A.

ATTACHMENT RULE 57

1.
G.R. NO. 144740 : August 31, 2005]
SECURITY PACIFIC ASSURANCE CORPORATION, Petitioners, v. THE HON.
AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge, Regional
Trial Court, Branch 9, Manila; THE PEOPLE OF THE PHILIPPINES, represented
by Spouses REYNALDO and ZENAIDA ANZURES; and REYNALDO R. BUAZON,
In his official capacity as Sheriff IV, Regional Trial Court, Branch 9,
Manila, Respondents.
DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari, assailing the Decision1 and

Resolution2 of the Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000
and 22 August 2000, respectively. The said Decision and Resolution declared that
there was no grave abuse of discretion on the part of respondent Judge in issuing the
assailed order dated 31 March 2000, which was the subject in CA-G.R. SP No. 58147.
THE FACTS

The factual milieu of the instant case can be traced from this Court's decision in G.R.
No. 106214 promulgated on 05 September 1997.

On 26 August 1988, Reynaldo Anzures instituted a complaint against Teresita Villaluz

(Villaluz) for violation of Batas Pambansa Blg. 22. The criminal information was
brought before the Regional Trial Court, City of Manila, and raffled off to Branch 9,
then presided over by Judge Edilberto G. Sandoval, docketed as Criminal Case No.
89-69257.

An Ex-Parte Motion for Preliminary Attachment3 dated 06 March 1989 was filed by
Reynaldo Anzures praying that pending the hearing on the merits of the case, a Writ
of Preliminary Attachment be issued ordering the sheriff to attach the properties of
Villaluz in accordance with the Rules.
On 03 July 1989, the trial court issued an Order4 for the issuance of a writ of
preliminary attachment "upon complainant's posting of a bond which is hereby fixed
at P2,123,400.00 and the Court's approval of the same under the condition prescribed
by Sec. 4 of Rule 57 of the Rules of Court'. "

An attachment bond5 was thereafter posted by Reynaldo Anzures and approved by

the court. Thereafter, the sheriff attached certain properties of Villaluz, which were
duly annotated on the corresponding certificates of title.

On 25 May 1990, the trial court rendered a Decision6 on the case acquitting Villaluz
of the crime charged, but held her civilly liable. The dispositive portion of the said
decision is reproduced hereunder:

WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the

accused TERESITA E. VILLALUZ with cost de oficio. As to the civil aspect of the case
however, accused is ordered to pay complainant Reynaldo Anzures the sum of TWO
MILLION ONE HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED
(P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fully
paid, the sum of P50,000.00 as attorney's fees and the cost of suit.7
Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, the
latter rendered its Decision,8 the dispositive portion of which partly reads:

WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court of
Manila, Branch 9, dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-
69257, is hereby AFFIRMED, in all respects'.

The case was elevated to the Supreme Court (G.R. No. 106214), and during its
pendency, Villaluz posted a counter-bond in the amount of P2,500,000.00 issued by
petitioner Security Pacific Assurance Corporation.9Villaluz, on the same date10 of the
counter-bond, filed an Urgent Motion to Discharge Attachment.11
On 05 September 1997, we promulgated our decision in G.R. No. 106214, affirming in
toto the decision of the Court of Appeals.

In view of the finality of this Court's decision in G.R. No. 106214, the private
complainant moved for execution of judgment before the trial court.12

On 07 May 1999, the trial court, now presided over by respondent Judge, issued a
Writ of Execution.13

Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but the
latter no longer resided in her given address. This being the case, the sheriff sent a
Notice of Garnishment upon petitioner at its office in Makati City, by virtue of the
counter-bond posted by Villaluz with said insurance corporation in the amount
of P2,500,000.00. As reported by the sheriff, petitioner refused to assume its
obligation on the counter-bond it posted for the discharge of the attachment made by
Villaluz.14

Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed with
Garnishment,15 which was opposed by petitioner16 contending that it should not be
held liable on the counter-attachment bond.
The trial court, in its Order dated 31 March 2000,17 granted the Motion to Proceed
with Garnishment. The sheriff issued a Follow-Up of Garnishment18 addressed to the
President/General Manager of petitioner dated 03 April 2000.
On 07 April 2000, petitioner filed a Petition for Certiorari with Preliminary Injunction
and/or Temporary Restraining Order19 with the Court of Appeals, seeking the
nullification of the trial court's order dated 31 March 2000 granting the motion to
proceed with garnishment. Villaluz was also named as petitioner. The petitioners
contended that the respondent Judge, in issuing the order dated 31 March 2000, and
the sheriff committed grave abuse of discretion and grave errors of law in proceeding
against the petitioner corporation on its counter-attachment bond, despite the fact that
said bond was not approved by the Supreme Court, and that the condition by which
said bond was issued did not happen.20

On 16 June 2000, the Court of Appeals rendered a Decision,21 the dispositive portion
of which reads:

WHEREFORE, premises considered, the Court finds no grave abuse of discretion on

the part of respondent judge in issuing the assailed order. Hence, the petition is
dismissed.

A Motion for Reconsideration22 was filed by petitioner, but was denied for lack of merit
by the Court of Appeals in its Resolution23 dated 22 August 2000.
Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules of
Civil Procedure, with Urgent Application for a Writ of Preliminary Injunction and/or
Temporary Restraining Order.24

On 13 December 2000, this Court issued a Resolution25 requiring the private

respondents to file their Comment to the Petition, which they did. Petitioner was
required to file its Reply26 thereafter.

Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and Zenaida
Anzures executed a Memorandum of Understanding (MOU).27 In it, it was stipulated
that as of said date, the total amount garnished from petitioner had amounted
to P1,541,063.85, and so the remaining amount still sought to be executed
was P958,936.15.28 Petitioner tendered and paid the amount of P300,000.00 upon
signing of the MOU, and the balance of P658,936.15 was to be paid in installment
at P100,000.00 at the end of each month from February 2001 up to July 2001. At the
end of August 2001, the amount of P58,936.00 would have to be paid. This would
make the aggregate amount paid to the private respondents P2,500,000.00.29 There
was, however, a proviso in the MOU which states that "this contract shall not be
construed as a waiver or abandonment of the appellate review pending before the
Supreme Court and that it will be subject to all such interim orders and final outcome
of said case."

On 13 August 2001, the instant petition was given due course, and the parties were
obliged to submit their respective Memoranda.30
ISSUES
The petitioner raises the following issues for the resolution of this Court:

Main Issue - WHETHER OR NOT THE COURT OF Appeals committed reversible

error in affirming the 31 march 2000 order of public respondent judge which allowed
execution on the counter-bond issued by the petitioner.

Corollary Issues - (1) WHETHER OR NOT THE COURT OF APPEALS

CORRECTLY RULED THAT THE ATTACHMENT ON THE PROPERTY OF
VILLALUZ WAS DISCHARGED WITHOUT NEED OF COURT APPROVAL OF THE
COUNTER-BOND POSTED; and (2) WHETHER OR NOT THE COURT OF
APPEALS CORRECTLY RULED THAT THE ATTACHMENT ON THE PROPERTY
OF VILLALUZ WAS DISCHARGED BY THE MERE ACT OF POSTING THE
COUNTER-BOND.

THE COURT'S RULING

Petitioner seeks to escape liability by contending, in the main, that the writ of
attachment which was earlier issued against the real properties of Villaluz was not
discharged. Since the writ was not discharged, then its liability did not accrue. The
alleged failure of this Court in G.R. No. 106214 to approve the counter-bond and to
cause the discharge of the attachment against Villaluz prevented the happening of a
condition upon which the counter-bond's issuance was premised, such that petitioner
should not be held liable thereon.31
Petitioner further asserts that the agreement between it and Villaluz is not a suretyship
agreement in the sense that petitioner has become an additional debtor in relation to
private respondents. It is merely waiving its right of excussion32 that would ordinarily
apply to counter-bond guarantors as originally contemplated in Section 12, Rule 57
of the 1997 Rules.
In their Comment,33 the private respondents assert that the filing of the counter-bond
by Villaluz had already ipso facto discharged the attachment on the properties and
made the petitioner liable on the bond. Upon acceptance of the premium, there was
already an express contract for surety between Villaluz and petitioner in the amount
of P2,500,000.00 to answer for any adverse judgment/decision against Villaluz.

Petitioner filed a Reply34 dated 09 May 2001 to private respondents' Comment,

admitting the binding effect of the bond as between the parties thereto. What it did
not subscribe to was the theory that the attachment was ipso facto or automatically
discharged by the mere filing of the bond in court. Such theory, according to petitioner,
has no foundation. Without an order of discharge of attachment and approval of the
bond, petitioner submits that its stipulated liability on said bond, premised on their
occurrence, could not possibly arise, for to hold otherwise would be to trample upon
the statutorily guaranteed right of the parties to contractual autonomy.

Based on the circumstances present in this case, we find no compelling reason to

reverse the ruling of the Court of Appeals.

Over the years, in a number of cases, we have made certain pronouncements about
counter-bonds.

In Tijam v. Sibonghanoy,35 as reiterated in Vanguard Assurance Corp. v. Court of

Appeals,36 we held:

. . . [A]fter the judgment for the plaintiff has become executory and the execution is
'returned unsatisfied,' as in this case, the liability of the bond automatically attaches
and, in failure of the surety to satisfy the judgment against the defendant despite
demand therefore, writ of execution may issue against the surety to enforce the
obligation of the bond.

In Luzon Steel Coporation v. Sia, et al.: 37

. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to these
bonds being security for the payment of any judgment that the attaching party may
obtain; they are thus mere replacements of the property formerly attached, and just
as the latter may be levied upon after final judgment in the case in order to realize the
amount adjudged, so is the liability of the countersureties ascertainable after the
judgment has become final. . . .

In Imperial Insurance, Inc. v. De Los Angeles,38 we ruled:

. . . Section 17, Rule 57 of the Rules of Court cannot be construed that an "execution
against the debtor be first returned unsatisfied even if the bond were a solidary one,
for a procedural may not amend the substantive law expressed in the Civil Code, and
further would nullify the express stipulation of the parties that the surety's obligation
should be solidary with that of the defendant.

In Philippine British Assurance Co., Inc. v. Intermediate Appellate Court,39 we further

held that "the counterbond is intended to secure the payment of 'any judgment' that
the attaching creditor may recover in the action."

Petitioner does not deny that the contract between it and Villaluz is one of surety.
However, it points out that the kind of surety agreement between them is one that
merely waives its right of excussion. This cannot be so. The counter-bond itself states
that the parties jointly and severally bind themselves to secure the payment of any
judgment that the plaintiff may recover against the defendant in the action. A surety
is considered in law as being the same party as the debtor in relation to whatever is
adjudged touching the obligation of the latter, and their liabilities are interwoven as to
be inseparable.40

Suretyship is a contractual relation resulting from an agreement whereby one person,

the surety, engages to be answerable for the debt, default or miscarriage of another,
known as the principal. The surety's obligation is not an original and direct one for the
performance of his own act, but merely accessory or collateral to the obligation
contracted by the principal. Nevertheless, although the contract of a surety is in
essence secondary only to a valid principal obligation, his liability to the creditor or
promise of the principal is said to be direct, primary and absolute; in other words, he
is directly and equally bound with the principal. The surety therefore becomes liable
for the debt or duty of another although he possesses no direct or personal interest
over the obligations nor does he receive any benefit therefrom.41

In view of the nature and purpose of a surety agreement, petitioner, thus, is barred
from disclaiming liability.

Petitioner's argument that the mere filing of a counter-bond in this case cannot
automatically discharge the attachment without first an order of discharge and
approval of the bond, is lame.

Under the Rules, there are two (2) ways to secure the discharge of an attachment.
First, the party whose property has been attached or a person appearing on his behalf
may post a security. Second, said party may show that the order of attachment was
improperly or irregularly issued.42 The first applies in the instant case. Section 12,
Rule 57,43 provides:
SEC. 12. Discharge of attachment upon giving counter-bond. - After a writ of
attachment has been enforced, the party whose property has been attached, or the
person appearing on his behalf, may move for the discharge of the attachment wholly
or in part on the security given. The court shall, after due notice and hearing, order
the discharge of the attachment if the movant makes a cash deposit, or files a counter-
bond executed to the attaching party with the clerk of the court where the application
is made, in an amount equal to that fixed by the court in the order of attachment,
exclusive of costs. But if the attachment is sought to be discharged with respect to a
particular property, the counter-bond shall be equal to the value of that property as
determined by the court. In either case, the cash deposit or the counter-bond shall
secure the payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching party. 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 to the person appearing on his
behalf, the deposit or counter-bond aforesaid standing in 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 party may apply for a new order of attachment.
It should be noted that in G.R. No. 106214, per our Resolution dated 15 January
1997,44 we permitted Villaluz to file a counter-attachment bond. On 17 February
1997,45 we required the private respondents to comment on the sufficiency of the
counter-bond posted by Villaluz.

It is quite palpable that the necessary steps in the discharge of an attachment upon
giving counter-bond have been taken. To require a specific order for the discharge of
the attachment when this Court, in our decision in G.R. No. 106214, had already
declared that the petitioner is solidarily bound with Villaluz would be mere surplusage.
Thus:

During the pendency of this petition, a counter-attachment bond was filed by petitioner
Villaluz before this Court to discharge the attachment earlier issued by the trial court.
Said bond amounting to P2.5 million was furnished by Security Pacific Assurance,
Corp. which agreed to bind itself "jointly and severally" with petitioner for "any
judgment" that may be recovered by private respondent against the former.46

We are not unmindful of our ruling in the case of Belisle Investment and Finance Co.,
Inc. v. State Investment House, Inc.,47 where we held:
. . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbond does
not automatically discharge the writ of attachment. It is only after hearing and after
the judge has ordered the discharge of the attachment if a cash deposit is made or a
counterbond is executed to the attaching creditor is filed, that the writ of attachment
is properly discharged under Section 12, Rule 57 of the Rules of Court.

The ruling in Belisle, at first glance, would suggest an error in the assailed ruling of
the Court of Appeals because there was no specific resolution discharging the
attachment and approving the counter-bond. As above-explained, however,
consideration of our decision in G.R. No. 106214 in its entirety will readily show that
this Court has virtually discharged the attachment after all the parties therein have
been heard on the matter.

On this score, we hew to the pertinent ratiocination of the Court of Appeals as regards
the heretofore cited provision of Section 12, Rule 57 of the 1997 Rules of Civil
Procedure, on the discharge of attachment upon giving counter-bond:

. . . The filing of the counter-attachment bond by petitioner Villaluz has discharged the
attachment on the properties and made the petitioner corporation liable on the
counter-attachment bond. This can be gleaned from the "DEFENDANT'S BOND FOR
THE DISSOLUTION OF ATTACHMENT", which states that Security Pacific
Assurance Corporation, as surety, in consideration of the dissolution of the said
attachment jointly and severally, binds itself with petitioner Villaluz for any judgment
that may be recovered by private respondent Anzures against petitioner Villaluz.
The contract of surety is only between petitioner Villaluz and petitioner corporation.
The petitioner corporation cannot escape liability by stating that a court approval is
needed before it can be made liable. This defense can only be availed by petitioner
corporation against petitioner Villaluz but not against third persons who are not parties
to the contract of surety. The petitioners hold themselves out as jointly and severally
liable without any conditions in the counter-attachment bond. The petitioner
corporation cannot impose requisites before it can be made liable when the law
clearly does not require such requisites to be fulfilled.48(Emphases supplied.)
Verily, a judgment must be read in its entirety, and it must be construed as a whole
so as to bring all of its parts into harmony as far as this can be done by fair and
reasonable interpretation and so as to give effect to every word and part, if possible,
and to effectuate the intention and purpose of the Court, consistent with the provisions
of the organic law.49
Insurance companies are prone to invent excuses to avoid their just obligation.50 It
seems that this statement very well fits the instant case.
WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court
of Appeals dated 16 June 2000 and 22 August 2000, respectively, are both
AFFIRMED. Costs against petitioner.

SO ORDERED.

2. G.R. No. 166759 November 25, 2009

SOFIA TORRES, FRUCTOSA TORRES, HEIRS OF MARIO TORRES and SOLAR

RESOURCES, INC.,Petitioners,
vs.
NICANOR SATSATIN, EMILINDA AUSTRIA SATSATIN, NIKKI NORMEL
SATSATIN and NIKKI NORLIN SATSATIN, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated November 23,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 83595, and its
Resolution2 dated January 18, 2005, denying petitioners’ motion for reconsideration.

The factual and procedural antecedents are as follows:

The siblings Sofia Torres (Sofia), Fructosa Torres (Fructosa), and Mario Torres
(Mario) each own adjacent 20,000 square meters track of land situated at Barrio
Lankaan, Dasmariñas, Cavite, covered by Transfer Certificate of Title (TCT) Nos.
251267,3 251266,4 and 251265,5 respectively.

Sometime in 1997, Nicanor Satsatin (Nicanor) asked petitioners’ mother, Agripina

Aledia, if she wanted to sell their lands. After consultation with her daughters,
daughter-in-law, and grandchildren, Agripina agreed to sell the properties.
Petitioners, thus, authorized Nicanor, through a Special Power of Attorney, to
negotiate for the sale of the properties.6

Sometime in 1999, Nicanor offered to sell the properties to Solar Resources, Inc.
(Solar). Solar allegedly agreed to purchase the three parcels of land, together with
the 10,000-square-meter property owned by a certain Rustica Aledia, for
₱35,000,000.00. Petitioners alleged that Nicanor was supposed to remit to them the
total amount of ₱28,000,000.00 or ₱9,333,333.00 each to Sofia, Fructosa, and the
heirs of Mario.

Petitioners claimed that Solar has already paid the entire purchase price of
₱35,000,000.00 to Nicanor in Thirty-Two (32) post-dated checks which the latter
encashed/deposited on their respective due dates. Petitioners added that they also
learned that during the period from January 2000 to April 2002, Nicanor allegedly
acquired a house and lot at Vista Grande BF Resort Village, Las Piñas City and a car,
which he registered in the names of his unemployed children, Nikki Normel Satsatin
and Nikki Norlin Satsatin. However, notwithstanding the receipt of the entire payment
for the subject property, Nicanor only remitted the total amount of ₱9,000,000.00,
leaving an unremitted balance of ₱19,000,000.00. Despite repeated verbal and
written demands, Nicanor failed to remit to them the balance of ₱19,000,000.00.

Consequently, on October 25, 2002, petitioners filed before the regional trial court
(RTC) a Complaint7 for sum of money and damages, against Nicanor, Ermilinda
Satsatin, Nikki Normel Satsatin, and Nikki Norlin Satsatin. The case was docketed as
Civil Case No. 2694-02, and raffled to RTC, Branch 90, Dasmariñas, Cavite.

On October 30, 2002, petitioners filed an Ex-Parte Motion for the Issuance of a Writ
of Attachment,8 alleging among other things: that respondents are about to depart the
Philippines; that they have properties, real and personal in Metro Manila and in the
nearby provinces; that the amount due them is P19,000,000.00 above all other
claims; that there is no other sufficient security for the claim sought to be enforced;
and that they are willing to post a bond fixed by the court to answer for all costs which
may be adjudged to the respondents and all damages which respondents may sustain
by reason of the attachment prayed for, if it shall be finally adjudged that petitioners
are not entitled thereto.

On October 30, 2002, the trial court issued an Order9 directing the petitioners to post
a bond in the amount of ₱7,000,000.00 before the court issues the writ of attachment,
the dispositive portion of which reads as follows:

WHEREFORE, premises considered, and finding the present complaint and motion
sufficient in form and substance, this Court hereby directs the herein plaintiffs to post
a bond, pursuant to Section 3, Rule 57 of the 1997 Rules of Civil Procedure, in the
amount of Seven Million Pesos (P7,000,000.00), before the Writ of Attachment
issues.10

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff,11 informing
the court that they have already filed an attachment bond. They also prayed that a
sheriff be deputized to serve the writ of attachment that would be issued by the court.

In the Order12 dated November 15, 2002, the RTC granted the above motion and
deputized the sheriff, together with police security assistance, to serve the writ of
attachment.

Thereafter, the RTC issued a Writ of Attachment13 dated November 15, 2002,
directing the sheriff to attach the estate, real or personal, of the respondents, the
decretal portion of which reads:

WE, THEREFORE, command you to attach the estate, real or personal, not exempt
from execution, of the said defendants, in your province, to the value of said demands,
and that you safely keep the same according to the said Rule, unless the defendants
give security to pay such judgment as may be recovered on the said action, in the
manner provided by the said Rule, provided that your legal fees and all necessary
expenses are fully paid.

You shall return this writ with your proceedings indorsed hereon within twenty (20)
days from the date of receipt hereof.

GIVEN UNDER MY HAND AND SEAL of this Court, this 15th day of November, 2002,
at Imus for Dasmariñas, Cavite, Philippines.14

On November 19, 2002, a copy of the writ of attachment was served upon the
respondents. On the same date, the sheriff levied the real and personal properties of
the respondent, including household appliances, cars, and a parcel of land located at
Las Piñas, Manila.15

On November 21, 2002, summons, together with a copy of the complaint, was served
upon the respondents.16
On November 29, 2002, respondents filed their Answer.17

On the same day respondents filed their answer, they also filed a Motion to Discharge
Writ of Attachment18anchored on the following grounds: the bond was issued before
the issuance of the writ of attachment; the writ of attachment was issued before the
summons was received by the respondents; the sheriff did not serve copies of the
application for attachment, order of attachment, plaintiffs’ affidavit, and attachment
bond, to the respondents; the sheriff did not submit a sheriff’s return in violation of the
Rules; and the grounds cited for the issuance of the writ are baseless and devoid of
merit. In the alternative, respondents offered to post a counter-bond for the lifting of
the writ of attachment.19

On March 11, 2003, after the parties filed their respective pleadings, the RTC issued
an Order20 denying the motion, but at the same time, directing the respondents to file
a counter-bond, to wit:

WHEREFORE, premises considered, after the pertinent pleadings of the parties have
been taken into account, the herein defendants are hereby directed to file a counter-
bond executed to the attaching party, in the amount of Seven Million Pesos
(₱7,000,000.00), to secure the payment of any judgment that the attaching party may
recover in the action, with notice on the attaching party, whereas, the Motion to
Discharge Writ of Attachment is DENIED.

SO ORDERED.21

Thereafter, respondents filed a motion for reconsideration and/or motion for

clarification of the above order. On April 3, 2003, the RTC issued another
Order22 which reads:

In view of the Urgent Motion For Reconsideration And/Or Motion For Clarification of
the Order of this Court dated March 11, 2003, denying their Motion to Discharge Writ
of Attachment filed by the defendants through counsel Atty. Franco L. Loyola, the
Motion to Discharge Writ of Attachment is denied until after the defendants have
posted the counter-bond in the amount of Seven Million Pesos (₱7,000,000.00).

