESPITE THE PENDENCY OF THAT ARBITRATION, SIMPLY TO OBTAIN THE PROVISIONAL REMEDY OF ATTACHMENT AGAINST THE BANK, THE ADVERSE PARTY IN THE ARBITRATION PROCEEDINGS."42 [Rollo, pp. 310-311.]

We find no merit in the petition. Section 14 of Republic Act 876, otherwise known as the Arbitration Law, allows any party to the arbitration proceeding to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration, thus:

Section 14. Subpoena and subpoena duces tecum. - Arbitrators shall have the power to require any person to attend a hearing as a witness. They shall have the power to subpoena witnesses and documents when the relevancy of the testimony and the materiality thereof has been demonstrated to the arbitrators. Arbitrators may also require the retirement of any witness during the testimony of any other witness. All of the arbitrators appointed in any controversy must attend all the hearings in that matter and hear all the allegations and proofs of the parties; but an award by the majority of them is valid unless the concurrence of all of them is expressly required in the submission or contract to arbitrate. The arbitrator or arbitrators shall have the power at any time, before rendering the award, without prejudice to the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. (emphasis supplied)

Petitioner's exposition of the foregoing provision deserves scant consideration. Section 14 simply grants an arbitrator the power to issue subpoena and subpoena duces tecum at any time before rendering the award. The exercise of such power is without prejudice to the right of a party to file a petition in court to safeguard any matter which is the subject of the dispute in arbitration. In the case at bar, private respondent filed an action for a sum of money with prayer for a writ of preliminary attachment. Undoubtedly, such action involved the same subject matter as that in arbitration, i.e., the sum of P25,200,000.00 which was allegedly deprived from private respondent in what is known in banking as a "kiting scheme." However, the civil action was not a simple case of a money claim since private respondent has included a prayer for a writ of preliminary attachment, which is sanctioned by section 14 of the Arbitration Law.

Petitioner cites the cases of Associated Bank vs. Court of Appeals,43 [233 SCRA 137 (1994)] Puromines, Inc. vs. Court of Appeals,,44 [220 SCRA 281 (1993)] and Ledesma vs. Court of Appeals 45 [211 SCRA 753 (1992). This case involves the application of the Katarungang Pambarangay Law (P.D. 1508)] in contending that "(w)hen arbitration is agreen upon and suit is filed without arbitration having been held and terminated, the case that is filed should be dismissed."46 [Rollo, p. 318.] However, the said cases are not in point. In Associated Bank, we affirmed the dismissal of the third-party complaint filed by Associated Bank against Philippine Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust Company and Citytrust Banking Corporation for lack of jurisdiction, it being shown that the said parties were bound by the Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House Corporation. In Associated Bank, we declared that:

"xxx xxx. Under the rules and regulations of the Philippines Clearing House Corporation (PCHC), the mere act of participation of the parties concerned in its operations in effect amounts to a manifestation of agreement by the parties to abide by its rules and regulations. As a consequence of such participation, a party cannot invoke the jurisdiction of the courts over disputes and controversies which fall under the PCHC Rules and Regulations without first going through the arbitration processes laid out by the body."47 [Associated Bank vs. Court of Appeals, 233 SCRA 137, 142-143 (1994)] (emphasis supplied)

And thus we concluded:

"Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to the arbitration rules cannot go directly to the Regional Trial Court when it finds it convenient to do so. The jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is particularly applicable to all the parties in the third party complaint under their obligation to first seek redress of their disputes and grievances with the PCHC before going to the trial court."48 [Ibid., at p. 145.] (emphasis supplied)

Simply put, participants in the regional clearing operations of the Philippine Clearing House Corporation cannot bypass the arbitration process laid out by the body and seek relief directly from the courts. In the case at bar, undeniably, private respondent has initiated arbitration proceedings as required by the PCHC rules and regulations, and pending arbitration has sought relief from the trial court for measures to safeguard and/or conserve the subject of the dispute under arbitration, as sanctioned by section 14 of the Arbitration Law, and otherwise not shown to be contrary to the PCHC rules and regulations.

Likewise, in the case of Puromines, Inc. vs. Court of Appeals,49 [220 SCRA 281 (1993)] we have ruled that:

"In any case, whether the liability of respondent should be based on the sales contract or that of the bill of lading, the parties are nevertheless obligated to respect the arbitration provisions on the sales contract and/or bill of lading. Petitioner being a signatory and party to the sales contract cannot escape from his obligation under the arbitration clause as stated therein."

In Puromines, we found the arbitration clause stated in the sales contract to be valid and applicable, thus, we ruled that the parties, being signatories to the sales contract, are obligated to respect the arbitration provisions on the contract and cannot escape from such obligation by filing an action for breach of contract in court without resorting first to arbitration, as agreed upon by the parties.

At this point, we emphasize that arbitration, as an alternative method of dispute resolution, is encouraged by this Court. Aside from unclogging judicial dockets, it also hastens solutions especially of commercial disputes.50 [Allied Banking Corporation vs. Court of Appeals, 294 SCRA 803, 812 (1998)] The Court looks with favor upon such amicable arrangement and will only interfere with great reluctance to anticipate or nullify the action of the arbitration.51 [Puromines, Inc. vs. Court of Appeals, 220 SCRA 281, 290 (1993)]

Justice Buena, Second Division, HOME BANKERS SAVINGS AND TRUST COMPANY, petitioners vs. COURT OF APPEALS and FAR EAST BANK & TRUST COMPANY, respondents,  [G.R. No. 115412. November 19, 1999]

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