The defendants, once again, is directed to file their counter-bond of Seven Million
Pesos (₱7,000,000.00), if it so desires, in order to discharge the Writ of Attachment.

SO ORDERED.

On December 15, 2003, respondents filed an Urgent Motion to Lift/Set Aside Order
Dated March [11], 2003,23 which the RTC denied in an Order24 of even date, the
dispositive portion of which reads:

WHEREFORE, premises considered, defendants’ Urgent Motion to Lift/Set Aside

Order Dated March 23, 2003 (With Manifestation to Dissolve Writ of Attachment) is
hereby DENIED for lack of Merit.

SO ORDERED.

Respondents filed an Urgent Motion for Reconsideration,25 but it was denied in the
Order26 dated March 3, 2004.

Aggrieved, respondents filed before the CA a Petition for Certiorari, Mandamus and
Prohibition with Preliminary Injunction and Temporary Restraining Order27 under Rule
65 of the Rules of Court, docketed as CA-G.R. SP No. 83595, anchored on the
following grounds:

(1) public respondents committed grave abuse of discretion amounting to lack of or

in excess of jurisdiction in failing to notice that the lower court has no jurisdiction over
the person and subject matter of the complaint when the subject Writ of Attachment
was issued;

(2) public respondents committed grave abuse of discretion amounting to lack of or

in excess of jurisdiction in granting the issuance of the Writ of Attachment despite
non-compliance with the formal requisites for the issuance of the bond and the Writ
of Attachment.28

Respondents argued that the subject writ was improper and irregular having been
issued and enforced without the lower court acquiring jurisdiction over the persons of
the respondents. They maintained that the writ of attachment was implemented
without serving upon them the summons together with the complaint. They also
argued that the bond issued in favor of the petitioners was defective, because the
bonding company failed to obtain the proper clearance that it can transact business
with the RTC of Dasmariñas, Cavite. They added that the various clearances which
were issued in favor of the bonding company were applicable only in the courts of the
cities of Pasay, Pasig, Manila, and Makati, but not in the RTC, Imus, Cavite.29

On November 23, 2003, the CA rendered the assailed Decision in favor of the
respondents, finding grave abuse of discretion amounting to lack of or in excess of
jurisdiction on the part of the RTC in issuing the Orders dated December 15, 2003
and March 3, 2004. The decretal portion of the Decision reads:

WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the assailed

Orders are hereby nullified and set aside. The levy on the properties of the petitioners
pursuant to the Writ of Attachment issued by the lower court is hereby LIFTED.

SO ORDERED.30

Petitioners filed a Motion for Reconsideration,31 but it was denied in the

Resolution32 dated January 18, 2005.

Hence, this petition assigning the following errors:

I.

THE HONORABLE COURT OF APPEALS ERRED IN ORDERING THE LIFTING OF

THE WRIT OF ATTACHMENT PURSUANT TO SECTION 13, RULE 57 OF THE
REVISED RULES OF CIVIL PROCEDURE.

II.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC

RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF OR IN EXCESS OF JURISDICTION IN GRANTING THE WRIT OF
ATTACHMENT DESPITE THE BOND BEING INSUFFICIENT AND HAVING BEEN
IMPROPERLY ISSUED.

III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE
PETITION BY REASON OF ESTOPPEL, LACHES AND PRESCRIPTION AND IN
HOLDING THAT THE WRIT OF ATTACHMENT WAS IMPROPERLY AND
IRREGULARLY ENFORCED IN VIOLATION OF SECTION 5, RULE 57 OF THE
REVISED RULES OF COURT.

IV.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE

PRINCIPLE OF ESTOPPEL WILL NOT LIE AGAINST RESPONDENTS.

Petitioners maintain that in the case at bar, as in the case of FCY Construction Group,
Inc. v. Court of Appeals,33the only way the subject writ of attachment can be dissolved
is by a counter-bond. They claim that the respondents are not allowed to file a motion
to dissolve the attachment under Section 13, Rule 57 of the Rules of Court. Otherwise,
the hearing on the motion for the dissolution of the writ would be tantamount to a trial
on the merits, considering that the writ of preliminary attachment was issued upon a
ground which is, at the same time, the applicant’s cause of action.

Petitioners insist that the determination of the existence of grounds to discharge a writ
of attachment rests in the sound discretion of the lower court. They argue that the
Certification34 issued by the Office of the Administrator and the Certifications35 issued
by the clerks of court of the RTCs of Dasmariñas and Imus, Cavite, would show that
the bonds offered by Western Guaranty Corporation, the bonding company which
issued the bond, may be accepted by the RTCs of Dasmariñas and Imus, Cavite, and
that the said bonding company has no pending liability with the government.

Petitioners contend that respondents are barred by estoppel, laches, and prescription
from questioning the orders of the RTC issuing the writ of attachment. They also
maintain that the issue whether there was impropriety or irregularity in the issuance
of the orders is moot and academic, considering that the attachment bond questioned
by the respondent had already expired on November 14, 2003 and petitioners have
renewed the attachment bond covering the period from November 14, 2003 to
November 14, 2004, and further renewed to cover the period of November 14, 2004
to November 14, 2005.

The petition is bereft of merit.

A writ of preliminary attachment is defined as a provisional remedy issued upon order

of the court where an action is pending to be levied upon the property or properties
of the defendant therein, the same to be held thereafter by the sheriff as security for
the satisfaction of whatever judgment that might be secured in the said action by the
attaching creditor against the defendant.36

In the case at bar, the CA correctly found that there was grave abuse of discretion
amounting to lack of or in excess of jurisdiction on the part of the trial court in
approving the bond posted by petitioners despite the fact that not all the requisites for
its approval were complied with. In accepting a surety bond, it is necessary that all
the requisites for its approval are met; otherwise, the bond should be rejected.37

Every bond should be accompanied by a clearance from the Supreme Court showing
that the company concerned is qualified to transact business which is valid only for
thirty (30) days from the date of its issuance.38 However, it is apparent that the
Certification39 issued by the Office of the Court Administrator (OCA) at the time the
bond was issued would clearly show that the bonds offered by Western Guaranty
Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and
Pasig. Therefore, the surety bond issued by the bonding company should not have
been accepted by the RTC of Dasmariñas, Branch 90, since the certification secured
by the bonding company from the OCA at the time of the issuance of the bond certified
that it may only be accepted in the above-mentioned cities. Thus, the trial court acted
with grave abuse of discretion amounting to lack of or in excess of jurisdiction when
it issued the writ of attachment founded on the said bond.

Moreover, in provisional remedies, particularly that of preliminary attachment, the

distinction between the issuance and the implementation of the writ of attachment is
of utmost importance to the validity of the writ. The distinction is indispensably
necessary to determine when jurisdiction over the person of the defendant should be
acquired in order to validly implement the writ of attachment upon his person.

This Court has long put to rest the issue of when jurisdiction over the person of the
defendant should be acquired in cases where a party resorts to provisional remedies.
A party to a suit may, at any time after filing the complaint, avail of the provisional
remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment
speaks of the grant of the remedy "at the commencement of the action or at any time
before entry of judgment."40 This phrase refers to the date of the filing of the complaint,
which is the moment that marks "the commencement of the action." The reference
plainly is to a time before summons is served on the defendant, or even before
summons issues.41

In Davao Light & Power Co., Inc. v. Court of Appeals,42 this Court clarified the actual
time when jurisdiction should be had:

It goes without saying that whatever be the acts done by the Court prior to the
acquisition of jurisdiction over the person of defendant x x x issuance of
summons, order of attachment and writ of attachment x x x 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 explicitly
required by Section 5 of Rule 57, but also the summons addressed to said defendant
as well as a copy of the complaint x x x. (Emphasis supplied.)

In Cuartero v. Court of Appeals,43 this Court held that the grant of the provisional
remedy of attachment involves three stages: first, the court issues the order granting
the application; second, the writ of attachment issues pursuant to the order granting
the writ; and third, the writ is implemented. For the initial two stages, it is not
necessary that jurisdiction over the person of the defendant be first obtained.
However, once the implementation of the writ commences, the court must have
acquired jurisdiction over the defendant, for without such jurisdiction, the court has no
power and authority to act in any manner against the defendant. Any order issuing
from the Court will not bind the defendant.44

Thus, it is indispensable not only for the acquisition of jurisdiction over the person of
the defendant, but also upon consideration of fairness, to apprise the defendant of
the complaint against him and the issuance of a writ of preliminary attachment and
the grounds therefor that prior or contemporaneously to the serving of the writ of
attachment, service of summons, together with a copy of the complaint, the
application for attachment, the applicant’s affidavit and bond, and the order must be
served upon him.

In the instant case, assuming arguendo that the trial court validly issued the writ of
attachment on November 15, 2002, which was implemented on November 19, 2002,
it is to be noted that the summons, together with a copy of the complaint, was served
only on November 21, 2002.

At the time the trial court issued the writ of attachment on November 15, 2002, it can
validly to do so since the motion for its issuance can be filed "at the commencement
of the action or at any time before entry of judgment." However, at the time the writ
was implemented, the trial court has not acquired jurisdiction over the persons of the
respondent since no summons was yet served upon them. The proper officer should
have previously or simultaneously with the implementation of the writ of attachment,
served a copy of the summons upon the respondents in order for the trial court to
have acquired jurisdiction upon them and for the writ to have binding effect.
Consequently, even if the writ of attachment was validly issued, it was improperly or
irregularly enforced and, therefore, cannot bind and affect the respondents.

Moreover, although there is truth in the petitioners’ contention that an attachment may
not be dissolved by a showing of its irregular or improper issuance if it is upon a
ground which is at the same time the applicant’s cause of action in the main case,
since an anomalous situation would result if the issues of the main case would be
ventilated and resolved in a mere hearing of a motion. However, the same is not
applicable in the case bar. It is clear from the respondents’ pleadings that the grounds
on which they base the lifting of the writ of attachment are the irregularities in its
issuance and in the service of the writ; not petitioners’ cause of action.1avvphi1

Further, petitioners’ contention that respondents are barred by estoppel, laches, and
prescription from questioning the orders of the RTC issuing the writ of attachment and
that the issue has become moot and academic by the renewal of the attachment bond
covering after its expiration, is devoid of merit. As correctly held by the CA:

There are two ways of discharging the attachment. First, to file a counter-bond in
accordance with Section 12 of Rule 57. Second[,] [t]o quash the attachment on the
ground that it was irregularly or improvidently issued, as provided for in Section 13 of
the same rule. Whether the attachment was discharged by either of the two ways
indicated in the law, the attachment debtor cannot be deemed to have waived any
defect in the issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. The filing of a counter-bond is
merely a speedier way of discharging the attachment writ instead of the other way.45

Moreover, again assuming arguendo that the writ of attachment was validly issued,
although the trial court later acquired jurisdiction over the respondents by service of
the summons upon them, such belated service of summons on respondents cannot
be deemed to have cured the fatal defect in the enforcement of the writ. The trial court
cannot enforce such a coercive process on respondents without first obtaining
jurisdiction over their person. The preliminary writ of attachment must be served after
or simultaneous with the service of summons on the defendant whether by personal
service, substituted service or by publication as warranted by the circumstances of
the case. The subsequent service of summons does not confer a retroactive
acquisition of jurisdiction over her person because the law does not allow for
retroactivity of a belated service.46
WHEREFORE, premises considered, the petition is DENIED. The Decision and
Resolution of the Court of Appeals dated November 23, 2004 and January 18, 2005,
respectively, in CA-G.R. SP No. 83595 are AFFIRMED.

SO ORDERED.

3. G.R. NO. 123638 June 15, 2005

INSULAR SAVINGS BANK, Petitioner,

vs.
COURT OF APPEALS, JUDGE OMAR U. AMIN, in his capacity as Presiding
Judge of Branch 135 of the Regional Trial Court of Makati, and FAR EAST BANK
AND TRUST COMPANY, Respondents.

DECISION

GARCIA, J.:

Thru this appeal via a petition for review on certiorari under Rule 45 of the Rules of
Court, petitioner Insular Savings Bank seeks to set aside the D E C I S I O N1 dated
October 9, 1995 of the Court of Appeals in CA-G.R. SP No. 34876 and its resolution
dated January 24, 1996,2 denying petitioner’s motion for reconsideration.

The assailed decision of October 9, 1995 cleared the Regional Trial Court (RTC) at
Makati, Branch 135, of committing, as petitioner alleged, grave abuse of discretion in
denying petitioner’s motion to discharge attachment by counter-bond in Civil Case
No. 92-145, while the equally assailed resolution of January 24, 1996 denied
petitioner’s motion for reconsideration.

The undisputed facts are summarized in the appellate court’s decision3 under review,
as follows:

"On December 11, 1991, respondent Bank [Far East Bank and Trust Company]
instituted Arbitration Case No. 91-069 against petitioner [Insular Savings Bank] before
the Arbitration Committee of the Philippine Clearing House Corporation [PCHC]. The
dispute between the parties involved three [unfunded] checks with a total value of
₱25,200,000.00. The checks were drawn against respondent Bank and were
presented by petitioner for clearing. As respondent Bank returned the checks beyond
the reglementary period, [but after petitioner’s account with PCHC was credited with
the amount of P25,200,000.00] petitioner refused to refund the money to respondent
Bank. While the dispute was pending arbitration, on January 17, 1992, respondent
Bank instituted Civil Case No. 92-145 in the Regional Trial Court of Makati and
prayed for the issuance of a writ of preliminary attachment. On January 22, 1992,
Branch 133 of the Regional Trial Court of Makati issued an Order granting the
application for preliminary attachment upon posting by respondent Bank of an
attachment bond in the amount of ₱6,000,000.00. On January 27, 1992, Branch 133
of the Regional Trial Court of Makati issued a writ of preliminary attachment for the
amount of ₱25,200,000.00. During the hearing on February 11, 1992 before the
Arbitration Committee of the Philippine Clearing House Corporation, petitioner and
respondent Bank agreed to temporarily divide between them the disputed amount of
₱25,200,000.00 while the dispute has not yet been resolved. As a result, the sum of
₱12,600,000.00 is in the possession of respondent Bank. On March 9, 1994,
petitioner filed a motion to discharge attachment by counter-bond in the amount of
₱12,600,000.00. On June 13, 1994, respondent Judge issued the first assailed
order denying the motion. On June 27, 1994, petitioner filed a motion for
reconsideration which was denied in the second assailed order dated July 20,
1994" (Emphasis and words in bracket added).

From the order denying its motion to discharge attachment by counter-bond,

petitioner went to the Court of Appeals on a petition for certiorari thereat docketed as
CA-G.R. SP No. 34876, ascribing on the trial court the commission of grave abuse of
discretion amounting to lack of jurisdiction.

While acknowledging that "[R]espondent Judge may have erred in his Order of June
13, 1994 that the counter-bond should be in the amount of ₱27,237,700.00", in that
he erroneously factored in, in arriving at such amount, unliquidated claim items, such
as actual and exemplary damages, legal interest, attorney’s fees and expenses of
litigation, the CA, in the herein assailed decision dated October 9, 1995,
nonetheless denied due course to and dismissed the petition. For, according to the
appellate court, the RTC’s order may be defended by, among others, the provision of
Section 12 of Rule 57 of the Rules of Court, infra. The CA added that, assuming that
the RTC erred on the matter of computing the amount of the discharging counter-
bond, its error does not amount to grave abuse of discretion.

With its motion for reconsideration having been similarly denied, petitioner is now with
us, faulting the appellate court, as follows:

"I. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE PRINCIPAL
AMOUNT CLAIMED BY RESPONDENT BANK SHOULD BE THE BASIS FOR
COMPUTING THE AMOUNT OF THE COUNTER-BOND, FOR THE PRELIMINARY
ATTACHMENT WAS ISSUED FOR THE SAID AMOUNT ONLY.

"II. THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ARGUMENT
THAT THE AMOUNT OF THE COUNTER-BOND SHOULD BE BASED ON THE
VALUE OF THE PROPERTY ATTACHED CANNOT BE RAISED FOR THE FIRST
TIME IN THE COURT OF APPEALS.

"III. THE COURT OF APPEALS ERRED IN RULING THAT THE AMOUNT OF THE
COUNTER-BOND SHOULD BE BASED ON THE VALUE OF THE PROPERTY
ATTACHED EVEN IF IT WILL RESULT IN MAKING THE AMOUNT OF THE
COUNTER-BOND EXCEED THE AMOUNT FOR WHICH PRELIMINARY
ATTACHMENT WAS ISSUED."

Simply put, the issue is whether or not the CA erred in not ruling that the trial court
committed grave abuse of discretion in denying petitioner’s motion to discharge
attachment by counter-bond in the amount of ₱12,600,000.00.

Says the trial court in its Order of June 13, 1994:

"xxx (T)he counter-bond posted by [petitioner] Insular Savings Bank should include
the unsecured portion of [respondent’s] claim of ₱12,600,000.00 as agreed by means
of arbitration between [respondent] and [petitioner]; Actual damages at 25% percent
per annum of unsecured amount of claim from October 21, 1991 in the amount of
₱7,827,500.00; Legal interest of 12% percent per annum from October 21, 1991 in
the amount of ₱3,805,200.00; Exemplary damages in the amount of ₱2,000,000.00;
and attorney’s fees and expenses of litigation in the amount of ₱1,000,000.00 with a
total amount of ₱27,237,700.00 (Adlawan vs. Tomol, 184 SCRA 31 (1990)".

Petitioner, on the other hand, argues that the starting point in computing the amount
of counter-bond is the amount of the respondent’s demand or claim only, in this case
₱25,200,000.00, excluding contingent expenses and unliquidated amount of
damages. And since there was a mutual agreement between the parties to
temporarily, but equally, divide between themselves the said amount pending and
subject to the final outcome of the arbitration, the amount of ₱12,600,000.00 should,
so petitioner argues, be the basis for computing the amount of the counter-bond.

The Court rules for the petitioner.

The then pertinent provision of Rule 57 (Preliminary Attachment) of the Rules of Court
under which the appellate court issued its assailed decision and resolution, provides
as follows:

"SEC. 12. Discharge of attachment upon giving counter-bond. – At any time after an
order of attachment has been granted, the party whose property has been attached,
. . . may upon reasonable notice to the applicant, apply to the judge who granted the
order or to the judge of the court 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 counter-bond
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. x x x . 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 party
may apply for a new order of attachment"4 (Emphasis supplied).4

As may be noted, the amount of the counter-attachment bond is, under the terms of
the aforequoted Section 12, to be measured against the value of the attached
property, as determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action. Albeit not explicitly stated in the same
section and without necessarily diminishing the sound discretion of the issuing judge
on matters of bond approval, there can be no serious objection, in turn, to the
proposition that the attached property - and logically the counter-bond necessary to
discharge the lien on such property - should as much as possible correspond in value
to, or approximately match the attaching creditor’s principal claim. Else, excessive
attachment, which ought to be avoided at all times, shall ensue. As we held
in Asuncion vs. Court of Appeals:5

"We, however, find the counter-attachment bond in the amount of P301,935.41

required of the private respondent by the trial court as rather excessive under the
circumstances. Considering that the principal amounts claimed by the petitioner . . .
total only P185,685.00, and that he had posted a bond of only P80,000.00 for the
issuance of the writ of preliminary attachment, we deem it reasonable to lower the
amount of the counter-attachment bond to be posted by the private respondent . . . to
the sum of P185,685.00."

The following excerpts from Herrera, REMEDIAL LAW, Vol. VII, 1997 ed., p. 61, citing
retired Justice Jose Y. Feria, drive home the same point articulated in Asuncion:

"The sheriff is required to attach only so much of the property of the party against
whom the order is issued as may be sufficient to satisfy the applicant’s demand, the
amount of which is stated in the order, unless a deposit is made or a counter-bond
is given equal to said amount. However, if the value of the property to be attached
is less than the amount of the demand, the amount of the applicant’s bond may be
equal to the value of said property, and the amount of the adverse party’s deposit
or counter-bond may be equal to the applicant’s bond. The writ of preliminary
attachment is issued upon approval of the requisite bond". (Emphasis
supplied).1avvphi1.net

Turning to the case at bar, the records show that the principal claim of respondent,
as plaintiff a quo, is in the amount of ₱25,200,000.00,6 representing the three (3)
unfunded checks drawn against, and presented for clearing to, respondent bank.
Jurisprudence teaches that a writ of attachment cannot be issued for moral and
exemplary damages, and other unliquidated or contingent claim.7

The order of attachment dated January 22, 1992 fixed the bond to be posted by
respondent, as applicant, at ₱6,000,000.00. The writ of attachment issued on January
27, 1992, in turn, expressly indicated that petitioner is justly indebted to respondent
in the amount of ₱25,200,000.00.8 On February 11, 1992, before the Arbitration
Committee of the Philippine Clearing House Corporation, petitioner and respondent,
however, agreed to equally divide between themselves, albeit on a temporary basis,
the disputed amount of ₱25,200,000.00, subject to the outcome of the arbitration
proceedings. Thus, the release by petitioner of the amount of ₱12,600,000.00 to
respondent. On March 7, 1994, petitioner filed a motion to discharge attachment by
counter-bond in the amount of ₱12,600,000.009 which, to petitioner, is the extent that
respondent may actually be prejudiced in the event its basic complaint for recovery
of money against petitioner prospers.

As things stood, therefore, respondent’s principal claim against petitioner immediately

prior to the filing of the motion to discharge attachment has effectively been pruned
down to ₱12,600,000.00. The trial court was fully aware of this reality. Accordingly, it
should have allowed a total discharge of the attachment on a counter-bond based on
the reduced claim of respondent. If a portion of the claim is already secured, we see
no justifiable reason why such portion should still be subject of counter-bond. It may
be that a counter-bond is intended to secure the payment of any judgment that the
attaching party may recover in the main action. Simple common sense, if not
consideration of fair play, however, dictates that a part of a possible judgment that
has veritably been preemptively satisfied or secured need not be covered by the
counter-bond.

With the view we take of this case, the trial court, in requiring petitioner to post a
counter-bond in the amount of ₱27,237,700.00,

obviously glossed over one certain fundamental. We refer to the fact that the
attachment respondent applied for and the corresponding writ issued was only for the
amount of ₱25.2 Million. Respondent, it bears to stress, did not pray for attachment
on its other claims, contingent and unliquidated as they were. Then, too, the attaching
writ rightly excluded such claims. While the records do not indicate, let alone provide
a clear answer as to the actual value of the property levied upon, it may reasonably
be assumed that it is equal to respondent’s principal claim. Be that as it may, it was
simply unjust for the trial court to base the amount of the counter-bond on a figure
beyond the ₱25,200,000.00 threshold, as later reduced to ₱12,600,200.00.

The trial court, therefore, committed grave abuse of discretion when it denied
petitioner’s motion to discharge attachment by counter-bond in the amount of
₱12,600,000.00, an amount more than double the attachment bond required of, and
given by, respondent. As a necessary consequence, the Court of Appeals committed
reversible error when it dismissed petitioner’s recourse thereto in CA-G.R. SP No.
34876.
It bears to stress, as a final consideration, that the certiorari proceedings before the
appellate court and the denial of the motion to discharge attachment subject of such
proceedings, transpired under the old rules on preliminary attachment which has
since been revised.10 And unlike the former Section 12 of Rule 57 of the Rules of
Court where the value of the property attached shall be the defining measure in the
computation of the discharging counter-attachment bond, the present less stringent
Section 12 of Rule 57 provides that the court shall order the discharge of attachment
if the movant "makes a cash deposit, or files a counter-bond . . . in an amount equal
to that fixed by the court in the order of attachment, exclusive of costs." Not being in
the nature of a penal statute, the Rules of Court cannot be given retroactive effect.11

This disposition should be taken in the light of then Section 12, Rule 57 of the Rules
of Court.

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision

and resolution of the Courts of Appeals are hereby REVERSED and SET
ASIDE, along with the orders dated June 13, 1994 and July 20, 1994 of the Regional
Trial Court at Makati, Branch 135, in Civil Case No. 92-145 insofar they denied
petitioner’s motion to discharge attachment by counter-bond in the amount of
₱12,600,000.00, and a new one entered GRANTING such motion upon the reposting
of the same counter-bond.

SO ORDERED.

4. G.R. No. 155868 February 6, 2007

SPOUSES GREGORIO and JOSEFA YU, Petitioners,

vs.
NGO YET TE, doing business under the name and style, ESSENTIAL
MANUFACTURING, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the March 21, 2001 Decision1 of the Court of Appeals (CA) in CA-G.R. CV
No. 522462 and its October 14, 2002 Resolution.3

The antecedent facts are not disputed.

Spouses Gregorio and Josefa Yu (Spouses Yu) purchased from Ngo Yet Te (Te) bars
of detergent soap worth ₱594,240.00, and issued to the latter three postdated
checks 4 as payment of the purchase price. When Te presented the checks at
maturity for encashment, said checks were returned dishonored and stamped
"ACCOUNT CLOSED".5 Te demanded6 payment from Spouses Yu but the latter did
not heed her demands. Acting through her son and attorney-in-fact, Charry Sy (Sy),
Te filed with the Regional Trial Court (RTC), Branch 75, Valenzuela, Metro Manila, a
Complaint,7 docketed as Civil Case No. 4061-V-93, for Collection of Sum of Money
and Damages with Prayer for Preliminary Attachment.

In support of her prayer for preliminary attachment, Te attached to her Complaint an

Affidavit executed by Sy that Spouses Yu were guilty of fraud in entering into the
purchase agreement for they never intended to pay the contract price, and that, based
on reliable information, they were about to move or dispose of their properties to
defraud their creditors.8
Upon Te’s posting of an attachment bond,9 the RTC issued an Order of
Attachment/Levy10 dated March 29, 1993 on the basis of which Sheriff Constancio
Alimurung (Sheriff Alimurung) of RTC, Branch 19, Cebu City levied and attached
Spouses Yu’s properties in Cebu City consisting of one parcel of land (known as Lot
No. 11)11 and four units of motor vehicle, specifically, a Toyota Ford Fierra, a jeep, a
Canter delivery van, and a passenger bus.12

On April 21, 1993, Spouses Yu filed an Answer13 with counterclaim for damages
arising from the wrongful attachment of their properties, specifically, actual damages
amounting to ₱1,500.00 per day; moral damages, ₱1,000,000.00; and exemplary
damages, ₱50,000.00. They also sought payment of ₱120,000.00 as attorney’s fees
and ₱80,000.00 as litigation expenses.14 On the same date, Spouses Yu filed an
Urgent Motion to Dissolve Writ of Preliminary Attachment.15 They also filed a Claim
Against Surety Bond16 in which they demanded payment from Visayan Surety and
Insurance Corporation (Visayan Surety), the surety which issued the attachment
bond, of the sum of ₱594,240.00, representing the damages they allegedly sustained
as a consequence of the wrongful attachment of their properties.

While the RTC did not resolve the Claim Against Surety Bond, it issued an
Order17 dated May 3, 1993, discharging from attachment the Toyota Ford Fierra, jeep,
and Canter delivery van on humanitarian grounds, but maintaining custody of Lot No.
11 and the passenger bus. Spouses Yu filed a Motion for Reconsideration18 which
the RTC denied.19

Dissatisfied, they filed with the CA a Petition for Certiorari,20 docketed as CA-G.R. SP
No. 31230, in which a Decision21 was rendered on September 14, 1993, lifting the
RTC Order of Attachment on their remaining properties. It reads in part:

In the case before Us, the complaint and the accompanying affidavit in support of the
application for the writ only contains general averments. Neither pleading states in
particular how the fraud was committed or the badges of fraud purportedly committed
by the petitioners to establish that the latter never had an intention to pay the
obligation; neither is there a statement of the particular acts committed to show that
the petitioners are in fact disposing of their properties to defraud creditors. x x x.

xxxx

Moreover, at the hearing on the motion to discharge the order of attachment x x x

petitioners presented evidence showing that private respondent has been extending
multi-million peso credit facilities to the petitioners for the past seven years and that
the latter have consistently settled their obligations. This was not denied by private
respondent. Neither does the private respondent contest the petitioners’ allegations
that they have been recently robbed of properties of substantial value, hence their
inability to pay on time. By the respondent court’s own pronouncements, it appears
that the order of attachment was upheld because of the admitted financial reverses
the petitioner is undergoing.

This is reversible error. Insolvency is not a ground for attachment especially when
defendant has not been shown to have committed any act intended to defraud its
creditors x x x.

For lack of factual basis to justify its issuance, the writ of preliminary attachment
issued by the respondent court was improvidently issued and should be discharged.22

From said CA Decision, Te filed a Motion for Reconsideration but to no avail. 23

Te filed with us a Petition for Review on Certiorari24 but we denied the same in a
Resolution dated June 8, 1994 for having been filed late and for failure to show that
a reversible error was committed by the CA.25 Entry of Judgment of our June 8, 1994
Resolution was made on July 22, 1994.26 Thus, the finding of the CA in its September
14, 1993 Decision in CA-G.R. SP No. 31230 on the wrongfulness of the
attachment/levy of the properties of Spouses Yu became conclusive and binding.

However, on July 20, 1994, the RTC, apparently not informed of the SC Decision,
rendered a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the Court finds that the plaintiff has established
a valid civil cause of action against the defendants, and therefore, renders this
judgment in favor of the plaintiff and against the defendants, and hereby orders the
following:

1) Defendants are hereby ordered or directed to pay the plaintiff the sum of
₱549,404.00, with interest from the date of the filing of this case (March 3, 1993);

2) The Court, for reasons aforestated, hereby denies the grant of damages to the
plaintiff;

3) The Court hereby adjudicates a reasonable attorney’s fees and litigation expenses
of ₱10,000.00 in favor of the plaintiff;

4) On the counterclaim, this Court declines to rule on this, considering that the
question of the attachment which allegedly gave rise to the damages incurred by the
defendants is being determined by the Supreme Court.

SO ORDERED.27 (Emphasis ours)

Spouses Yu filed with the RTC a Motion for Reconsideration28 questioning the
disposition of their counterclaim. They also filed a Manifestation29 informing the RTC
of our June 8, 1994 Resolution in G.R. No. 114700.

The RTC issued an Order dated August 9, 1994, which read:

xxxx

(2) With regard the counter claim filed by the defendants against the plaintiff for the
alleged improvident issuance of this Court thru its former Presiding Judge (Honorable
Emilio Leachon, Jr.), the same has been ruled with definiteness by the Supreme Court
that, indeed, the issuance by the Court of the writ of preliminary attachment appears
to have been improvidently done, but nowhere in the decision of the Supreme
Court and for that matter, the Court of Appeal’s decision which was in effect
sustained by the High Court, contains any ruling or directive or imposition, of
any damages to be paid by the plaintiff to the defendants, in other words, both
the High Court and the CA, merely declared the previous issuance of the writ of
attachment by this Court thru its former presiding judge to be improvidently issued,
but it did not award any damages of any kind to the defendants, hence, unless the
High Court or the CA rules on this, this Court coud not grant any damages by virtue
of the improvident attachment made by this Court thru its former presiding judge,
which was claimed by the defendants in their counter claim.

(3) This Court hereby reiterates in toto its Decision in this case dated July 20,
1994. 30 (Emphasis ours)
The RTC also issued an Order dated December 2, 1994,31 denying the Motion for
Reconsideration of Spouses Yu.32

In the same December 2, 1994 Order, the RTC granted two motions filed by Te, a
Motion to Correct and to Include Specific Amount for Interest and a Motion for
Execution Pending Appeal.33 The RTC also denied Spouses Yu’s Notice of
Appeal34 from the July 20, 1994 Decision and August 9, 1994 Order of the RTC.

From said December 2, 1994 RTC Order, Spouses Yu filed another Notice of
Appeal 35 which the RTC also denied in an Order36 dated January 5, 1995.

Spouses Yu filed with the CA a Petition37 for Certiorari, Prohibition and Mandamus,
docketed as CA-G.R. SP No. 36205, questioning the denial of their Notices of Appeal;
and seeking the modification of the July 20, 1994 Decision and the issuance of a Writ
of Execution. The CA granted the Petition in a Decision38 dated June 22, 1995.

Hence, Spouses Yu filed with the CA an appeal39 docketed as CA-G.R. CV No.

52246, questioning only that portion of the July 20, 1994 Decision where the RTC
declined to rule on their counterclaim for damages.40 However, Spouses Yu did not
dispute the specific monetary awards granted to respondent Te; and therefore, the
same have become final and executory.

Although in the herein assailed Decision41 dated March 21, 2001, the CA affirmed in
toto the RTC Decision, it nonetheless made a ruling on the counterclaim of Spouses
Yu by declaring that the latter had failed to adduce sufficient evidence of their
entitlement to damages.

Spouses Yu filed a Motion for Reconsideration42 but the CA denied it in the herein
assailed Resolution43 dated October 14, 2002.

Spouses Yu filed the present Petition raising the following issues:

I. Whether or not the appellate court erred in not holding that the writ of attachment
was procured in bad faith, after it was established by final judgment that there was no
true ground therefor.

II. Whether or not the appellate court erred in refusing to award actual, moral and
exemplary damages after it was established by final judgment that the writ of
attachment was procured with no true ground for its issuance.44

There is one preliminary matter to set straight before we resolve the foregoing issues.

According to respondent Te,45 regardless of the evidence presented by Spouses Yu,

their counterclaim was correctly dismissed for failure to comply with the procedure
laid down in Section 20 of Rule 57. Te contends that as Visayan Surety was not
notified of the counterclaim, no judgment thereon could be validly rendered.

Such argument is not only flawed, it is also specious.

As stated earlier, Spouses Yu filed a Claim Against Surety Bond on the same day
they filed their Answer and Urgent Motion to Dissolve Writ of Preliminary
Attachment.46 Further, the records reveal that on June 18, 1993, Spouses Yu filed
with the RTC a Motion to Give Notice to Surety.47 The RTC granted the Motion in an
Order48 dated June 23, 1993. Accordingly, Visayan Surety was notified of the pre-trial
conference to apprise it of a pending claim against its attachment bond. Visayan
Surety received the notice on July 12, 1993 as shown by a registry return receipt
attached to the records.49

Moreover, even if it were true that Visayan Surety was left in the proceedings a quo,
such omission is not fatal to the cause of Spouses Yu. In Malayan Insurance
Company, Inc. v. Salas,50 we held that "x x x if the surety was not given notice when
the claim for damages against the principal in the replevin bond was heard, then as
a matter of procedural due process the surety is entitled to be heard when the
judgment for damages against the principal is sought to be enforced against the
surety’s replevin bond."51 This remedy is applicable for the procedures governing
claims for damages

on an attachment bond and on a replevin bond are the same.52

We now proceed to resolve the issues jointly.

Spouses Yu contend that they are entitled to their counterclaim for damages as a
matter of right in view of the finality of our June 8, 1994 Resolution in G.R. No. 114700
which affirmed the finding of the CA in its September 14, 1993 Decision in CA-G.R.
SP No. 31230 that respondent Te had wrongfully caused the attachment of their
properties. Citing Javellana v. D.O. Plaza Enterprises, Inc.,53 they argue that they
should be awarded damages based solely on the CA finding that the attachment was
illegal for it already suggests that Te acted with malice when she applied for
attachment. And even if we were to assume that Te did not act with malice, still she
should be held liable for the aggravation she inflicted when she applied for attachment
even when she was clearly not entitled to it.54

That is a rather limited understanding of Javellana. The counterclaim disputed therein

was not for moral damages and therefore, there was no need to prove malice. As
early as in Lazatin v. Twaño,55 we laid down the rule that where there is wrongful
attachment, the attachment defendant may recover actual damages even without
proof that the attachment plaintiff acted in bad faith in obtaining the attachment.
However, if it is alleged and established that the attachment was not merely wrongful
but also malicious, the attachment defendant may recover moral damages and
exemplary damages as well. 56 Either way, the wrongfulness of the attachment does
not warrant the automatic award of damages to the attachment defendant; the latter
must first discharge the burden of proving the nature and extent of the loss or injury
incurred by reason of the wrongful attachment.57

In fine, the CA finding that the attachment of the properties of Spouses Yu was
wrongful did not relieve Spouses Yu of the burden of proving the factual basis of their
counterclaim for damages.

To merit an award of actual damages arising from a wrongful attachment, the

attachment defendant must prove, with the best evidence obtainable, the fact of loss
or injury suffered and the amount thereof.58 Such loss or injury must be of the kind
which is not only capable of proof but must actually be proved with a reasonable
degree of certainty. As to its amount, the same must be measurable based on specific
facts, and not on guesswork or speculation. 59 In particular, if the claim for actual
damages covers unrealized profits, the amount of unrealized profits must be
estalished and supported by independent evidence of the mean income of the
business undertaking interrupted by the illegal seizure. 60

Spouses Yu insist that the evidence they presented met the foregoing standards.
They point to the lists of their daily net income from the operation of said passenger
bus based on used ticket stubs61 issued to their passengers. They also cite unused
ticket stubs as proof of income foregone when the bus was wrongfully seized.62 They
further cite the unrebutted testimony of Josefa Yu that, in the day-to-day operation of
their passenger bus, they use up at least three ticket stubs and earn a minimum daily
income of ₱1,500.00.63

In ruling that Spouses Yu failed to adduce sufficient evidence to support their

counterclaim for actual damages, the CA stated, thus:

In this case, the actual damages cannot be determined. Defendant-appellant Josefa

Yu testified on supposed lost profits without clear and appreciable explanation.
Despite her submission of the used and unused ticket stubs, there was no evidence
on the daily net income, the routes plied by the bus and the average fares for each
route. The submitted basis is too speculative and conjectural. No reports regarding
the average actual profits and other evidence of profitability necessary to prove the
amount of actual damages were presented. Thus, the Court a quodid not err in not
awarding damages in favor of defendants-appellants.64

We usually defer to the expertise of the CA, especially when it concurs with the factual
findings of the RTC.65Indeed, findings of fact may be passed upon and reviewed by
the Supreme Court in the following instances: (1) when the conclusion is a finding
grounded entirely on speculations, surmises, or conjectures; (2) when the inference
made is manifestly mistaken, absurd, or impossible; (3) where there is a grave abuse
of discretion in the appreciation of facts; (4) when judgment is based on a
misapprehension of facts; (5) when the lower court, in making its findings, went
beyond the issues of the case and such findings are contrary to the admissions of
both appellant and appellee; (6) when the factual findings of the CA are contrary to
those of the trial court; (7) when the findings of fact are themselves conflicting; (8)
when the findings of fact are conclusions made without a citation of specific evidence
on which they are based; (9) when the facts set forth in the petition as well as in the
petitioner’s main and reply briefs are not disputed by the respondents; (10) when the
findings of fact of the lower court are premised on the supposed absence of evidence
and are contradicted by the evidence on record.66 However, the present case does
not fall under any of the exceptions. We are in full accord with the CA that Spouses
Yu failed to prove their counterclaim.

Spouses Yu’s claim for unrealized income of ₱1,500.00 per day was based on their
computation of their average daily income for the year 1992. Said computation in turn
is based on the value of three ticket stubs sold over only five separate days in
1992.67 By no stretch of the imagination can we consider ticket sales for five days
sufficient evidence of the average daily income of the passenger bus, much less its
mean income. Not even the unrebutted testimony of Josefa Yu can add credence to
such evidence for the testimony itself lacks corroboration.68

Besides, based on the August 29, 1994 Manifestation69 filed by Sheriff Alimurung, it
would appear that long before the passenger bus was placed under preliminary
attachment in Civil Case No. 4061-V-93, the same had been previously attached by
the Sheriff of Mandaue City in connection with another case and that it was placed in
the Cebu Bonded Warehousing Corporation, Cebu City. Thus, Spouses Yu cannot
complain that they were unreasonably deprived of the use of the passenger bus by
reason of the subsequent wrongful attachment issued in Civil Case No. 4061-V-93.
Nor can they also attribute to the wrongful attachment their failure to earn income or
profit from the operation of the passenger bus.
Moreover, petitioners did not present evidence as to the damages they suffered by
reason of the wrongful attachment of Lot No. 11.

Nonetheless, we recognize that Spouses Yu suffered some form of pecuniary loss

when their properties were wrongfully seized, although the amount thereof cannot be
definitively ascertained. Hence, an award of temperate or moderate damages in the
amount of ₱50,000.00 is in order.70

As to moral and exemplary damages, to merit an award thereof, it must be shown that
the wrongful attachment was obtained by the attachment plaintiff with malice or bad
faith, such as by appending a false affidavit to his application.71

Spouses Yu argue that malice attended the issuance of the attachment bond as
shown by the fact that Te deliberately appended to her application for preliminary
attachment an Affidavit where Sy perjured himself by stating that they had no intention
to pay their obligations even when he knew this to be untrue given that they had
always paid their obligations; and by accusing them of disposing of their properties to
defraud their creditors even when he knew this to be false, considering that the
location of said properties was known to him.72

The testimony of petitioner Josefa Yu herself negates their claim for moral and
exemplary damages. On cross-examination she testified, thus:

Q: Did you ever deposit any amount at that time to fund the check?

A: We requested that it be replaced and staggered into smaller amounts.

COURT: Did you fund it or not?

Atty. Ferrer: The three checks involved?

Atty. Florido: Already answered. She said that they were not able to fund it.

Atty. Ferrer: And as a matter of fact, you went to the bank to close your account?

A: We closed account with the bank because we transferred the account to another
bank.

Q: How much money did you transfer from that bank to which the three checks were
drawn to this new bank?

A: I don’t know how much was there but we transferred already to the Solid Bank.

Q: Who transferred?

A: My daughter, sir.73 (Emphasis ours)

Based on the foregoing testimony, it is not difficult to understand why Te concluded

that Spouses Yu never intended to pay their obligation for they had available funds in
their bank but chose to transfer said funds instead of cover the checks they issued.
Thus, we cannot attribute malice nor bad faith to Te in applying for the attachment
writ. We cannot hold her liable for moral and exemplary damages.

As a rule, attorney’s fees cannot be awarded when moral and exemplary damages
are not granted, the exception however is when a party incurred expenses to lift a
wrongfully issued writ of attachment.1awphi1.net74 Without a doubt, Spouses Yu
waged a protracted legal battle to fight off the illegal attachment of their properties
and pursue their claims for damages. It is only just and equitable that they be awarded
reasonable attorney’s fees in the amount of ₱30,000.00.

In sum, we affirm the dismissal of the counterclaim of petitioners Spouses Yu for

actual, moral, and exemplary damages. However, we grant them temperate damages
and attorney’s fees.

WHEREFORE, the petition is partly GRANTED. The March 21, 2001 Decision of the
Court of Appeals is AFFIRMED with the MODIFICATION that petitioners’
counterclaim is PARTLY GRANTED. Gregorio Yu and Josefa Yu are awarded
₱50,000.00 temperate damages and ₱30,000.00 attorney’s fees.

No costs.

SO ORDERED.

5. G.R. No. 193821, November 23, 2015

PHIL-AIR CONDITIONING CENTER, Petitioner, v. RCJ LINES AND ROLANDO

ABADILLA, JR., Respondent.

DECISION

BRION, J.:

Phil-Air Conditioning Center (Phil-Air) filed this petition for review on certiorari1 to
assail the September 15, 2010 decision2 of the Court of Appeals (CA) in CA-G.R. CV
No. 85866.

The CA affirmed the September 8, 2004 decision of the Regional Trial Court (RTC),
Branch 119 of Pasay City, dismissing Phil-Air's complaint for sum of money with
prayer for a writ of preliminary attachment.3

Designated as Acting Member in lieu of Associate Justice Antonio T. Carpio, per

Special Order No. 2282 dated November 13, 2015.

Designated as Acting Chairperson in lieu of Associate Justice Antonio T. Carpio, per

Special Order No. 2281 dated November 13, 2015.

Antecedents

On various dates between March 5, 1990, and August 29, 1990, petitioner Phil-Air
sold to respondent RCJ Lines four Carrier Paris 240 air-conditioning units for buses
(units). The units included compressors, condensers, evaporators, switches, wiring,
circuit boards, brackets, and fittings.4

The total purchases amounted to P1,240,000.00 as shown on a sales invoice dated

November 5, 1990.5RCJ Lines paid P400,000.00, leaving a balance of P840,000.00.6

RCJ Lines accepted the delivery of the units, which Phil-Air then installed after they
were inspected by RCJ Lines president Rolando Abadilla, Sr.7

Phil-Air allegedly performed regular maintenance checks on the units pursuant to the
one-year warranty on parts and labor. After some months from installation, Phil-Air
supposedly boosted the capacity of the units by upgrading them to the Carrier Paris
280 model.8 It also purportedly repaired the control switch panel of one of the units
for an additional cost of P60,000.00.9

RCJ Lines issued three post-dated checks in favor of Phil-Air to partly cover the
unpaid balance:chanRoblesvirtualLawlibrary

Check No.Amount Post-dated

479759 Php 244,998.00
February 28, 1992
479760 Php 244,998.00
March 31, 1992
479761 Php 244,998.00
April 30, 1992
TOTAL Php 734,994.00
cralawlawlibrary

All the post-dated checks were dishonored when Phil-Air subsequently presented
them for payment. Check No. 479759 was returned because it was drawn against
insufficient funds, while Check Nos. 479760 and 479761 were returned because
payments were stopped.10

Before presenting the third check for payment, Phil-Air sent a demand letter11 to
Rolando Abadilla, Sr. on April 7, 1992, asking him to fund the post-dated checks.

On July 17, 1996, Phil-Air demanded payment from Rolando Abadilla, Jr., for the total
amount of P734,994.00 plus interest, and attorney's fees equivalent to 25% of the
amount due. Phil-Air warned that it would take court action if payment is not made
within five days from demand.12

In view of the failure of RCJ Lines to pay the balance despite demand, Phil-Air filed
on April 1, 1998 the complaint13 for sum of money with prayer for the issuance of a
writ of preliminary attachment.14 Phil-Air sought to recover from RCJ
Lines:chanRoblesvirtualLawlibrary

a)The total amount of P840,000.00 exclusive of interest for the unpaid delivered
air-conditioning units;
b)The amount of P60,000.00 for the unpaid repair services;
c)The total interest in the amount of P756,000.00 (P840,000.00 x 12% x 7 years +
P60,000.00 x 12% x 7 years);
d)The sum equivalent to 25% of the total amount due as attorney's fees, plus
P3,000.00 per court appearance; and
e)Costs of the suit.

In its answer with compulsory counterclaim,15RCJ Lines admitted that it purchased

the units in the total amount of PI,240,000.00 and that it had only paid P400,000.00.
It refused to pay the balance because Phil-Air allegedly breached its warranty.16

RCJ Lines averred that the units did not sufficiently cool the buses despite repeated
repairs. Phil-Air purportedly represented that the units were in accord with RCJ Lines'
cooling requirements as shown in Phil-Air's price quotation17 dated August 4, 1989.
The price quotation provided that full payment should be made upon the units'
complete installation. Complete installation, according to RCJ Lines, is equivalent to
being in operational condition.

As it turned out, the Carrier Paris 240 model was not suited to the 45 to 49-seater
buses operated by RCJ Lines. The units, according to RCJ Lines, were defective and
did not attain full operational condition.18

Further, RCJ Lines claimed that it was also entitled to be reimbursed for costs and
damages occasioned by the enforcement of the writ of attachment.

RCJ Lines thus urged the RTC to order Phil-Air to pay (1) the replacement costs of
the units; (2) lost profits for nine days from April 22 to April 30, 1999, resulting from
the attachment of its two buses amounting to P207,000.00;19 and (3) P64,390.00 for
the counter-bond premium, moral damages, exemplary damages and attorney's fees.

The RTC Ruling

The RTC granted the application for the issuance of a writ of preliminary attachment
after Phil-Air posted an attachment bond in the amount of P1,656,000.00.20 Two
buses of RCJ Lines were attached pursuant to the writ dated December 18,
1998.21 The writ was executed on April 21, 1999.22 The attachment, however, was
later lifted when the RTC granted RCJ Lines' urgent motion to discharge the writ of
attachment.23 RCJ Lines posted a counter-bond in the same amount as the
attachment bond.24

Ruling on the merits after trial, the RTC found that Phil-Air was guilty of laches and
estopped from pursuing its claim. It also sustained the allegation that Phil-Air had
breached its warranty.

The dispositive portion of the RTC judgment reads:chanRoblesvirtualLawlibrary

WHEREFORE, judgment is hereby rendered as follows:

A. Dismissing the complaint of plaintiff for lack of merit.

B. Directing the plaintiff to pay the defendants the amount of PI00,000.00

as attorney's fees as they were forced to spend and hire a lawyer to litigate for seven
(7) years in this Court the unfounded and invalid cause of action of plaintiff.

C. Directing the plaintiff to pay P82,274.00 as refund of the premium xxx

for defendant's counter-bond for the release of the two buses which were attached
per Writ of Attachment of this Court.

D. Directing the plaintiff to pay P216,000.00 for the lost profits of

defendants for the attachment of their two buses as there was no fraud in the
transaction of the parties and plaintiff had no sufficient cause of action for the issuance
of the writ of attachment.

E. Dismissing all other claims of defendants as stated in their counter-

claims.
F. Costs against plaintiff. SO ORDERED.25

cralawlawlibrary

The CA Ruling
The CA affirmed the RTC decision in toto.26

First, the CA held that Phil-Air's cause of action was barred by laches.27

The CA concluded that "Phil-Air's inaction on RCJ Lines' repeated demands and
inexplicable failure to comply with its obligations had certainly led the latter to believe
[Phil-Air] was no longer interested in pursuing any claim" and that "[Phil-Air] had been
conspicuously silent for so long a time which is disturbingly unusual for one claiming
to have been aggrieved by another."28

Second, the CA held that Phil-Air breached its warranty. The price quotation
supposedly warranted that the Carrier Paris 240 model was suitable for 50-60-
passenger coaches and especially recommended for operation in the tropics. 29

The CA gave credence to the testimony of the country manager of Carrier

Refrigeration Philippines Inc. (Carrier Philippines) who testified that the Carrier Paris
240 model is suited for buses with a maximum seating capacity of up to 35 persons;
beyond that, the units would not function properly.30 The CA also found convincing
the testimonies of two RCJ Lines employees who testified that they experienced
firsthand the inefficient cooling of the Carrier Paris 240.31

Relying on these testimonies, the CA found that the four units did not meet the cooling
requirements of RCJ Lines.32

Third, the CA ordered Phil-Air to reimburse the premium on the counter-bond

amounting to P82,274.00 since the writ was improvidently issued.

Fourth, the CA affirmed the finding of the RTC that RCJ Lines suffered losses when
the RTC attached two of its buses.

The RTC and the CA relied on the testimony of Rolando Abadilla, Jr., who claimed to
be in charge of the daily operations of RCJ Lines. He testified that they suffered losses
for nine days as a result of the enforcement of the writ of preliminary attachment. The
lost profits purportedly amounted to P227,280.00. To support this claim, RCJ Lines
adduced as evidence the summary of the daily cash collections33 from the buses that
were not attached, on various dates in August and September 2000.34

Finally, the CA sustained the award of attorney's fees for PI 00,000.00 in favor of RCJ
lines for having been compelled to litigate.

The Petition

First, Phil-Air argues that the doctrine of laches is not applicable when the action is
filed within the prescriptive period. Laches, being a doctrine of equity, should only be
applied to fill a void in the law.35

Phil-Air asserts that it filed the complaint on April 1, 1998, or less than eight years
from the execution of the sales invoice dated November 5, 1990. The complaint was
thus filed within the ten-year prescriptive period for actions based upon a written
contract.

Second, Phil-Air denies that it breached its warranty.

It maintains that all the units were brand new and were accepted by RCJ Lines in
good, working, and operational condition. The units were inspected, tested, and
approved by then RCJ Lines president, Rolando Abadilla, Sr., as proved by the
delivery receipts in which he affixed his signature.36

Phil-Air further avers that it was not notified of the alleged breach of warranty.
Assuming it breached its warranty, Phil-Air submits that the action to enforce the
warranty had already prescribed.

Third, Phil-Air rejects the CA's order that it must reimburse the premium payment for
the counter-bond and the alleged losses suffered by RCJ Lines. The attachment bond
should be answerable for damages, if any.

Respondent's Comment

RCJ Lines reiterates all the arguments it raised in its counterclaim. It admits that it did
not pay the balance of the purchase price.37 It maintains, however, that it was justified
in doing so because Phil-Air breached its warranty. It insists that Phil-Air was guilty of
laches because it waited for eight years to file the collection case. 38

Issues

Based on the foregoing, the Court resolves the following

issues:chanRoblesvirtualLawlibrary

(1)
Whether the claim of Phil-Air was barred by laches;
(2)
Whether Phil-Air should reimburse RCJ Lines for the counter- bond premium and its
alleged unrealized profits;
(3)
Whether RCJ Lines proved its alleged unrealized profits arising from the enforcement
of the preliminary writ of attachment; and
(4)
Whether RCJ Lines proved that Phil-Air breached its warranty.

Our Ruling

We grant the petition.

Phil-Air's claim is not

barred by laches.

In general, there is no room to apply the concept of laches when the law provides the
period within which to enforce a claim or file an action in court. Phil-Air's complaint for
sum of money is based on a written contract of sale. The ten-year prescriptive period
under Article 1144 of the Civil Code thus applies.39

In the present case, both parties admit the existence and validity of the contract of
sale. They recognize that the price quotation dated August 4, 1989, contained the
terms and conditions of the sale contract. They also agree that the price and
description of the units were indicated on the sales invoice dated November 5, 1990.
The sales were in fact consummated on various dates between March 5, 1990 and
August 29, 1990, as proved by several delivery receipts.

The Court therefore can resolve whether Phil-Air's action to enforce the contract was
timely filed even in the apparent absence of a formal or notarized deed of sale.40 More
significantly, Rolando Abadilla, Jr., admitted under oath that the sale was in writing.41

We note that Phil-Air filed the complaint with the RTC on April 1, 1998. Counting from
the date of the sales invoice, or from the date of the delivery receipts, or even from
the date of the price quotation, it is clear that the complaint was filed within the ten-
year prescriptive period. Contrary to the CA's ruling, laches does not apply.

Laches is defined as the failure or neglect for an unreasonable and unexplained

length of time, to do that which by exercising due diligence, could or should have been
done earlier; it is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it.42

While the CA correctly held that prescription and estoppel by laches are two different
concepts, it failed to appreciate the marked distinctions between the two concepts.

On the one hand, the question of laches is addressed to the sound discretion of the
court.43 The court resolves whether the claimant asserted its claim within a
reasonable time and whether its failure to do so warrants the presumption that it
either has abandoned it or declined to assert it. The court determines the claimant's
intent to assert its claim based on its past actions or lack of action. After all, what is
invoked in instances where a party raises laches as a defense is the equity jurisdiction
of the court.44

On the other hand, if the law gives the period within which to enforce a claim or file
an action in court, the court confirms whether the claim is asserted or the action is
filed in court within the prescriptive period. The court determines the claimant's
intent to assert its claim by simply measuring the time elapsed from the proper
reckoning point (e.g., the date of the written contract) to the filing of the action or
assertion of the claim.

In sum, where the law provides the period within which to assert a claim or file an
action in court, the assertion of the claim or the filing of the action in court at any
time within the prescriptive period is generally deemed reasonable, and thus,
does not call for the application of laches. As we held in one case, unless reasons
of inequitable proportions are adduced, any imputed delay within the prescriptive
period is not delay in law that would bar relief.45

In Agra, et al. v. Philippine National Bank,46 we held that "[l]aches is a recourse in

equity [and] is applied only in the absence, never in contravention, of statutory law.
Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive
period mandated by the Civil Code."

Agra involved an action for collection of a sum of money arising from an unpaid loan.
In resisting payment, the sureties invoked laches and maintained that the creditor-
bank with full knowledge of the deteriorating financial condition of the principal debtor
did not take steps to collect from the latter while still solvent. The sureties thus argued
that the creditor-bank's action was barred by laches.

We found that the sureties failed to prove all the elements of laches, namely:
(1)conduct on the part of the defendant or one under whom he claims, giving rise to
the situation of which complaint is made and for which the complainant seeks a
remedy;
(2)delay in asserting the complainant's right, the complainant having had knowledge
or notice of defendant's conduct and having been afforded an opportunity to
institute a suit;
 (3)lack of knowledge or notice on the part of the defendant that the complainant
would assert the right on which he bases his claim; and
(4)injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held barred.47
cralawlawlibrary

Examining these elements, we found that only the first element was present. There
was no delay (second element) because the creditor-bank filed the action within the
ten-year prescriptive period. Since the claim was timely filed, the defendants did not
lack notice that the creditor-bank would assert its claim (third element). Nor was the
assertion of the right deemed injurious to the defendants (fourth element); the
creditor-bank could assert its claim at any time within the prescriptive period.

The same conclusion holds true in the present case; not all the elements of laches
are present. To repeat, Phil-Air filed the complaint with the RTC on April 1, 1998. The
time elapsed from August 4, 1989 (the date of the price quotation, which is the earliest
possible reckoning point), is eight years and eight months, well within the ten-year
prescriptive period. There was simply no delay (second element of laches) where
Phil-Air can be said to have negligently slept on its rights.

More significantly, there is no basis for laches as the facts of the present case do not
give rise to an inequitable situation that calls for the application of equity and the
principle of laches.48

Phil-Air is not directly liable

for the counter-bond premium and
RCJ Lines' alleged unrealized profits.

The CA and the RTC erred when it held Phil-Air directly liable for the counter-bond
premium and RCJ Lines' alleged unrealized profits. Granting that RCJ Lines suffered
losses, the judgment award should have been first executed on the attachment bond.
Only if the attachment bond is insufficient to cover the judgment award can Phil-Air
be held liable.49

We explain below the purpose of a preliminary attachment, the procedure in obtaining

it, and the manner of having it lifted.

A writ of preliminary attachment is a provisional remedy issued by the court where an

action is pending to be levied upon the property or properties of the defendant. The
property is held by the sheriff as security for the satisfaction of whatever judgment
that might be secured by the attaching party against the defendant. 50

The grant of the writ is conditioned not only on the finding of the court that there exists
a valid ground for its issuance.51 The Rules also require the applicant to post a bond.

Section 4 of Rule 57 of the Rules of Civil Procedure (Rules) provides that "the party
applying for the order must...give a bond executed to the adverse party in the amount
fixed by the court, in its order granting the issuance of the writ, conditioned that the
latter will pay all the costs that may be adjudged to the adverse party and all
damages that he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto."
The enforcement of the writ notwithstanding, the party whose property is attached is
afforded relief to have the attachment lifted.

There are various modes of discharging an attachment under Rule 57, viz.: (1) by
depositing cash or posting a counter-bond under Section 12;52 (2) by proving that the
attachment bond was improperly or irregularly issued or enforced, or that the bond is
insufficient under Section 13;53 (3) by showing that the attachment is excessive under
Section 13; and (4) by claiming that the property is exempt from execution under
Section 2.54

RCJ Lines availed of the first mode by posting a counter-bond.

Under the first mode, the court will order the discharge of the attachment after (1) the
movant makes a cash deposit or posts a counter-bond and (2) the court hears the
motion to discharge the attachment with due notice to the adverse party. 55

The amount of the cash deposit or counter-bond must be equal to that fixed by the
court in the order of attachment, exclusive of costs. The cash deposit or counter-bond
shall secure the payment of any judgment that the attaching party may recover in the
action.56

The filing of a counter-bond to discharge the attachment applies when there has
already been a seizure of property by the sheriff and all that is entailed is the
presentation of a motion to the proper court, seeking approval of a cash or surety
bond in an amount equivalent to the value of the property seized and the lifting of the
attachment on the basis thereof. The counter-bond stands in place of the property
so released.57

To be clear, the discharge of the attachment by depositing cash or posting a counter-

bond under Section 12 should not be confused with the discharge sanctioned under
Section 13. Section 13 speaks of discharge on the ground that the writ was improperly
or irregularly issued or enforced, or that the attachment bond is insufficient, or that
the attachment is excessive.

To reiterate, the discharge under Section 12 takes effect upon posting of a counter-
bond or depositing cash, and after hearing to determine the sufficiency of the cash
deposit or counter-bond. On the other hand, the discharge under Section 13 takes
effect only upon showing that the plaintiffs attachment bond was improperly or
irregularly issued, or that the bond is insufficient. The discharge of the attachment
under Section 13 must be made only after hearing.58

These differences notwithstanding, the discharge of the preliminary attachment either

through Section 12 or Section 13 has no effect on and does not discharge the
attachment bond. The dissolution of the preliminary attachment does not result
in the dissolution of the attachment bond. Justice Narvasa, writing his separate
opinion in one case, explained:chanRoblesvirtualLawlibrary
The dissolution of the preliminary attachment upon security given [Section 12],
or a showing of its irregular or improper issuance [Section 13], does not of course
operate to discharge the sureties on plaintiffs 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." Hence, until that determination is
made, as to the applicant's entitlement to the attachment, his bond must stand and
cannot be withdrawn.59[emphasis and underscoring supplied, citations
omitted]cralawlawlibrary

In the present case, the RTC lifted the preliminary attachment after it heard RCJ Lines'
urgent motion to discharge attachment and the latter posted a counter-bond. The RTC
found that there was no fraud and Phil-Air had no sufficient cause of action for the
issuance of the writ of the attachment. As a consequence, it ordered Phil-Air to refund
the premium payment for the counter-bond and the losses suffered by RCJ Lines
resulting from the enforcement of the writ. The CA affirmed the RTC ruling in toto.

We reverse the CA and RTC rulings.

As discussed above, it is patent that under the Rules, the attachment bond answers
for all damages incurred by the party against whom the attachment was issued. 60

Thus, Phil-Air cannot be held directly liable for the costs adjudged to and the damages
sustained by RCJ Lines because of the attachment. Section 4 of Rule 57 positively
lays down the rule that the attachment bond 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."

The RTC, instead of declaring Phil-Air liable for the alleged unrealized profits and
counter-bond premium, should have ordered the execution of the judgment award on
the attachment bond. To impose direct liability to Phil-Air would defeat the purpose of
the attachment bond, which was not dissolved despite the lifting of the writ of
preliminary attachment.

The order to refund the counter-bond premium is likewise erroneous. The premium
payment may be deemed a cost incurred by RCJ Lines to lift the attachment. Such
cost may be charged against the attachment bond.

RCJ Lines failed to prove its

alleged unrealized profits.

In finding that RCJ Lines suffered damages because of the attachment, the RTC and
the CA gave complete credence to the testimony of Rolando Abadilla, Jr. He claimed
that RCJ Lines lost P216,000.00 in unrealized profits for nine days when the buses
were wrongfully seized.

To arrive at this amount, RCJ Lines alleged that a bus travelling from Manila to Ilocos
and vice versa earned an average daily income of P12,000.00. To back this claim,
RCJ Lines prepared a summary of the daily cash collections of its nine buses on
certain days of August and September 2000.

The summary of daily cash collections apparently prepared by one RCJ Lines
employee was in turn based on the reports of the dispatchers indicating the number
of passengers and the amount of fare collected on a particular trip. Except for one
bus which travelled round-trip on August 22-23, 2000, the daily cash collections all
pertained to the round-trip of eight buses on September 2-3, 2000.

These documents are insufficient to prove actual damages.

In Spouses Yu v. Ngo Yet Te,61 we held that if the claim for actual damages covers
unrealized profits, the amount of unrealized profits must be established and supported
by independent evidence of the mean income of the business undertaking interrupted
by the illegal seizure.

We explained in Spouses Yu that to merit an award of actual damages arising from a

wrongful attachment, the attachment defendant must prove, with the best evidence
obtainable, the fact of loss or injury suffered and the amount thereof. Such loss or
injury must be of the kind which is not only capable of proof but must actually be
proved with a reasonable degree of certainty. As to its amount, the same must be
measurable based on specific facts, and not on guesswork or speculation.62

Spouses Yu is on all fours with the present dispute because it also involved a claim
for actual damages arising from the illegal attachment of the claimant's properties,
one of which was a passenger bus.

The claimants in that case attempted to prove actual damages by computing the daily
average income of its bus operation based on the value of three ticket stubs sold over
five separate days. The claimants likewise cited unused ticket stubs as proof of
income foregone when the bus was wrongfully seized.

We found the claimant's evidence insufficient to prove actual damages. While we

recognized that they suffered some damages, we held that "[b]y no stretch of the
imagination can we consider ticket sales for five days sufficient evidence of the
average daily income of the passenger bus, much less its mean income. Not even
the unrebutted testimony of [the claimant] can add credence to such evidence for the
testimony itself lacks corroboration."63

Similarly, the evidence adduced by RCJ Lines to show actual damages fell short of
the required proof. Its average daily income cannot be derived from the summary of
daily cash collections from only two separate occasions, i.e., August 22-23 and
September 2-3, 2000. The data submitted is too meager and insignificant to conclude
that the buses were indeed earning an average daily income of P12,000.00.

More significant, the person who prepared the unsigned summary of daily cash
collections was not presented before the RTC to verify and explain how she arrived
at the computation. The dispatchers who prepared the collection reports were likewise
not presented; some of the reports were also unsigned. While the summary was
approved by Rolando Abadilla, Jr., his testimony on the alleged unrealized profits was
uncorroborated and self-serving.

Nonetheless, we recognize that RCJ Lines suffered some form of pecuniary loss
when two of its buses were wrongfully seized, although the amount cannot be
determined with certainty.

We note that in its prayer for the issuance of the writ of preliminary attachment, Phil-
Air alleged that RCJ Lines was guilty of fraud in entering into the sale transaction. A
perusal of the record, however, would show that Phil-Air failed to prove this bare
assertion. This justifies an award of temperate or moderate damages in the amount
of Php 50,000.00.64

The allegation of breach

of express warranty was
notproved.
We are not convinced that Phil-Air breached its express warranty. RCJ Lines had no
right to recoupment in diminution of the price.65

The Civil Code defines an express warranty as any affirmation of fact or any promise
by the seller relating to the thing if the natural tendency of such affirmation or promise
is to induce the buyer to purchase the same, and if the buyer purchases the thing
relying thereon.66

The question whether there was a breach of warranty is factual. Consequently, the
Court should rely on the factual findings of the CA and RTC, which
are generally deemed binding and conclusive to the Court. More so in a Rule 45
petition where only questions of law can be raised. Further, factual findings of the
RTC, when affirmed by the CA, are conclusive on the Court when supported by the
evidence on record.67

The evidence on record does not support the findings of the CA and RTC.

We emphasize that there are recognized cases where the Court can disregard the
factual findings of the RTC and CA. In these cases, the Court draws its own
conclusion based on the evidence on record.68

In this case, Phil-Air denies that it breached its express warranty and strongly argues
that the CA and RTC completely ignored its evidence while it sustained the bare
allegations of Rolando Abadilla, Jr.

We agree with Phil-Air. Our examination of the record reveals that the RTC and CA
manifestly overlooked certain relevant facts not disputed by the parties which, if
properly considered, would justify a different conclusion.

To prove that Phil-Air breached its express warranty, RCJ Lines presented the
following testimonial and documentary evidence:

Rolando Abadilla, Jr. who claimed that their employees reported the defect of the
units to him and to his late father. His late father allegedly demanded Phil-Air to repair
the defects. But despite repeated verbal demands, Phil-Air purportedly failed to
comply with its one-year warranty on parts and labor.

Two RCJ Lines employees who claimed that they experienced firsthand the inefficient
cooling of the units.

The general manager of Carrier Philippines who testified that the Carrier 240 model
was not suitable for buses with a capacity of more than 35 passengers, like those
operated by RCJ Lines.

Summary of expenses, sales invoices, provisional receipts, and statements of

accounts issued by other suppliers and shops (Car Cool Philippines, Inc. and Sta.
Rosa Motor Works, Inc.) engaged by RCJ Lines during the period of warranty to repair
the defective units, amounting to P208,132.00
Commercial invoice for the $68,780.00 US Dollars worth of new units bought from
another supplier after the lapse of warranty to replace the units supplied by Phil-Air.69

In defense, Phil-Air claimed that it regularly checked the units and that during the
effectivity of the one-year warranty, RCJ Lines never once complained of defects; if
there were defects, the latter should have demanded Phil-Air to perform its warranty
in writing; the reason it had no proof it made repairs and delivered spare parts was
precisely because it was not apprised of any defect; and that the testimonies of the
RCJ Lines witnesses were self-serving.70

The RTC noted that Phil-Air did not present evidence to rebut the allegation of
breach.71 Phil-Air instead opposed the admission of the documentary evidence of
RCJ Lines for failing to comply with the best evidence rule. 72

We hold that the evidence that RCJ Lines submitted failed to prove breach of express
warranty.

As to the testimonial evidence

The testimonies of the RCJ Lines witnesses were self-serving and uncorroborated.

The claim of Rolando Abadilla, Jr. that his late father verbally communicated the
defects of the units to Phil-Air was hearsay and not admissible.73 He admitted that he
was not around when his father phoned Phil-Air to demand the repair of the units. He
likewise admitted that they did not attempt to personally meet with nor send a letter
to Phil-Air to demand the repairs.74

More tellingly, Rolando Abadilla, Jr. admitted that they issued the post-dated checks
to Phil-Air to cover the balance of the purchase price sometime in 1992, viz-

Q.

Mr. Witness is it not in this case that you personally issued three (3) checks draws
against the name Rolando Abadilla and Susan or Rolando Abadilla, and this was
some time in 1992?
A.

Yes, Sir.

Q.

And you confirm that these were all dated March 31, April 30 and February 29, 1992?
A.

Yes, Sir.

Q.

Despite your claim that these air-conditioning units were defective and despite your
claim that these air-conditioning units were not repaired by plaintiff, hence you
referred them for repair to other companies who are not authorized, do you still affirm
the fact that you issued the postdated checks, the total of which is exactly the balance
of the purchase price as quoted in the price quotation, yes or no? [Emphasis supplied]
A.

Yes, Sir.75
We note that the alleged repairs made by Car Cool Philippines, Inc. and Sta. Rosa
Motor Works, Inc. started in 1991.76 If RCJ Lines knew as early as 1991 that the units
were defective and that Phil-Air refused to perform its warranty despite repeated
demands, we wonder why RCJ Lines still issued the post-dated checks in 1992 to
cover the balance of the purchase price.

The record also reveals that Car Cool Philippines, Inc. and Sta. Rosa Motor Works,
Inc. were not authorized by the Carrier brand to repair the units, a fact not denied by
Rolando Abadilla, Jr.77 It was likewise established that some of the parts/items
purportedly provided by the other suppliers were expressly excluded from the list of
parts/items that Phil-Air was supposed to supply, again, a fact admitted by Rolando
Abadilla, Jr.78 It was likewise unclear that the repairs made by the other service
providers were done on the same buses on which the subject units were installed. 79

We also find glaring the fact that RCJ Lines did not respond to the April 7, 1992
demand letter sent by Phil-Air, viz. -
Dear Mr. Abadilla,

I have been trying to get in touch with you and Junjun the past several weeks but
have been unsuccessful xxx The two checks that you used to partly pay for the four
units bus air conditions [sic] were all dishonored by the bank [because they were
drawn against insufficient funds].

We are but a small company and our cash flow was adversely affected by the return
of the checks, xxx It would mean so much if you could somehow help us replenished
these checks, xxx We look forward to hearing from you Respectfully, we remain.

Yours truly,
Ricardo Cokieng
cralawlawlibrary

If RCJ Lines was aware all along that the units were defective and that Phil-Air refused
to heed its verbaldemands to make repairs, we do not understand why it ignored Phil-
Air's written demand to replenish the returned checks. We also find it unthinkable that
RCJ Lines would spend for parts and services from other suppliers and
providers, during the period of warranty, without demanding first in writing that Phil-
Air make good its express warranty.

In this regard, we note that the right of the buyer to the recoupment in the diminution
of the price under Article 1599 (1) should be read together with Article 1586 of the
Civil Code,80 which provides that:chanRoblesvirtualLawlibrary

Art. 1586. In the absence of express or implied agreement of the parties, acceptance
of the goods by the buyer shall not discharge the seller from liability in damages or
other legal remedy for breach of any promise or warranty in the contract of sale.
But, if, after acceptance of the goods, the buyer fails to give notice to the seller
of the breach in any promise of warranty within a reasonable time after the
buyer knows, or ought to know of such breach, the seller shall not be liable
therefor.cralawlawlibrary

The obvious purpose of the notice is to protect the seller against belated claims. If the
seller is not duly notified, he is prevented from making prompt investigation to
determine the cause and extent of his liability.81 Consequently, he is barred from
repairing or rectifying whatever defects the goods sold had.

RCJ Lines failed to convince us that it notified Phil-Air of the breach of warranty within
a reasonable time. In truth, we are not convinced at all that it had even notified Phil-
Air. Although Article 1586 does not require that the notice to the seller be in writing,
we cannot accept the claim of Rolando Abadilla, Jr. that his late father verbally notified
Phil-Air of the defects, without violating the rule on hearsay.

Also, the testimonies of the two RCJ Lines employees that they experienced firsthand
the insufficient cooling of the units were self-serving and uncorroborated by a
disinterested party.

Further, the reliance of the CA and the RTC on the testimony82 of the general
manager of Carrier Philippines was misplaced and unwarranted. It appears that the
computation of the cooling efficiency of the Carrier 240 model was merely theoretical,
based only on the specifications of the model and not on actual test, viz. —
Q:

Have you seen RCJ Bus?

A:

I did see.
xxx

Q:

With respect to car aircon Paris 240 installed, have you seen this bus?
A:

No, I did not.

Q:

Mr. Witness, this case involves a particular product a brand of the product that you
did not try [sic] but specifically Paris 240. Have you seen it personally, the four units
installed?
A:

No I did not.
Q:

Even one unit?

The meat of his testimony centered not on the subject units but on the cooling capacity
of the product that Carrier Philippines was then selling in the market. In fact, he
admitted that his role in the company had nothing to do with repairs of air-conditioning
units.

On this basis, we do not find his testimony conclusive as to the alleged breach of
express warranty. It was too tangential and speculative. We note that he was not even
presented as an expert witness. Even if we assume that the computation of the
cooling capacity of the Carrier 240 was accurate, RCJ Lines still failed to prove that it
duly and promptly informed Phil-Air of the alleged breach.
On the documentary evidence

The pieces of documentary evidence submitted by RCJ Lines to prove breach of

express warranty failed to comply with the best evidence rule. It is established on
record that the sales invoices and provisional receipts issued by the other suppliers
and service providers were mere photocopies.83 The counsel of Phil-Air objected to
the admission of the secondary evidence without proof that the originals were indeed
lost. The counsel for RCJ Lines requested that the evidence be conditionally accepted
and marked, which the trial court granted.

Nowhere on record, however, was it ever established that the originals were later
submitted. It was also not shown that the originals were indeed lost, which could have
justified the submission of secondary evidence.84 The RTC simply ignored this fact
when it finally decided the case.

Conclusion

Based on the foregoing analysis, we find- that RCJ Lines failed to prove its allegation
that Phil-Air breached its express warranty. RCJ Lines is thus held liable to pay the
balance of the purchase price plus interest and attorney's fees.85 RCJ Lines, however,
is entitled to temperate damages as a result of the wrongful attachment of its buses
and to the refund of the premium payment for the counter-bond.

WHEREFORE, in view of the foregoing, we hereby GRANT the petition. The

September 15, 2010 decision of the Court of Appeals in CA-G.R. CV No. 85866
is REVERSED and SET ASIDE.

ACCORDINGLY, RCJ Lines is DIRECTED to pay:

1. Eight Hundred Forty Thousand Pesos (P840,000.00) representing the

unpaid balance of the purchase price;
2. Interest of twelve percent (12%) per annum on the unpaid balance to be
computed from November 5, 199086 until June 30, 2013;
3. Interest of six percent (6%) per annum on the unpaid balance to be
computed from July 1, 2013,87 until fully paid;
4. Attorney's fees in the fixed amount of P30,000.00.88

The total amount to be recovered shall further be subject to the legal interest rate of
six percent (6 %) per annum from the finality of this decision until fully paid. 89

The attachment bond posted by Phil-Air shall be levied upon to satisfy the P50,000.00
temperate damages awarded to RCJ Lines and the P82,274.00 refund of the counter-
bond premium.

SO ORDERED.chanroblesvirtuallawlibrary

6.
.R. No. 212025 July 1, 2015

EXCELLENT QUALITY APPAREL, INC., Petitioners,

vs.
VISAYAN SURETY & INSURANCE CORPORATION, and FAR EASTERN SURETY
& INSURANCE CO., INC.,Respondent.

DECISION

MENDOZA, J.:

The present case involves the wrongful attachment and release of the petitioner's
funds to the adverse party and its plight to recover the same. It seems that when
misfortune poured down from the skies, the petitioner received a handful. The scales
of justice, however, do not tilt based on chance; rather on the proper application of
law, jurisprudence and justice.

This is a petition for review on certiorari seeking to reverse and set aside the October
21, 2013 Decision1 and the April 1, 2014 Resolution2 of the Court of Appeals (CA), in
CA-G.R. CV No. 95421, which affirmed the January 15, 20103 and May 19,
20104 Orders of the Regional Trial Court of Manila, Branch 32 (RTC), in Civil Case
No. 04-108940.

The Facts

On March 26, 1996, petitioner Excellent Quality Apparel, Inc. (petitioner), then
represented by Max L.F. Ying (Ying), Vice-President for Productions, and Alfiero R.
Orden, Treasurer, entered into a contract with Multi-Rich Builders (Multi-Rich), a
single proprietorship, represented by Wilson G. Chua, its President and General
Manager, for the construction of a garment factory within the Cavite Philippine
Economic Zone Authority (CPEZA). The duration of the project was for a maximum
period of five (5) months or 150 consecutive calendar days. Included in the contract
was an Arbitration Clause in case of dispute.

On November 27, 1996, the construction of the factory building was completed.

On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-Rich) was
incorporated with the Securities and Exchange Commission (SEC).

On January 26, 2004, Win Multi-Rich filed a complaint for sum of money and damages
against petitioner and Ying before the RTC.5 It also prayed for the issuance of a writ
of attachment, claiming that Ying was about to abscond and that petitioner had an
impending closure.

Win Multi-Rich then secured the necessary bond in the amount of P8,634,448.20 from
respondent Visayan Surety and Insurance Corporation (Visayan Surety).6 In the
Order,7 dated February 2, 2004, the RTC issued a writ of preliminary attachment in
favor of Win Multi-Rich.

To prevent the enforcement of the writ of preliminary attachment on its equipment and
machinery, petitioner issued Equitable PCI Bank Check No. 160149,8 dated February
16, 2004, in the amount of P8,634,448.20 payable to the Clerk of Court of the RTC.

On February 19, 2004, petitioner filed its Omnibus Motion,9 seeking to discharge the
attachment. Petitioner also questioned the jurisdiction of the RTC due to the presence
of the Arbitration Clause in the contract. It asserted that the case should have been
referred first to the Construction Industry Arbitration Commission (CIAC) pursuant to
Executive Order (E.O.) No. 1008.
The motion, however, was denied by the RTC in its Order,10 dated April 12, 2004,
because the issues of the case could be resolved after a full-blown trial.

On April 26, 2004, petitioner filed its Answer with Compulsory Counterclaim11 before
the RTC. It denied the material allegation of the complaint and sought the immediate
lifting of the writ of attachment. It also prayed that the bond filed by Win Multi-Rich to
support its application for attachment be held to satisfy petitioner’s claim for damages
due to the improper issuance of such writ.

On April 29, 2004, the RTC issued another order12 directing the deposit of the
garnished funds of petitioner to the cashier of the Clerk of Court of the RTC.

Win Multi-Rich then filed a motion,13 dated April 29, 2004, to release petitioner’s cash
deposit to it. Notably, the motion was granted by the RTC in the Order, 14 dated May
3, 2004. Subsequently, on May 7, 2004, Win Multi-Rich posted Surety Bond No.
1019815 issued by respondent Far Eastern Surety and Insurance Co.,
Inc. (FESICO) for the amount of P9,000,000.00, to secure the withdrawal of the cash
deposited by petitioner. Thus, Win Multi-Rich was able to receive the funds of
petitioner even before the trial began.

On June 18, 2004, petitioner filed a petition for certiorari16 under Rule 65 of the 1997
Rules of Civil Procedure before the CA. The petition sought to annul and set aside
the April 12, 2004 and April 29, 2004 Orders of the RTC. Petitioner then filed its
Supplemental Manifestation and Motion,17 asserting that its cash deposit with the
RTC was turned over to Win Multi-Rich.

On March 14, 2006, the CA rendered a decision,18 annulling the April 12 2004 and
April 29, 2004 Orders of the RTC. It ruled, however, that the RTC had jurisdiction over
the case inspite of the arbitration clause because it was a suit for collection of sum of
money. The dispositive portion of which reads:

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The
Orders dated April 12, 2004 and April 29, 2004 of respondent judge are hereby
ANNULLED and SET ASIDE. Accordingly, the writ of preliminary injunction is hereby
MADE PERMANENT.

SO ORDERED.19

Petitioner filed a motion for reconsideration arguing, among others, that the CA
decision failed to state an order to return the garnished amount of P8,634,448.20,
which was taken from its bank account and given to Win Multi-Rich. In its
Resolution,20 dated October 11, 2006, the CA denied the motion.

Aggrieved, petitioner elevated the matter to the Court by way of a petition for review
on certiorari under Rule 45, docketed as G.R. No. 175048.

On February 10, 2009, in G.R. No. 175048, the Court promulgated a Decision21 in
favor of petitioner and held: first, that Win Multi-Rich was not a real party in
interest; second, that the RTC should not have taken cognizance of the collection suit
because the presence of the arbitration clause vested jurisdiction on the CIAC over
all construction disputes between petitioner and Multi-Rich; and lastly, that Win Multi-
Rich could not retain the garnished amount, as the RTC did not have jurisdiction to
issue the questioned writ of attachment and to order the release of the funds. The
dispositive portion reads:
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is
hereby MODIFIED. Civil Case No. 04-108940 is DISMISSED. Win Multi-Rich
Builders, Inc. is ORDERED to return the garnished amount of EIGHT MILLION SIX
HUNDRED THIRTY FOUR THOUSAND FOUR HUNDRED FORTY-EIGHT PESOS
AND TWENTY CENTAVOS (P8,634,448.20), which was turned over by the Regional
Trial Court, to petitioner with legal interest of 12 percent (12%) per annum upon finality
of this Decision until payment.

SO ORDERED.22

Win Multi-Rich filed a motion for reconsideration but it was denied by the Court in its
April 20, 2009 Resolution.23Pursuant to an entry of judgment,24 the Court’s decision
became final and executory on June 2, 2009.

On June 26, 2009, petitioner moved for execution thereof, praying for the return of its
cash deposit and, in the event of refusal of Win Multi-Rich to comply, to hold Visayan
Surety and FESICO liable under their respective bonds.25

Win Multi-Rich, Visayan Surety and FESICO were served with copies of the motion
for execution.26 During the August 7, 2009 hearing on the motion for execution,
counsels for petitioner, Win Multi-Rich and FESICO were present.27 The hearing,
however, was reset to September 16, 2009. On the said date, Win Multi-Rich, Visayan
Surety and FESICO were given fifteen (15) days to submit their respective comments
or oppositions to the motion for execution.28

On October 15, 2009, Win Multi-Rich opposed the motion for Execution29 because
the cash deposit awarded to it by the RTC had been paid to suppliers and the said
amount was long overdue and demandable.

The RTC granted the motion for execution in an Order,30 dated October 19, 2009, and
issued a writ of execution.31Visayan Surety and FESICO separately moved for
reconsideration of the RTC order.

The RTC Ruling

On January 15, 2010, the RTC issued the order,32 granting the surety respondents’
motion for reconsideration and lifting its October 19, 2009 Order insofar as it granted
the motion for execution against Visayan Surety and FESICO. The RTC absolved the
surety respondents because petitioner did not file a motion for judgment on the
attachment bond before the finality of judgment, thus, violating the surety
respondents’ right to due process. It further held that the execution against the surety
respondents would go beyond the terms of the judgment sought to be executed
considering that the Court decision pertained to Win Multi-Rich only.

Petitioner moved for reconsideration, but its motion was denied by the RTC in its May
19, 2010 Order.33

Undaunted, petitioner appealed before the CA, arguing that there was no violation of
the right to due process because the liability of the surety respondents were based
on the bonds issued by them.

The CA Ruling

In the assailed decision, dated October 21, 2013, the CA found petitioner’s appeal
without merit. Citing Section 20, Rule 57 of the 1997 Rules of Civil Procedure (Section
20, Rule 57), the CA held that petitioner failed to timely claim damages against the
surety before the decision of the Court became final and executory. It further stated
that a court judgment could not bind persons who were not parties to the action as
the records showed that Visayan Surety and FESICO were neither impleaded nor
informed of the proceedings before the Court in G.R. No. 175048. It was the view of
the CA that "[h]aving failed to observe very elementary rules of procedure which are
mandatory, [petitioner] caused its own predicament."

Petitioner filed a motion for reconsideration, but it was denied by the CA in the
assailed April 1, 2014 Resolution.

Hence, this present petition, anchored on the following

STATEMENT OF ISSUES

THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT

OF APPEALS SHOULD BE REVERSED AND SET ASIDE FOR BEING
CONTRARY TO LAW AND JURISPRUDENCE CONSIDERING THAT THE RIGHT
TO DUE PROCESS OF THE TWO SURETY COMPANIES WILL NOT BE
VIOLATED IF EXECUTION OF THE JUDGMENT AGAINST THEM IS ALLOWED.

II

THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT

OF APPEALS SHOULD BE REVERSED AND SET ASIDE FOR BEING
CONTRARY TO LAW AND JURISPRUDENCE CONSIDERING THAT TO ALLOW
THE EXECUTION AGAINST THE TWO SURETY COMPANIES WOULD GIVE
FULL EFFECT TO THE TERMS OF THE JUDGMENT.34

Petitioner contends that Visayan Surety and FESICO could be held liable because
the Court, in G.R. No. 175048, ruled that it cannot allow Win Multi-Rich to retain the
garnished amount turned over by the RTC, which had no jurisdiction to issue the
questioned writ of attachment. Petitioner argues that if Win Multi-Rich fails or refuses
to refund or return the cash deposit, then Visayan Surety and FESICO must be held
liable under their respective bonds. Also, petitioner claims that the surety bond of
FESICO is not covered by Section 20, Rule 57 because it did not pertain to the writ
of attachment itself, but on the withdrawal of the cash deposit.

On October 3, 2014, Visayan Surety filed its Comment.35 It asserted that no

application for damages was filed before the Court in G.R. No. 175048. Thus, there
was no occasion to direct the RTC to hear and decide the claim for damages, which
constituted a violation of its right to due process. Also, Visayan Surety contended that
Section 20, Rule 57 provided a mandatory rule that an application for damages must
be filed before the judgment becomes final and executory.

On October 8, 2014, FESICO filed its Comment.36 It averred that petitioner failed to
comply with Section 20, Rule 57 of the Rules of Court because the hearing on the
motion for execution was conducted after the decision in G.R. No. 175048 had
already become final and executory. It also stated that petitioner failed to implead the
surety respondents as parties in G.R. No. 175048.

On January 26, 2015, petitioner filed its Consolidated Reply.37 It stressed that
because the highest court of the land had directed the return of the wrongfully
garnished amount to petitioner, proceedings on the application under Section 20,
Rule 57, became no longer necessary.
The Court’s Ruling

The petition is partly meritorious.

There was an application

for damages; but there
was no notice given to
Visayan Surety

By its nature, preliminary attachment, under Rule 57 of the Rules of Court, "is an
ancillary remedy applied for not for its own sake but to enable the attaching party to
realize upon relief sought and expected to be granted in the main or principal action;
it is a measure auxiliary or incidental to the main action. As such, it is available during
the pendency of the action which may be resorted to by a litigant to preserve and
protect certain rights and interests therein pending rendition and for purposes of the
ultimate effects, of a final judgment in the case.38 In addition, attachment is also
availed of in order to acquire jurisdiction over the action by actual or constructive
seizure of the property in those instances where personal or substituted service of
summons on the defendant cannot be effected."39

The party applying for the order of attachment must thereafter give a bond executed
to the adverse party in the amount fixed by the court in its order granting the issuance
of the writ.40 The purpose of an attachment bond is to answer for all costs and
damages which the adverse party may sustain by reason of the attachment if the
court finally rules that the applicant is not entitled to the writ.41

In this case, the attachment bond was issued by Visayan Surety in order for Win Multi-
Rich to secure the issuance of the writ of attachment. Hence, any application for
damages arising from the improper, irregular or excessive attachment shall be
governed by Section 20, Rule 57, which provides:

Sec. 20. Claim for damages on account of improper, irregular or excessive

attachment.

An application for damages on account of improper, irregular or excessive attachment

must be filed before the trial or before appeal is perfected or before the judgment
becomes executory, with due notice to the attaching party and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof. Such
damages may be awarded only after proper hearing and shall be included in the
judgment on the main case.

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

Nothing herein contained shall prevent the party against whom the attachment was
issued from recovering in the same action the damages awarded to him from any
property of the attaching party not exempt from execution should the bond or deposit
given by the latter be insufficient or fail to fully satisfy the award.

The history of Section 20, Rule 57 was discussed in Malayan Insurance, Inc. v.
Salas.42 In that case, the Court explained that Section 20, Rule 57 was a revised
version of Section 20, Rule 59 of the 1940 Rules of Court, which, in turn, was a
consolidation of Sections 170, 177, 223, 272, and 439 of the Code of Civil Procedure
regarding the damages recoverable in case of wrongful issuance of the writs of
preliminary injunction, attachment, mandamus and replevin and the appointment of a
receiver.

Thus, the current provision of Section 20, Rule 57 of the 1997 Rules of Civil Procedure
covers application for damages against improper attachment, preliminary injunction,
receivership, and replevin.43 Consequently, jurisprudence concerning application for
damages against preliminary injunction, receivership and replevin bonds can be
equally applied in the present case.

In a catena of cases,44 the Court has cited the requisites under Section 20, Rule 57
in order to claim damages against the bond, as follows:

1. The application for damages must be filed in the same case where the bond was
issued;

2. Such application for damages must be filed before the entry of judgment; and

3. After hearing with notice to the surety.

The first and second requisites, as stated above, relate to the application for damages
against the bond. An application for damages must be filed in the same case where
the bond was issued, either (a) before the trial or (b) before the appeal is perfected or
(c) before the judgment becomes executory.45 The usual procedure is to file an
application for damages with due notice to the other party and his sureties. The other
method would be to incorporate the application in the answer with compulsory
counterclaim.46

The purpose of requiring the application for damages to be filed in the same
proceeding is to avoid the multiplicity of suit and forum shopping. It is also required to
file the application against the bond before the finality of the decision to prevent the
alteration of the immutable judgment.47

In Paramount Insurance Corp. v. CA,48 the Court allowed an application for damages
incorporated in the answer with compulsory counterclaim of the defendant therein.
The sureties were properly notified of the hearing and were given their day in court.

Conversely, in the recent case of Advent Capital and Finance Corp. v. Young,49 the
application for damages against the bond was not allowed. The respondent therein
filed his omnibus motion claiming damages against surety after the dismissal order
issued by the trial court had attained finality.

In the present petition, the Court holds that petitioner sufficiently incorporated an
application for damages against the wrongful attachment in its answer with
compulsory counterclaim filed before the RTC. Petitioner alleged that the issuance of
the improper writ of attachment caused it actual damages in the amount of at least
P3,000,000.00. It added that the Equitable PCI Bank Check No. 160149 it issued to
the RTC Clerk of Court, to lift the improper writ of attachment, should be returned to
it.50 Evidently, these allegations constitute petitioner’s application for damages arising
from the wrongful attachment, and the said application was timely filed as it was filed
before the finality of judgment.

The next requisite that must be satisfied by petitioner to hold Visayan Surety liable
would be that the judgment against the wrongful attachment was promulgated after
the hearing with notice to the surety. Certainly, the surety must be given prior notice
and an opportunity to be heard with respect to the application for damages before the
finality of the judgment. The Court rules that petitioner did not satisfy this crucial
element.

Section 20, Rule 57 specifically requires that the application for damages against the
wrongful attachment, whether filed before the trial court or appellate court, must be
with due notice to the attaching party and his surety or sureties. Such damages may
be awarded only after proper hearing and shall be included in the judgment on the
main case.

Due notice to the adverse party and its surety setting forth the facts supporting the
applicant's right to damages and the amount thereof under the bond is indispensable.
The surety should be given an opportunity to be heard as to the reality or
reasonableness of the damages resulting from the wrongful issuance of the writ. In
the absence of due notice to the surety, therefore, no judgment for damages may be
entered and executed against it.51

In the old case of Visayan Surety and Insurance Corp. v. Pascual,52 the application
for damages was made before the finality of judgment, but the surety was not given
due notice. The Court allowed such application under Section 20, Rule 59 of the 1940
Rules of Court because there was no rule which stated that the failure to give to the
surety due notice of the application for damages would release the surety from the
obligation of the bond.53

The case of Visayan Surety and Insurance Corp. v. Pascual, however, was
abandoned in the subsequent rulings of the Court because this was contrary to the
explicit provision of Section 20, Rule 57.54

In People Surety and Insurance Co. v. CA,55 the defendant therein filed an application
for damages during the trial but the surety was not notified. The Court denied the
application and stated that "it is now well settled that a court has no jurisdiction to
entertain any proceeding seeking to hold a surety liable upon its bond, where the
surety has not been given notice of the proceedings for damages against the principal
and the judgment holding the latter liable has already become final."56

In Plaridel Surety & Insurance Co. v. De Los Angeles,57 a motion for execution against
the bond of the surety was filed after the finality of judgment. The petitioner therein
asserted that the motion for execution was a sufficient notification to the surety of its
application for damages. The Court ruled, that "[t]his notification, however, which was
made after almost a year after the promulgation of the judgment by the Court of
Appeals, did not cure the tardiness of the claim upon the liability of the surety, which,
by mandate of the Rules, should have been included in the judgment."58

In the present case, petitioner’s answer with compulsory counterclaim, which

contained the application for damages, was not served on Visayan Surety. 59 Also, a
perusal of the records60 revealed that Visayan Surety was not furnished any copies
of the pleadings, motions, processes, and judgments concerned with the application
for damages against the surety bond. Visayan Surety was only notified of the
application when the motion for execution was filed by petitioner on June 29, 2009,
after the judgment in G.R. No. 175048 had become final and executory on June 2,
2009.

Clearly, petitioner failed to comply with the requisites under Section 20, Rule 57
because Visayan Surety was not given due notice on the application for damages
before the finality of judgment. The subsequent motion for execution, which sought to
implicate Visayan Surety, cannot alter the immutable judgment anymore.

FESICO’s bond is not

covered by Section 20,
Rule 57

While Visayan Surety could not be held liable under Section 20, Rule 57, the same
cannot be said of FESICO. In the case at bench, to forestall the enforcement of the
writ of preliminary attachment, petitioner issued Equitable PCI Bank Check No.
160149, dated February 16, 2004, in the amount of P8,634,448.20 payable to the
Clerk of Court of the RTC. Pursuant to the RTC Order, dated April 29, 2004, the
garnished funds of petitioner were deposited to the cashier of the Clerk of Court of
the RTC. The procedure to discharge the writ of preliminary attachment is stated in
Section 12, Rule 57, to wit:

Sec. 12. Discharge of attachment upon giving counterbond.

After a writ of attachment has been enforced, the party whose property has been
attached, or the person appearing on his behalf, may move for the discharge of the
attachment wholly or in part on the security given. The court shall, after due notice
and hearing, order the discharge of the attachment if the movant makes a cash
deposit, or files a counter-bond executed to the attaching party with the clerk
of the court where the application is made, in an amount equal to that fixed by
the court in the order of attachment, exclusive of costs. But if the attachment is
sought to be discharged with respect to a particular property, the counter-bond shall
be equal to the value of that property as determined by the court. In either case, the
cash deposit or the counter-bond shall secure the payment of any judgment that the
attaching party may recover in the action. A notice of the deposit shall forthwith be
served on the attaching party. 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 to the person appearing on his behalf, the deposit or counter-bond aforesaid
standing in place of the property so released. Should such counter-bond for any
reason to be found to be or become insufficient, and the party furnishing the same fail
to file an additional counter-bond, the attaching party may apply for a new order of
attachment.

[Emphasis Supplied]

Win Multi-Rich, however, took a step further and filed a motion to release petitioner’s
cash deposit to it. Immediately, the RTC granted the motion and directed Win Multi-
Rich to post a bond in favor of petitioner in the amount of P9,000,000.00 to answer
for the damages which the latter may sustain should the court decide that Win Multi-
Rich was not entitled to the relief sought. Subsequently, Win Multi-Rich filed a surety
bond of FESICO before the RTC and was able to obtain the P8,634,448.20 cash
deposit of petitioner, even before the trial commenced.

Strictly speaking, the surety bond of FESICO is not covered by any of the provisions
in Rule 57 of the Rules of Court because, in the first place, Win Multi-Rich should not
have filed its motion to release the cash deposit of petitioner and the RTC should not
have granted the same. The release of the cash deposit to the attaching party is
anathema to the basic tenets of a preliminary attachment.
The chief purpose of the remedy of attachment is to secure a contingent lien on
defendant’s property until plaintiff can, by appropriate proceedings, obtain a
judgment and have such property applied to its satisfaction, or to make some
provision for unsecured debts in cases where the means of satisfaction thereof are
liable to be removed beyond the jurisdiction, or improperly disposed of or concealed,
or otherwise placed beyond the reach of creditors.61The garnished funds or attached
properties could only be released to the attaching party after a judgment in his favor
is obtained. Under no circumstance, whatsoever, can the garnished funds or
attached properties, under the custody of the sheriff or the clerk of court, be
released to the attaching party before the promulgation of judgment.

Cash deposits and counterbonds posted by the defendant to lift the writ of attachment
is a security for the payment of any judgment that the attaching party may obtain; they
are, thus, mere replacements of the property previously attached.62 Accordingly, the
P8,634,448.20 cash deposit of petitioner, as replacement of the properties to be
attached, should never have been released to Win Multi-Rich.

Nevertheless, the Court must determine the nature of the surety bond of FESICO.
The cash deposit or the counter-bond was supposed to secure the payment of any
judgment that the attaching party may recover in the action. 63 In this case, however,
Win Multi-Rich was able to withdraw the cash deposit and, in exchange, it posted a
surety bond of FESICO in favor of petitioner to answer for the damages that the latter
may sustain. Corollarily, the surety bond of FESICO substituted the cash deposit of
petitioner as a security for the judgment. Thus, to claim damages from the surety bond
of FESICO, Section 17, Rule 57 could be applied. It reads:

Sec. 17. Recovery upon the counter-bond.

When the judgment has become executory, the surety or sureties on any counter-
bond given pursuant to the provisions of this Rule to secure the payment of the
judgment shall become charged on such counter-bond and bound to pay the
judgment obligee upon demand the amount due under the judgment, which amount
may be recovered from such surety or sureties after notice and summary hearing in
the same action.

From a reading of the above-quoted provision, it is evident that a surety on a counter-

bond given to secure the payment of a judgment becomes liable for the payment of
the amount due upon: (1) demand made upon the surety; and (2) notice and summary
hearing on the same action.64 Noticeably, unlike Section 20, Rule 57, which requires
notice and hearing before the finality of the judgment in an application for damages,
Section 17, Rule 57 allows a party to claim damages on the surety bond after the
judgment has become executory.65

The question remains, in contrast to Section 20, why does Section 17 sanction the
notice and hearing to the surety after the finality of judgment? The answer lies in the
kind of damages sought to be enforced against the bond.

Under Section 20, Rule 57, in relation to Section 4 therein,66 the surety bond shall
answer for all the costs which may be adjudged to the adverse party and all damages
which he may sustain by reason of the attachment. In other words, the damages
sought to be enforced against the surety bond are unliquidated. Necessarily, a
notice and hearing before the finality of judgment must be undertaken to properly
determine the amount of damages that was suffered by the defendant due to the
improper attachment. These damages to be imposed against the attaching party and
his sureties are different from the principal case, and must be included in the
judgment.

On the other hand, under Section 17, Rule 57, in relation to Section 12 therein, the
cash deposit or the counter-bond shall secure the payment of any judgment that the
attaching party may recover in the action. Stated differently, the damages sought to
be charged against the surety bond are liquidated. The final judgment had already
determined the amount to be awarded to the winning litigant on the main action. Thus,
there is nothing left to do but to execute the judgment against the losing party, or in
case of insufficiency, against its sureties.

Here, the Court is convinced that a demand against FESICO had been made, and
that it was given due notice and an opportunity to be heard on its
defense.1âwphi1 First, petitioner filed a motion for execution on June 29, 2009, a
copy of which was furnished to FESICO;67 second, petitioner filed a
manifestation,68 dated July 13, 2009, that FESICO was duly served with the said
motion and notified of the hearing on August 7, 2009; third, during the August 7, 2009
hearing on the motion for execution, the counsels for petitioner, Win Multi-Rich and
FESICO were all present;69fourth, in an Order, dated September 16, 2009, FESICO
was given fifteen (15) days to submit its comment or opposition to the motion for
execution;70 and lastly, FESICO filed its comment71 on the motion on October 1,
2009. Based on the foregoing, the requirements under Section 17, Rule 57 have been
more than satisfied.

Indeed, FESICO cannot escape liability on its surety bond issued in favor of petitioner.
The purpose of FESICO's bond was to secure the withdrawal of the cash deposit and
to answer any damages that would be inflicted against petitioner in the course of the
proceedings.72 Also, the undertaking73 signed by FESICO stated that the duration of
the effectivity of the bond shall be from its approval by the court until the action is fully
decided, resolved or terminated.

FESICO cannot simply escape liability by invoking that it was not a party in G.R. No.
175048. From the moment that FESICO issued Surety Bond No. 10198 to Win Multi-
Rich and the same was posted before the RTC, the court has acquired jurisdiction
over the surety, and the provisions of Sections 12 and 17 of Rule 57 became
operational. Thus, the Court holds that FESICO is solidarily liable under its surety
bond with its principal Win Multi-Rich.

On a final note, the Court reminds the bench and the bar that lawsuits, unlike duels,
are not to be won by a rapier's thrust. Technicality, when it deserts its proper office
as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested rights in technicalities.74

WHEREFORE, the petition is PARTIALLY GRANTED. The October 21, 2013

Decision and the April 1, 2014 Resolution of the Court of Appeals in CA-G.R. CV No.
95421 are AFFIRMED WITH MODIFICATION. The Regional Trial Court of Manila,
Branch 32 in Civil Case No. 04-108940 is hereby ordered to proceed with the
execution against Far Eastern Surety & Insurance Co., Inc., to the extent of the
amount of the surety bond.

SO ORDERED.

B. PRELIMINARY INJUNCTION RULE 58

7.
.R. No. 175284 September 19, 2012
BP PHILIPPINES, INC. (FORMERLY BURMAH CASTROL PHILIPPINES,
INC.), Petitioner,
vs.
CLARK TRADING CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This Petition for Review on Certiorari under Rule 46 of the Rules of Court assails the
Court of Appeals Decision1dated August ? 2006 and Resolution2 dated October 30,
2006 in CA G.R. ------- entitled

Burmah Castrol Philippines, Inc. v. Clark Trading Corporation, which affirmed the
Decision3 dated December 15, 2002 of the Regional Trial Court (RTC), Branch 57,
Angeles City in Civil Case No. 9301.

BP Philippines, Inc. (petitioner), a corporation "engaged in the development,

manufacture, importation, distribution, marketing, and wholesale of: (i) the products
of the BURMAH CASTROL GROUP, including, x x x the CASTROL range of
lubricants and associated products x x x,"4 filed a Complaint5 for "injunction with
prayer for preliminary injunction and temporary restraining order (TRO) and
damages" in the RTC against respondent Clark Trading Corporation, owner of
Parkson Duty Free, which, in turn, is a duty free retailer operating inside the Clark
Special Economic Zone (CSEZ). Parkson Duty Free sells, among others, imported
duty-free Castrol products not sourced from petitioner.

Petitioner alleged that sometime in 1994 it had entered into a Marketing and Technical
Assistance Licensing Agreement6 and a Marketing and Distribution
7
Agreement (agreements) with Castrol Limited, U.K., a corporation organized under
the laws of England, and the owner and manufacturer of Castrol products. Essentially,
under the terms of the agreements,8 Castrol Limited, U.K. granted petitioner the title
"exclusive wholesaler importer and exclusive distributor" of Castrol products in the
territory of the Philippines.9 Under the July 22, 1998 Variation "territory" was further
clarified to include duty-free areas.10

Petitioner claimed that respondent, by selling and distributing Castrol Products11 not
sourced from petitioner in the Philippines, violated petitioner’s exclusive rights under
the agreements. Despite a cease and desist letter12 dated September 14, 1998 sent
by petitioner, respondent continued to distribute and sell Castrol products in its duty-
free shop. Petitioner, citing Yu v. Court of Appeals13 as basis for its claim, contended
that the unauthorized distribution and sale of Castrol products by respondent "will
cause grave and irreparable damage to its goodwill and reputation."

To support the application for TRO, petitioner presented the testimony of a certain
Farley14 Cuizon, one of the people who conducted a test-buy on October 30, 1998 at
Parkson Duty Free.15 Cuizon testified that he had purchased one box containing
twelve (12) bottles with red caps of Castrol GTX motor oil, and that these red caps
signified that the Castrol motor oil did not come from petitioner, since the bottles of
Castrol motor oil petitioner sold had white caps. Moreover, Cuizon further testified
that the bottles of Castrol motor oil bought from Parkson Duty Free had on them
printed labels stating that these "may not be resold outside North
America."16 However, on cross-examination, he testified that no patent violation
existed since the red caps on the Castrol GTX products were not significant.
On March 4, 1999, the RTC issued an Order directing the issuance of a TRO for a
period of twenty (20) days enjoining respondent "from selling and distributing Castrol
products until further orders x x x."17

On April 15, 1999, the RTC denied petitioner’s prayer for the issuance of a writ of
preliminary injunction, there being no sufficient justification for the relief.18

Respondent, in its answer,19 stated that petitioner had no cause of action. Respondent
alleged that it was a stranger to the agreements, it being neither a party nor a
signatory thereto. Based on the theory that only parties to a contract were bound by
it, respondent claimed that it could not be held liable for violations of the terms of the
agreements. While respondent admitted that it distributed and sold Castrol products,
it also posited that it only conducted its business within the confines of the CSEZ in
accordance with Executive Order Nos. 140,20 25021 and 250-A.22 Since petitioner was
not authorized to operate, distribute and sell within the CSEZ, respondent did not
violate the agreements because its efficacy only covers an area where petitioner is
allowed by law to distribute.

After trial on the merits, the RTC dismissed the complaint. It ruled that the factual
circumstances of the Yu case were different from the present case since respondent
was operating a duty-free shop inside the CSEZ. It noted that "the Castrol products
sold by [respondent] therefore [was] legal provided that they only [sold] the same in
their store inside Clark and to customers allowed to make said purchase and for their
consumption."23 With regard to the propriety of the issuance of a preliminary
injunction, the RTC ruled:

[Petitioner] failed to show xxx [any] act by [respondent] [that constitutes] an injurious
invasion of its rights stemming from a contract it signed with another party coupled by
the limited scope of the transaction of [respondent] and its customers.

Hence, [petitioner] cannot be entitled to an injunction in the instant case. It has not
shown that it has a right which must be protected by this court, and it failed to show
also that defendant is guilty of acts which [violate] its rights."

xxxx

WHEREFORE, premises considered, the complaint filed by [petitioner] is hereby

ordered DISMISSED.24

On appeal, the Court of Appeals affirmed the ruling of the RTC. Petitioner was not
able to establish the existence of a clear legal right to be protected and the acts which
would constitute the alleged violation of said right. The circumstances under which
the Yu case was decided upon were different from that of the present case. The Court
of Appeals pointed out the different circumstances in the following manner:

Firstly, in Yu, the High Court did not make a final determination of the rights and
obligations of the parties in connection with the exclusive sales agency agreement of
wall covering products between Philip Yu and the House of Mayfair in England. Said
case reached the High Court in connection with the incident on the preliminary
injunction and the main suit for injunction was still pending with the Regional Trial
Court of Manila. The High Court categorically stated that their "observations" do not
in the least convey the message that they "have placed the cart ahead of the horse,
so to speak." This is the reason why in the dispositive portion of said case, the High
Court remanded the case to the court of origin.
In the instant case, the trial court already rendered its assailed Decision which found
that [petitioner] has not shown that it has a right which must be protected and that
[respondent] is not guilty of acts which violate [petitioner’s] right. Thus, We fail to see
how the High Court’s "observations" in the Yu case should be cited as a controlling
precedent by [petitioner].

Secondly, in Yu, it appears that Philip Yu has an exclusive sales agency agreement
with the House of Mayfair in England since 1987 to promote and procure orders for
Mayfair wall covering products from customers in the Philippines. Despite [the] said
exclusive sales agency agreement, Yu’s dealer, Unisia Merchandising Co., Inc.,
engaged in a sinister scheme of importing the same goods, in concert with the FNF
Trading in West Germany, and misleading the House of Mayfair into believing that
the wallpaper products ordered via said trading German firm were intended for
shipment to Nigeria, although they were actually shipped to and sold in the
Philippines.

In the case at bar, [respondent], who is a registered locator doing business at the
Parkson Duty Free Shop within the [CSEZ] administered by the Clark Development
Corporation, was not a dealer of [petitioner] nor was there any business dealing or
transaction at all between [petitioner] and [respondent]. In fact, it was established in
evidence, through the testimony of Adrian Phillimore, [petitioner]’s very own witness,
that respondent was already selling imported Castrol GTX products even prior to the
execution of the Variation to Marketing and Distribution Agreement dated 23 July
1998 between [petitioner] and Castrol Limited, a corporation established under the
laws of England.

Further, [petitioner] failed to show that [respondent’s] duty free importation of said
Castrol GTX products which were sold at its Parkson Duty Free Shop was a sinister
scheme employed by [respondent] in order to by-pass [petitioner].

Thirdly, in Yu, the House of Mayfair of England, in its correspondence to FNF Trading
of West Germany, even took the cudgels for Philip Yu in seeking compensation for
the latter’s loss as a consequence of the scheme of the dealer Unisia Merchandising
Co., Inc., in concert with FNF Trading.

In the case at bar, [petitioner] did not allege in its Complaint nor prove who the supplier
of [respondent] was with respect to said Castrol GTX products sold in Parkson Duty
Free Shop. There is no showing that [respondent] sought Castrol Limited of England
in order to procure Castrol GTX products for retailing inside the duty free shop of
[respondent] within the Clark Special Economic Zone, with the intention of violating
the purported exclusive marketing and distributorship agreement between [petitioner]
and Castrol Limited of England. Neither do We find any showing that Castrol Limited
of England took up the cudgels for [petitioner], by corresponding with [respondent], in
connection with the latter’s retailing of Castrol GTX products with red caps in its duty
free shop at the Clark Special Economic Zone.

Fourthly, in Yu, the House of Mayfair in England was duped into believing that the
goods ordered through FNF Trading of West Germany were to be shipped to Nigeria
only, but the goods were actually sent to and sold in the Philippines. Considering this
circumstance, the Supreme Court stated that "(a) ploy of this character is akin to the
scenario of a third person who induces a party to renege on or violate his undertaking
under a contract, thereby entitling the other contracting party to relief therefrom
(Article 1314, New Civil Code)."
In the instance case, there is no evidence that any party was duped and that
[respondent], who is not a privy to the marketing and distribution agreement between
[petitioner] and Castrol Limited of England, employed any sinister scheme or ploy at
all. We do not find any showing of a scenario whereby [respondent] induced any party
to renege or violate its undertaking under said agreement, thereby entitling [petitioner]
to injunctive relief and damages. Thus, [petitioner’s] insistence that [respondent’s]
obligation to [petitioner] does not arise from contract, but from law, which protects
parties to a contract from the wrongful interference of strangers, does not have any
factual or legal basis.

xxxx

Considering the foregoing findings, [petitioner] is not entitled to a permanent

injunction and damages. [Petitioner] failed to establish the existence of a clear legal
right to be protected and the acts of [respondent] which are violative of said right. In
the absence of any actual, existing, clear legal right to be protected, injunction does
not lie and consequently, there is no ground for the award of damages as claimed by
[petitioner].

In any event, We take note, at this juncture, that [respondent] is a registered locator
operating the Parkson Duty Free Shop within the confines of the Clark Special
Economic Zone. In said duty free operation, goods sold within the duty free shops are
imported duty free and also resold as such.

Section 1 of Executive Order No. 250, as amended, provides:

SECTION 1. Allowable Areas for Duty Free Shop Operation. - The moratorium on the
establishment of duty free stores/outlets imposed by E.O. No. 140 is hereby lifted.
Accordingly, duty free stores/outlets, whether operated by the government and/or
private entities, may be established within the country’s international ports of entry
subject to the terms and conditions set forth in E.O. No. 46, as amended, and in the
secured and fenced-in areas of special economic zones/freeports pursuant to the
provisions of the Bases Conversion and Development Act of 1992 (RA 7227),
establishing the Subic Special Economic Zone/Freeport Zone, Clark Special
Economic Zone, John Hay Special Economic Zone, Poro Point Special Economic and
Freeport Zone; RA 7922 (Establishing the Sta. Ana, Cagayan Special Economic Zone
and Freeport); RA 7903 (Creating the Zamboanga City Special Economic Zone and
Freeport).

xxxx

WHEREFORE, premises considered, the appeal is DENIED for lack of merit. The
Decision dated 15 December 2002 of the Regional Trial Court of Angeles City, Branch
57 in Civil Case No. 9301 is AFFIRMED.

Costs against [petitioner].25

Petitioner moved for reconsideration but the same was denied for lack of merit.26

Hence, this petition.

Petitioner reiterates that it is entitled to have its proprietary rights under the
agreements protected by an injunction. It argues that the fact that respondent was
operating inside the CSEZ was inconsequential since the agreements specifically
covered the whole Philippines, including duty-free zones pursuant to the agreements.
Moreover, petitioner claims that the Court of Appeals erred in affirming the RTC ruling
that the Yu case does not apply. Thus, respondent’s continued unauthorized, illegal
and illegitimate sale of Castrol GTX motor oil has caused petitioner to suffer damages
to its goodwill and business reputation and resulted to losses in business
opportunities.

Respondent, for its part, argues that the case should be dismissed for lack of merit. It
contends that it is not a party to the agreements and as such, under Article 131127 of
the Civil Code, it cannot be bound to the contract. It also argues that the Yu case is
inapplicable here since, unlike in that case, unfair competition as defined under Article
2828 of the Civil Code is not present in the case now before us.

The facts of this case and the allegations of the parties raise the question of whether
petitioner is entitled to injunction against third-persons on the basis of its marketing
and distribution agreements.

The petition is without merit.

We agree with the Court of Appeals that the Yu case is inapplicable to the present
case. To reiterate and as pointed out by the Court of Appeals, aside from the Yu case
being issued during the pendency of the main action for injunction, the Court made
the following observation:

Another circumstance which respondent court overlooked was petitioner’s

suggestion, which was not disputed by herein private respondent in its comment, that
the House of Mayfair in England was duped into believing that the goods ordered
through the FNF Trading were to be shipped to Nigeria only, but the goods were
actually sent to and sold in the Philippines. A ploy of this character is akin to the
scenario of a third person who induces a party to renege on or violate his
undertaking under a contract, thereby entitling the other contracting party to
relief therefrom (Article 1314, New Civil Code). The breach caused by private
respondent was even aggravated by the consequent diversion of trade from the
business of petitioner to that of private respondent caused by the latter’s species of
unfair competition as demonstrated no less by the sales effected inspite of this Court’s
restraining order. This brings Us to the irreparable mischief which respondent court
misappreciated when it refused to grant the relief simply because of the observation
that petitioner can be fully compensated for the damage. x x x.29 (Emphasis supplied.)

This badge of "irreparable mischief" as observed by the Court caused the Yu case to
be remanded for the issuance of a preliminary injunction.

In contrast, the present case deals with the main action for injunction. In Bacolod City
Water District v. Labayen,30we have discussed the nature of an action for injunction,
to wit:

Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or

refrain from doing a certain act. It may be the main action or merely a provisional
remedy for and as an incident in the main action.

The main action for injunction is distinct from the provisional or ancillary
remedy of preliminary injunction which cannot exist except only as part or an
incident of an independent action or proceeding.1âwphi1 As a matter of course, in an
action for injunction, the auxiliary remedy of preliminary injunction, whether prohibitory
or mandatory, may issue. Under the law, the main action for injunction seeks a
judgment embodying a final injunction which is distinct from, and should not be
confused with, the provisional remedy of preliminary injunction, the sole object of
which is to preserve the status quo until the merits can be heard. A preliminary
injunction is granted at any stage of an action or proceeding prior to the judgment or
final order. It persists until it is dissolved or until the termination of the action without
the court issuing a final injunction. (Emphasis supplied, citations omitted.)

In the present case, neither the RTC nor the Court of Appeals found any nefarious
scheme by respondent to induce either party to circumvent, renege on or violate its
undertaking under the marketing and distribution agreements. We note that no
allegation was made on the authenticity of the Castrol GTX products sold by
respondent. Thus, there is nothing in this case that shows a ploy of the character
described in the Yu case, so this is clearly distinguishable from that case.

As we have already stated, the writ of injunction would issue:

Upon the satisfaction of two requisites, namely: (1) the existence of a right to be
protected; and (2) acts which are violative of said right. In the absence of a clear legal
right, the issuance of the injunctive relief constitutes grave abuse of discretion.
Injunction is not designed to protect contingent or future rights. Where the
complainant’s right is doubtful or disputed, injunction is not proper. The possibility of
irreparable damage without proof of actual existing right is not a ground for an
injunction.31

Respondent not being able to prove and establish the existence of a clear and actual
right that ought to be protected, injunction cannot issue as a matter of course.
Consequently, the Court does not find any ground for the award of damages.

WHEREFORE, the petition is DENIED. The Court of Appeal Decision in CA-G.R. CV

No. ? is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

8. A.M. No. RTJ-03-1814 May 26, 2005

UNIVERSAL MOTORS CORPORATION Represented by GERARDO M. GELLE,

complainant, vs.

JUDGE FRANCISCO G. ROJAS, SR., Regional Trial Court, Branch 41, Cagayan De
Oro City, respondent.

DECISION

PUNO, J.:

This is an administrative complaint filed by Universal Motors Corporation (UMC),

represented by Gerardo M. Gelle, Manager of Dealer Operations Department of said
corporation, against Judge Francisco G. Rojas, Sr., Presiding Judge, Regional Trial
Court, Branch 41, Cagayan De Oro City, for serious misconduct, gross ignorance of
the law and grave abuse of discretion.

The background facts are as follows:

Complainant UMC is the exclusive assembler and distributor in the Philippines of
Nissan light commercial vehicles and spare parts. In the pursuit of its business, it
maintains a network of authorized dealers who purchase vehicles and spare parts
from UMC and resell them in specified territories in the country. One of complainant’s
dealers was Nissan Specialist Sales Corporation (NSSC) covering Misamis Oriental
and other provinces and cities in northern Mindanao, including Cagayan De Oro City.

In November 2000, NSSC ordered from complainant Nissan vehicles and spare parts
worth P5,476,500.00. NSSC issued several postdated checks in favor of complainant
to pay for the purchases. The checks, however, were dishonored due to insufficient
funds. Complainant demanded payment from NSSC but the latter repeatedly failed to
comply. Hence, complainant stopped transacting with NSSC, although the latter still
remained as dealer. Complainant later appointed Nissan Cagayan De Oro
Distributors, Inc. (NICAD) to co-exist as dealer with NSSC to meet the market demand
in Northern Mindanao.

On October 30, 2001, because of NSSC’s continued failure and refusal to pay its
obligation, complainant terminated its dealership agreement with NSSC. It also filed
a criminal complaint for violation of Batas Pambansa Blg. 22 and/or estafa against
the officers of NSSC.

On February 22, 2002, NSSC filed Civil Case No. 2002-058 for breach of contract
against complainant and its officers, Rodrigo T. Janeo, Jr. and Gerry Gelle, and
NICAD and its officers, Jefferson Rolida and Peter Yap. The case was raffled to the
sala of respondent Judge Francisco G. Rojas, Sr.1

On March 1, 2002, respondent judge issued an order setting a summary hearing on

March 7, 2002 on the propriety of the issuance of a temporary restraining order.2

On March 6, 2002, NSSC filed an amended complaint which respondent judge

admitted in his order also dated March 6, 2002. The amended complaint inserted a
prayer for temporary restraining order which was not found in the original complaint.3

A hearing on the temporary restraining order was held on March 8, 2002.

On March 11, 2002, respondent judge issued a temporary restraining order "enjoining
defendants, Universal Motors Corporation, Rodrigo T. Janeo, Jr., [G]erry Gelle,
Nissan Cagayan de Oro Distributors, Inc., Jefferson U. Rolida and Peter Yap, their
agents, representatives, successors and assigns, from continuing in selling, dealing
and marketing all models of motor vehicles and spare parts of Nissan; from
terminating the dealer agreement between the plaintiff NSSC and defendant UMC; to
stop the entry of defendant Nissan Cagayan de Oro Distributors, Inc. and for the latter
to do business on Nissan Products in the territory of plaintiff NSSC as defined in the
Dealer Agreement and for defendant UMC to stop supplying and doing trading
transactions with defendant Nissan Cagayan de Oro Distributors, Inc."4

The following day, on March 12, 2002, NSSC filed an Urgent Motion to Fix Bond for
Plaintiff/Applicant and Approve/Admit Defendant’s Counterbond with Prayer to Lift
Temporary Restraining Order.5

Respondent judge denied the motion in his order dated March 18, 2002. It stated:

Considering that during the summary hearing for the issuance of a Temporary
Restraining Order, defendants/movant herein failed to present evidence to prove that
they may suffered [sic] irreparable injury if ever the Court issued [sic] a Temporary
Restraining Order and considering further that the Court has already exercise[d] its
discretion when it issued a Temporary Restraining Order without fixing the amount of
the bond, hence, defendants[’] Urgent Motion to Fix Bond for Plaintiff/Applicant and
Approve/Admit Defendant[’s] Counterbond With Prayer to Lift Temporary Restraining
Order is hereby denied for lack of merit.6

Respondent judge subsequently held several hearings with respect to the preliminary
injunction.

On April 1, 2002, respondent judge ordered the issuance of a writ of preliminary

injunction upon posting by the plaintiff of a bond in the amount of one million pesos
(P1,000,000.00). The writ of preliminary injunction was issued on April 2, 2002 after
NSSC filed its bond.7

On the same day, complainant filed with the trial court an Urgent Motion to
Recall/Dissolve Order/Writ of Preliminary Injunction.8 But respondent judge denied
the same in the resolution dated April 11, 2002.9

Complainant filed with the Court of Appeals a Petition for Certiorari and Prohibition
assailing the preliminary injunction issued by respondent judge.10

In the meantime, NSSC filed with the trial court a Motion to Enforce Writ of Preliminary
Injunction.11 Complainant, on the other hand, filed a Manifestation and Motion to
Cancel or Hold Proceedings in Abeyance.12 Respondent judge resolved both
motions on July 24, 2002, granting NSSC’s Motion to Enforce Writ of Preliminary
Injunction.13

The Court of Appeals promulgated its decision14 also on July 24, 2004, finding that
the trial court committed grave abuse of discretion in issuing the writ of preliminary
injunction. The appellate court also observed:

It is worthy to note that public respondent issued an Order dated March 11, 2002
granting a temporary restraining order for a period of 20 days without requiring private
respondents to issue any bond at all notwithstanding Rule 58[,] Section 4 (b) of the
Rules of Court, and this compelled petitioners to file an Urgent motion to Fix Bond for
Plaintiff/Applicant and Approve/Admit Defendant’s Counterbond with Prayer to Lift
TRO dated March 12, 2002.

On[e] final point. We further agree with petitioners’ observation that public respondent
issued an Order dated March 1, 2002 setting the application for a Temporary
Restraining Order for hearing, notwithstanding the fact that private respondents were
not applying for a temporary restraining order in their complaint, and to correct the
irregularity, private respondents filed an Amended complaint on March 6, 2002
inserting the prayer for an application of a Temporary Restraining Order, on which
date, the Court issued an Order admitting the Amended complaint. This blatant
irregularity committed by the court a quo cannot be left unnoticed.15

Hence, complainant filed the instant complaint against respondent judge for serious
misconduct, gross ignorance of the law, manifest partiality and grave abuse of
discretion. It alleges that respondent judge has exhibited manifest partiality toward
NSSC, as can be gleaned from the orders he issued in connection with Civil Case
No. 2002-058 and from the statements he made during the hearings on the temporary
restraining order and preliminary injunction.16
Respondent judge denied the charges against him. He justified his order setting a
summary hearing on the issuance of a temporary restraining order by citing the
caption of the complaint which stated that it was for "breach of contract, damages,
with preliminary injunction and temporary restraining order." Respondent judge
construed the same to mean that the plaintiff therein expressly applied for a temporary
restraining order. He also pointed out that the complaint included a general prayer
"for such other relief just and equitable," and that the material allegations in the body
of the complaint asked not only for a preliminary injunction but also for a temporary
restraining order. Respondent judge also denied that he argued for the plaintiff during
the hearing on March 8, 2002. He said that the questions he propounded during the
hearing were merely clarificatory which is allowed by the Rules. Respondent judge
also stated that he acted within the bounds of Rule 58 of the 1997 Rules of Civil
Procedure when he issued the temporary restraining order because he issued the
same only after notice and hearing the parties. He argued that Sec. 2(b) of Rule 58
does not prohibit the issuance of a temporary restraining order without bond. Besides,
he later required the plaintiff to post a bond of one million pesos (P1,000,000.00) as
a condition for the issuance of the writ of preliminary injunction. Respondent judge
submitted that the issuance of a temporary restraining order and the non-requirement
of bond did not amount to a violation of the Code of Judicial Conduct because he was
never motivated by bad faith, but rather, on his best assessment of facts, to maintain
the status quo.17

The Office of the Court Administrator (OCA) found respondent judge guilty of grave
abuse of discretion and recommended a fine of twenty thousand pesos (P20,000.00),
with warning that a repetition of the same or similar acts shall be dealt with more
severely.

We agree with the recommendation of the OCA as we find respondent judge’s actions
to constitute grave abuse of authority.

First, respondent judge ordered a hearing on the issuance of a temporary restraining

order although it was not prayed for in the complaint. We are not impressed with
respondent judge’s argument that the caption and the body of the complaint showed
an intent to include a prayer for a temporary restraining order. Nowhere in the
allegations in the complaint was it shown that great or irreparable injury would result
to the plaintiff, NSSC, pending hearing on the preliminary injunction. Under Section
5, Rule 58 of the 1997 Rules of Civil Procedure, a temporary restraining order may
be issued only if it appears from the facts shown by affidavits or by the verified
application that great or irreparable injury would result to the applicant before the writ
of preliminary injunction could be heard. In addition, Section 4(a) of Rule 58 of the
Rules of Court is clear with regard to the procedure to be followed in the issuance of
writs of preliminary injunction, i.e., a preliminary injunction or temporary restraining
order may be granted only when the application in the action or proceeding is verified,
and shows facts entitling the applicant to the relief demanded.18 We note that the
relief sought by NSSC in the original complaint consisted mainly of its reinstatement
as dealer of Nissan vehicles and spare parts in Northern Mindanao, and the
termination of the dealership agreement between UMC and NICAD. NSSC did not
allege facts to support an urgent need to issue a temporary restraining order to
prevent any great or irreparable injury that it might suffer while the preliminary
injunction is being heard. In one case, the Court penalized a judge who awarded
reliefs to plaintiffs without any showing that such reliefs were applied for.19
Second, respondent judge issued the temporary restraining order without requiring
the plaintiff to post a bond. Sec. 4, Rule 58 of the 1997 Rules of Civil Procedure states:

Sec. 4. Verified application and bond for preliminary injunction or temporary

restraining order. — A preliminary injunction or temporary restraining order may be
granted only when:

(a) The application in the action or proceeding is verified, and shows facts entitling
the applicant to the relief demanded; and

(b) Unless exempted by the court, the applicant files with the court where the action
or proceeding is pending, a bond executed to the party or person enjoined, in an
amount to be fixed by the court, to the effect that the applicant will pay to such party
or person all damages which he may sustain by reason of the injunction or temporary
restraining order if the court should finally decide that the applicant was not entitled
thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be
issued.

xxx

While Section 4(b) of Rule 58 gives the presiding judge the discretion to require a
bond before granting a temporary restraining order, the Rules did not intend to give
the judge the license to exercise such discretion arbitrarily to the prejudice of the
defendant. Certainly, each member of the Bench is not a depository of arbitrary
power, but a judge under the sanction of law.20 The bond under Rule 58 is intended
to pay all the damages which the party or person against whom the temporary
restraining order or injunction is issued may sustain by reason thereof should the
court finally decide that the applicant was not entitled thereto. Hence, it follows that
unless it appears that the enjoined party will not suffer any damage, the presiding
judge must require the applicant to post a bond, otherwise the courts could become
instruments of oppression and harassment.

It is worthy to note that prior to the effectivity of the 1997 Rules of Civil Procedure, no
bond was required for the availment of a temporary restraining order. However, the
present Rules now regulate the issuance of temporary restraining orders, not only by
requiring a hearing, but also by imposing a bond on the applicant to prevent the abuse
of this relief by litigants. As explained by Remedial Law expert Justice Florenz D.
Regalado:

Under this amended section, a temporary restraining order has been elevated to the
same level as a preliminary injunction in the procedure, grounds and requirements
for its obtention. Specifically on the matter of the requisite bond, the present
requirement therefor not only for a preliminary injunction but also for a restraining
order, unless exempted therefrom by the court, puts to rest a controversial policy
which was either wittingly or unwittingly abused. Heretofore, no bond was required
for the issuance of a temporary restraining order, except in labor cases brought to the
Supreme Court on certiorari from a decision of the National Labor Relations
Commission where a monetary award was granted, in which case the policy of the
Supreme Court was to require a bond equivalent to the monetary award or benefits
granted as a condition for the issuance of a temporary restraining order. The
exemption from bond in other cases, plus the fact that no hearing was required, made
a temporary restraining order a much sought relief for petitioners.21

The temporary restraining order issued by respondent judge in Civil Case No. 2002-
058 effectively enjoined the defendants therein, UMC and NICAD, from doing
business as dealer of Nissan vehicles in Northern Mindanao. It does not require deep
thinking to realize the losses that these companies will suffer if the court orders them
to freeze operations. Not only will they be deprived of potential earnings from sales
but they will also have to expend for their overhead even if they are not able to do
business. Any fair judge would require the plaintiff in such case to ensure
compensation to the defendant if it is later found that the former is not entitled to the
injunction. But not respondent judge. He even rejected complainant’s motion to fix the
plaintiff’s bond in Civil Case No. 2002-058, although complainant, as defendant
therein, had clearly manifested its willingness to post a counterbond. We cannot
consider such error on the part of respondent judge as mere error in judgment. We
agree with the findings of the OCA, thus:

From the foregoing, it is very evident that respondent committed grave abuse of
discretion when he issued an Order dated March 1, 2002 setting the application for a
Temporary Restraining Order for hearing notwithstanding the fact that the plaintiffs
(NSSC) were not applying for a temporary restraining order in their complaint. The
alleged irregularity was later on corrected when the plaintiffs filed an Amended
Complaint on March 6, 2002 by inserting the prayer for an application [for] Temporary
Restraining Order which the Court admitted on [the] same day.

In the case at bar, the errors committed by the respondent were not honest mistakes
in the performance of his duties. There was no urgency nor any irreparable injury
which would require the issuance of a Temporary Restraining Order and/or
Preliminary Injunction in favor of the plaintiffs. As correctly pointed out by the Court
of Appeals in its Decision dated July 24, 2002 the defendants (UMC) had already
terminated its dealership agreement with the plaintiffs (NSSC) as early as October
30, 2001 on clear grounds of failure to pay its financial obligations, and, thus, the latter
(NSSC) were no longer entitled to avail of the remedy of injunction as the act to be
prevented by the issuance thereof had long been consummated.

As for the rest of the charges, we find that the complainant failed to adduce evidence
in support of the same.

As a matter of public policy, not every error or mistake of a judge in the performance
of his official duties renders him liable. In the absence of fraud, dishonesty or
corruption, the acts of a judge in his official capacity do not always constitute
misconduct although said acts may be erroneous. It is true that a judge may not be
disciplined for error of judgment absent proof that such error was made with a
conscious and deliberate intent to cause an injustice. This does not mean, however,
that a judge need not observe propriety, discreetness and due care in the
performance of his official functions.22 Indeed, all members of the Bench are enjoined
to behave at all times as to promote public confidence in the integrity and impartiality
of the judiciary.23 Respondent judge’s actions with respect to the issuance of the
temporary restraining order in Civil Case No. 2002-058 failed to live up to such high
standards of judicial conduct.

IN VIEW WHEREOF, respondent judge is ordered to pay a FINE of TWENTY

THOUSAND PESOS (P20,000.00) and WARNED that commission of the same or
similar acts shall be dealt with more severely.

SO ORDERED.

9. A.M. No. RTJ-04-1826 February 6, 2008

GREENSTAR BOCAY MANGANDINGAN, complainant, vs.

JUDGE SANTOS B. ADIONG, Regional Trial Court (RTC), Branch 8, Marawi City;
ATTY. CAIRODING P. MARUHOM, Clerk of Court VI and MR. MASBOD M. SYBIL,
Cash Clerk II, both of the RTC, Office of the Clerk of Court, Marawi City, respondents.

RESOLUTION

PER CURIAM:

In his Affidavit-Complaint1 dated April 15, 2003, complainant Greenstar Bocay

Mangandingan charges respondent Judge Santos B. Adiong, presiding judge of the
Regional Trial Court (RTC) of Lanao del Sur, Marawi City, Branch 8, with gross
ignorance of the law or procedure; manifest unfaithfulness to a basic legal rule as well
as injudicious conduct; grave abuse of authority; grave misconduct; conduct
prejudicial to the administration of justice; violation of Rules 3.012 and 3.023 of the
Code of Judicial Conduct; knowingly rendering an unjust interlocutory order; and bias
and partiality.

Complainant was proclaimed the Punong Barangay of Basak-Bangco, Madalum,

Lanao del Sur during the special election on August 13, 2002 by virtue of Commission
on Elections (COMELEC) En Banc Resolution No. 03-0062.

On March 3, 2003, the losing candidate, Alizaman S. Sangcopan, filed with the RTC
of Lanao del Sur an action for damages with prayer for preliminary injunction and/or
preliminary mandatory injunction and temporary restraining order (TRO) against the
seven commissioners of the COMELEC; the winning and duly proclaimed
barangayofficials of BarangayBasak-Bangco including herein complainant; the Acting
Election Officer; the Board of Election Tellers of Precinct No. 68A; the Land Bank of
the Philippines (LBP); and the Chief of Barangay Affairs-Department of Interior and
Local Government (DILG), Province of Lanao del Sur. Said case was docketed as
Civil Case No. 1912-03.4

On March 5, 2003, the respondent Clerk of Court Atty. Cairoding P. Maruhom issued
the summons.5 Before these could be served on any of the defendants, however,
Judge Adiong issued a TRO without conducting a hearing. He also set the hearing on
the application for the issuance of a preliminary injunction on March 20, 2003.6
Complainant claims that there is no showing in the records that the case was raffled
to Branch 8 of the RTC presided by Judge Adiong when said TRO was issued.7

On March 7, 2003, the sheriff made a return of service which partly provides that the
defendants were served with summons through Datu Hassan Mangondaya at his
residence in Madalum, Lanao del Sur.8

Complainant claims that there was no valid service of summons on the defendants in
accordance with Sections 6 and 7 of Rule 14 of the Rules of Court since the same
was given to a certain Datu Hassan Mangondaya of Madalum, Lanao del Sur who
had absolutely nothing to do with the case and was not even authorized by the court
to receive summons for the defendants.

Complainant also alleges that on March 11, 2003, or barely six days after issuing the
TRO, Judge Adiong, without notice or hearing, issued another order extending the
effectivity of the illegally issued TRO for another twenty (20) days, prior to the
expiration of the TRO's effectivity and in blatant and open violation of Section 5 of
Rule 58 of the Rules of Court and Batas Pambansa Blg. 224.9

On March 20, 2003, Judge Adiong considered the application for a writ of preliminary
injunction submitted for resolution. The following day, he granted plaintiff's application
for a writ of preliminary injunction then issued the writ on March 25, 2003.10

Complainant avers that it was only on March 28, 2003 when he received a copy of
the summons at the Municipal Hall of Madalum, Lanao del Sur.

In his Supplemental Affidavit-Complaint11 dated May 7, 2003, complainant charges

respondents Atty. Cairoding P. Maruhom and Masbod Sybil with dishonesty, grave
misconduct in office, conduct prejudicial to the orderly administration of justice, and
violation of Section 3, paragraph (e) of Republic Act No. 3019.12

Complainant claims that Maruhom and Sybil conspired with Judge Adiong and Atty.
Edgar Masorong, counsel for the plaintiff, to manipulate the raffle of the case. Based
on the record of the raffling proceedings conducted at the Office of the Executive
Clerk of Court of Marawi City on April 1, 2003, Civil Case No. 1912-03 was raffled
only on said date and to Branch 10, not to Branch 8.13 Complainant also alleges that
instead of immediately notifying and/or summoning the parties pursuant to Supreme
Court Administrative Circular No. 20-95,14 Maruhom delivered the record of the case
to Judge Adiong on March 5, 2003. After the Writ of Preliminary Injunction was issued
on March 25, 2003, the record of the case was returned to the Office of the Executive
Clerk of Court where it was finally raffled to Branch 10 on April 1, 2003.

Complainant avers that he filed his Answer with Special and Affirmative Defenses15
with Branch 10, on April 3, 2003, but his Most Urgent Motion to Dissolve Writ of
Preliminary Injunction,16 which he scheduled for hearing on April 29, 2003, was not
heard on that date because it was not included in the court calendar of Branch 10.
Upon inquiry, it was discovered that Sybil had taken the records of the case from
Branch 10 without the knowledge and authority of the branch clerk of court and the
presiding judge, and replaced the case with Civil Case No. 1916-03 entitled "Amer D.
Bantuas, Jr. v. Felix Taranao, Jr." Complainant also alleges that Sybil manipulated
which branch of the RTC the case would be assigned for hearing, in conspiracy with
Maruhom, Judge Adiong and Atty. Masorong.

The complaint and supplemental complaint having been filed directly with the Office
of the Court Administrator (OCA), then Court Administrator17 Presbitero J. Velasco,
Jr. directed respondents, Judge Adiong, Atty. Maruhom and Mr. Sybil, to submit their
respective comments.

In his Comment18 dated June 25, 2003, Judge Adiong claims that there was valid
service of summons or if there was any defect the same had been cured when the
defendant filed his answer. According to Judge Adiong, the summons were served
through Datu Hassan Mangondaya, the former Municipal Vice Mayor of Madalum,
Lanao del Sur. As such, he is certainly a man of suitable age and discretion as well
as a prominent citizen who literally knows everybody in the community. Judge Adiong
claims that he relied upon the belief that the court sheriff had regularly done his job.

Judge Adiong argues that the issuance of the TRO on March 5, 2003 without prior
notice and hearing was valid pursuant to Supreme Court Administrative Circular No.
20-95, which authorizes the ex parte issuance of a TRO by an executive judge in
matters of extreme urgency, in order to prevent grave injustice and irreparable injury.
He claims that such circumstance was clearly obtaining at the time he issued the
TRO.

He also claims that when he extended the TRO to its maximum duration of twenty
(20) days from its issuance, no violation of Section 5 of Rule 58 of the Rules of Court
or B.P. Blg. 224was committed. He adds that if indeed notice of the preliminary
hearing was not received by complainant before March 11, 2003, that matter should
have been brought to the attention of the court by the defendants in Civil Case No.
1912-03 when the latter's counsel appeared at the Office of the Clerk of Court on
March 20, 2003 to complain about the improper service of summons. But they did not;
hence, the same is considered waived.

Judge Adiong maintains that the grant and issuance of the writ of preliminary
injunction were perfectly valid. Complainant's claim that he was not properly served
a summons is belied by the appearance of his counsel at the Office of the Clerk of
Court in the morning of March 20, 2003, shortly before the hearing of the application
for issuance of a writ of preliminary injunction was called.

Sybil in his Comment19 dated August 5, 2003 admits that sometime in April 2003,
plaintiff Sangcopan came to see him and asked if it was possible to have his complaint
heard by RTC Branch 8, since the case was already started there. Sangcopan was
concerned he might not have an impartial trial at RTC Branch 10 because the
presiding judge therein was involved in the political career of his son, Yusoph
Pangadapun, Jr., the incumbent Vice Mayor of Marawi City, and especially
considering that the principal defendants in the case are the members of the
COMELEC.

Because the case had just been raffled and there was no other sala to which it can
be re-raffled, Sybil told Sangcopan that they will have to ask RTC Branch 10 if said
branch is willing to exchange Civil Case No. 1912-03 with a Branch 8 case. He also
said that they will have to ask Judge Adiong's permission for the case to be
reassigned to his sala.

Candidato Dayondong, a court personnel of Branch 10 in charge of civil cases,

allegedly agreed subject to the conformity of the parties. Upon request, Judge Adiong
also agreed to the exchange.

Shortly after the exchange, Dayondong informed Sybil that complainant's counsel had
objected to the transfer prompting Sybil to immediately retrieve the complete case file
from Branch 8 and return it to Branch 10.

In his Comment20 dated July 31, 2003, Clerk of Court Maruhom avers that he had no
participation or knowledge of what transpired during the court proceedings from the
time Civil Case No. 1912-03 was filed, much less did he conspire with the other
respondents in the performance of all acts complained of. The alleged switching of
cases by Sybil was done without his knowledge, consent or instruction.

Judge Adiong in his Supplemental Comment21 dated August 4, 2003 admits

acquiescing to Sybil and Sangcopan's request because he was satisfied "that no
malice could be entertained from the Sangcopan's request" and no prejudice can be
inflicted upon the rights of any of the parties since the case would have to be totally
heard on its merits. Thereafter, the urgent motion to dissolve the issued injunctive writ
was set for hearing. But before that could take place, the case was returned to Branch
10 because the complainant's counsel had allegedly objected to the reassignment of
the case to respondent Judge's sala.

Upon evaluation of the case, the OCA found the complaint partly meritorious. It found
that the summons served through the former vice mayor of Madalum, Lanao del Sur
was not the valid substituted service contemplated by law. It also found that "[t]here
could be no way to avoid the impression of irregularity when the raffling procedure is
circumvented. For which reason, Judge Adiong and Sybil should be held
administratively liable."22 It recommended that the complaint against Maruhom be
dismissed for lack of merit and that both Judge Adiong and Sybil be held liable for
violation of Supreme Court rules, directives and circulars and each be fined in the
amount of twenty thousand pesos (P20,000).

We agree with the findings of the OCA that respondents Judge Adiong and Sybil
should be held administratively liable. However, we find the recommended penalties
too light under the circumstances of this case and find it more appropriate to impose
heavier penalties. We likewise find that the complaint against respondent Maruhom
should not be dismissed because he is also administratively liable.

We start with the determination of the extent of liability of Judge Adiong. We find
Judge Adiong's justifications for his acts unconvincing. No matter how urgent a case
may be, this fact cannot justify the procedural shortcuts employed by respondent
judge, i.e. dispensing with the proper service of summons,23 and the violation of
Section 5 of Rule 58 of the Rules of Court.

Rule 14 of the Rules of Court provides:

RULE 14

SUMMONS

xxxx

SEC. 6. Service in person on defendant.–Whenever practicable, the summons shall

be served handing a copy thereof to the defendant in person, or, if he refuses to
receive and sign for it, by tendering it to him.

SEC. 7. Substituted service.–If, for justifiable causes, the defendant cannot be served
within a reasonable time as provided in the preceding section, service may be effected
(a) by leaving copies of the summons at the defendant's residence with some person
of suitable age and discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent person in charge
thereof.

It is glaringly obvious from the service return24 of the sheriff that the proper service
as provided for in the rules was not followed. No copy of the summons was handed
to any of the defendants who were natural persons. Neither was a copy left at any of
their residences or offices. What the sheriff did was to leave a copy of the summons
at the residence of Datu Hassan Mangondaya, a total stranger to the case. The sheriff
also left a copy of the summons for defendant LBP with the manager of the LBP
Marawi City Branch, although the latter is not one of those enumerated in Section
1125 of Rule 14 of the Rules of Court upon whom service may be made when the
defendant is a corporation. In the face of contrary evidence clearly showing that there
was defective service of summons, Judge Adiong could not be justified in assuming
that the sheriff regularly performed his duties.

Worth stressing, Section 5, Rule 58 of the Rules of Court states that:

SEC. 5. Preliminary injunction not granted without notice; exception. – No preliminary

injunction shall be granted without hearing and prior notice to the party or person
sought to be enjoined. If it shall appear from facts shown by affidavits or by the verified
application that great or irreparable injury would result to the applicant before the
matter can be heard on notice, the court to which the application for preliminary
injunction was made, may issue ex parte a temporary restraining order to be effective
only for a period of twenty (20) days from service on the party or person sought to be
enjoined, except as herein provided. Within the said twenty-day period, the court must
order said party or person to show cause, at a specified time and place, why the
injunction should not be granted, determine within the same period whether or not the
preliminary injunction shall be granted, and accordingly issue the corresponding
order.

However, and subject to the provisions of the preceding sections, if the matter is of
extreme urgency and the applicant will suffer grave injustice and irreparable injury,
the executive judge of a multiple-sala court or the presiding judge of a single-sala
court may issue ex parte a temporary restraining order effective for only seventy-two
(72) hours from issuance but he shall immediately comply with the provisions of the
next preceding section as to service of summons and the documents to be served
therewith. Thereafter, within the aforesaid seventy-two (72) hours, the judge before
whom the case is pending shall conduct a summary hearing to determine whether the
temporary restraining order shall be extended until the application for preliminary
injunction can be heard. In no case shall the total period of effectivity of the temporary
restraining order exceed twenty (20) days, including the original seventy-two hours
provided herein.

In the event that the application for preliminary injunction is denied or not resolved
within the said period, the temporary restraining order is deemed automatically
vacated. The effectivity of a temporary restraining order is not extendible without need
of any judicial declaration to that effect and no court shall have authority to extend or
renew the same on the same ground for which it was issued.

x x xx

Judge Adiong disregarded these provisions of the Rules. He could not plausibly claim
that he issued a 72-hour TRO under the second paragraph of the rule quoted above
because, first, he was not the executive judge. Second, his order did not state that
the TRO was effective for 72 hours only. On the contrary, the defendants were
ordered to desist from releasing the subject funds "until further orders from this Court."
Third, there was no showing that the order was being issued because of extreme
urgency to justify the issuance of a 72-hour TRO. Judge Adiong only stated in his
order that he was "[a]cting on the prayer for the issuance of a Writ of Preliminary
Injunction, without finding that the plaintiff was entitled thereto."26

Judge Adiong's violations of the Rules in issuing the TRO are patent and inexcusable.

This Court already ruled that failure to abide by Administrative Circular No. 20-9527
constitutes the offense of grave abuse of authority, misconduct and conduct
prejudicial to the proper administration of justice. Indeed, a judge is presumed to know
this Circular. Judge Adiong's failure to comply with the clear provisions on issuing
TROs constitutes gross ignorance and gross inefficiency.28

We also agree that the presumptions of good faith and regularity in the performance
of judicial functions on the part of Judge Adiong were negated by the circumstances
on record. First, there was no proper notice to the herein complainant and the other
defendants in Civil Case No. 1912-03 that an application for the issuance of a TRO
had been filed. Second, Judge Adiong did not conduct a summary hearing before
granting the TRO. Third, as will be discussed hereafter, he contravened the circular
on the raffle of cases. All these systematically deprived complainant and the other
defendants of knowledge of and participation in the TRO proceedings and ensured
the unchallenged victory of Sangcopan therein. These three points, taken together,
paint a picture of bias or partiality on the part of Judge Adiong. His acts amount to
gross misconduct29 constituting violations of the following provisions of the Code of
Judicial Conduct:

CANON 2–A JUDGE SHOULD AVOID IMPROPRIETY AND APPEARANCE OF

IMPROPRIETY IN ALL ACTIVITIES.

Rule 2.01 – A judge should so behave at all times as to promote public confidence in
the integrity and impartiality of the judiciary.

xxxx

CANON 3–A JUDGE SHOULD PERFORM OFFICIAL DUTIES HONESTLY, AND

WITH IMPARTIALITY AND DILIGENCE.

xxxx

Gross ignorance of the law or procedure and gross misconduct are classified as
serious charges under Section 830 of Rule 140 of the Rules of Court for which any of
the following sanctions under Section 11 of Rule 140 may be imposed:

1. Dismissal from the service, forfeiture of all or part of the benefits as the Court may
determine, and disqualification from reinstatement or appointment to any public office,
including government-owned or controlled corporations: Provided, however, that the
forfeiture of benefits shall in no case include accrued leave credits;

2. Suspension from office without salary and other benefits for more than three (3)
but not exceeding six (6) months; or

3. A fine of more than P20,000.00 but not exceeding P40,000.00.

The Court notes that Judge Adiong was previously fined P20,000 for ignorance of the
law in Bantuas v. Pangadapun31 and P5,000 for gross ignorance of the law in Mutilan
v. Adiong.32 He was also warned in the latter case that repetition of the same or
similar acts in the future will be dealt with most severely. In Gomos v. Adiong,33 Judge
Adiong was again found guilty of gross ignorance of the law for issuing a writ of
preliminary injunction in violation of Section 21(1)34 of B.P. Blg. 12935and Sections
4(c)36 and 5, Rule 58 of the Rules of Court and for citing FAPE employees in
contempt of court in disregard of Section 3,37 Rule 71. Accordingly, he was
suspended from office without salary and other benefits for six (6) months with a
warning that a repetition of the same or similar acts shall be dealt with more severely.
In De la Paz v. Adiong,38 Judge Adiong was found guilty of gross ignorance of the
law and abuse of authority and was suspended for a period of six (6) months without
pay, with a warning that the commission of a similar act in the future will warrant his
dismissal from the service.

This Court cannot countenance the complacence of Judge Adiong manifested in his
gross ignorance and his deliberate misapplication or misinterpretation of the very
basic procedures subject of the present case to justify his actions that favor certain
litigants. Under the circumstances, and considering his propensity for disregarding
elementary rules of procedure, the extreme sanction of dismissal is called for.

Next, we discuss the liability of respondent Maruhom, the Clerk of Court of RTC,
Marawi City. In his Comment, he states that the complaint in Civil Case No. 1912-03
was filed on March 3, 2003 at 2:30 p.m. He referred it to Judge Adiong on March 5,
2003.39 He alleges that Judge Adiong was the only available RTC Judge at that time.
We find such referral unjustified. The case had already waited for more than a day
after being filed in court. From all indications, the case was not so urgent that
irreparable injury would be caused if the case was not acted upon in the first hours of
March 5, 2003. It could have waited some hours more for the arrival of the proper
official, the Executive Judge, to act on it. The undue haste of Maruhom in referring
the case to Judge Adiong for action, without a raffle being first conducted, is a
blatantly unjustified violation of the circulars of the Court which makes him
administratively liable. His act was instrumental in the resulting series of anomalous
events leading to the issuance of a temporary restraining order by an unauthorized
judge. By his act he made a mockery of settled procedure for the orderly dispensation
of justice. Time and again, this Court has emphasized the heavy burden and
responsibility of court personnel. They have been constantly reminded that any
impression of impropriety, misdeed or negligence in the performance of their official
functions must be avoided. The Court does not hesitate to condemn and sanction
such improper conduct, act or omission of those involved in the administration of
justice that violates the norm of public accountability and diminishes or tends to
diminish the faith of the public in the judiciary.40

For his prejudicial acts in the conduct of his official tasks, we find Maruhom guilty of
simple misconduct.41 The Uniform Rules on Administrative Cases in the Civil Service
reveals that simple misconduct carries with it a penalty of suspension from one (1)
month and one (1) day to six (6) months for the first offense. In our view, his
misconduct calls for the imposition of three (3) months suspension from office.

Finally, we now consider the acts of Sybil.

Supreme Court Circular No. 742 pertinently provides:

I. Raffling of Cases

All cases filed with the Court in stations or groupings where there are two or more
branches shall be assigned or distributed to the different branches by raffle. No case
may be assigned to any branch without being raffled. The raffle of cases should be
regularly conducted at the hour and on the day or days to be fixed by the Executive
Judge.…

The importance of assigning cases by raffle is obvious. Such method of assignment

safeguards the right of the parties to be heard by an impartial and unbiased tribunal,
while protecting judges from any suspicion of impropriety. For this reason, disregard
of Circular No. 7, which requires such raffle of cases, cannot be taken lightly.43

Parenthetically, Judge Adiong apparently sees nothing wrong with Sybil's highly
irregular act of exchanging the records of two cases in violation of the rules on raffle.
This is a reflection of moral obtuseness which further renders respondent judge unfit
to continue in the judicial office.

Going back to Sybil, he should bear in mind that employees of the judiciary must be
mindful and should tread carefully when assisting other persons.44 Court employees
should maintain a hands-off attitude where dealings with party-litigants are concerned
to maintain the integrity of the courts and to free court employees from suspicion of
any misconduct.45

In Macalua v. Tiu, Jr.,46 this Court held:

…[A court employee] is expected to do no more than what duty demands and no less
than what privilege permits. Though he may be of great help to specific individuals,
but when that help frustrates and betrays the public's trust in the system it cannot and
should not remain unchecked. The interests of the individual must give way to the
accommodation of the public – Privatum incommodum publico bono pensatur.47
(Emphasis supplied.)

By not abiding by the rules on raffle, Sybil opened himself to the suspicion that he is
biased and that he acted to favor the plaintiff. His highly improper conduct subjected
the court's integrity to distrust. For this, the Court finds respondent Sybil guilty of
simple misconduct.

WHEREFORE, the Court finds:

1. Judge Santos B. Adiong GUILTY of gross ignorance of the law as well as gross
misconduct constituting violation of the Code of Judicial Conduct. He is DISMISSED
from the service with forfeiture of all benefits except his accrued leave credits, if any.
He is further disqualified from reinstatement or appointment to any public office,
including government-owned or controlled corporations.

2. Atty. Cairoding P. Maruhom GUILTY of simple misconduct. He is SUSPENDED

from office for three (3) months, effective immediately.

3. Mr. Masbod M. Sybil GUILTY of simple misconduct. He is SUSPENDED from office

for three (3) months, effective immediately.

SO ORDERED.

10. G.R. No. 167174 September 23, 2013

SPOUSES CARMELITO and ANTONIA ALDOVER, Petitioners,

vs.
THE COURT OF APPEALS, SUSANA AHORRO,ARLINE SINGSON, BIBIANA
CAHIBAYBAYAN, LUMINADA ERQUIZA,1 ANGELITA ALBERT, JOSELITO
ACULA, SORAYDA ACULA, JOMAR ACULA, CECILIA FAMORCA, CELESTE
VASQUEZ, ALFONSO CABUWAGAN, CARMELITA RIVERA, JESSIE
CAHIBAYBAYAN, MA. ANA V. TAKEGUCHI, ROSEMARIE BONIFACIO,
ANGELINA FLORES, ALMACERES D. MISHIMA, AURELIA CAHIBAYBAYAN,
SONIA S. MALAQUE, NORA ANTONIO, REYNALDO ANTONIO, REGINALD
ANTONIO, RONALDO ANTONIO, JR., JUANITA CHING,2 MARIETA PACIS, TITO
PACIS, JOSE IBAYAN, ELSIE SISON, LEONARDO SISON, MERCEDES
ANTONIO, RICARDO SARMIENTO,3 SERGIO TEGIO, CRISENCIA FAVILLAR,
NELLY FERNANDEZ, MARILYN DE VEGA, CELIA TUAZON, CELINE RAMOS,
EUTEMIO RAMOS, LUZVIMINDA VERUEN, NICANOR ORTEZA, ADELAIDA
CALUGAN,4 GLORIA AGBUSAC,5 VIRGINIA GAON, REMIGIO MAYBITUIN,
LAURA GARCIA, CHARLES GARCIA, MA. CRISTINA GARCIA, 6 RICARDO
SARMIENTO, SR., ROBERTO TUAZON, GEMMA TUAZON, ANALYN TUAZON,
JOHN ROBERT TUAZON, ELJEROME TUAZON, JEMMALYN TUAZON,
MILAGROS TUBIGO,7 MARICAR TUBIGO,8 MARISSA BITUIN,9ROGER GOBRIN,
MARCELINA RAMOS, ESTRELLA RAMOS, ALFREDO RAMOS, ADORACION
RAMOS, ERICSON RAMOS, CAMILLE RAMOS, RAMIL MARQUISA, 10 ROMEO
PORCARE, NIDA PORCARE, JEROME PORCARE, JONATHAN PORCARE,
PILARCITA ABSIN, JHON-JHON ABSIN, JASON ABSIN,11 JAYSON ABSIN,
EDWARDO ABSIN, MAMRIA EDEN,12 ARNEL REUCAZA, ZENAIDA REUCAZA,
MICHELE REUCAZA, NALYN REUCAZA,13 MARICRIS REUCAZA, ABELLE
REUCAZA,14 JHON VILLAVECENCIO, CILLE VILLAVECENCIO, ARIEL
CAHIBAYBAYAN, JOHN EDWARD VILLAVECENCIO, ARCELITO
15
VILLAVECENCIO, FERMINA RIVERA, ANITA RIVERA, EDWIN HOSMILLO,
ESTER HOSMILLO, REGINE HOSMILLO, MARFIKIS VENZON, CURT SMITH
VENZON, ALBERTO VILLAVECENCIO, MARILYN DE VEGA, JEFFREY DE
VEGA, LIANA DE VEGA, RAMIL DE VEGA,16 SHANE VENZON, RUFO SINGSON,
ROSALIE BALINGIT, RAUL SINGSON, HAZEL GARCIA, CRISTINE GARCIA,
JASON GARCIA, ECY B. TAN,17 GREGORIO AURE, ICTORIA
18 19
SARMIENTO, OSCAR TUBIGO, JOVY SARMIENTO, BABYLYN SARMIENTO,
JEAN CAHIBAYBAYAN,20RONALD CAHIBAYBAYAN,21 ALLAN
CAHIBAYBAYAN, AMELIA DEQUINA, DENNIS DEQUINA, IRMA DEQUINA,
FREDERICK DEQUINA, CRISTINE JOY DEQUINA, ENRIQUE LOPEZ,22 NERY
LOPEZ, NERISSA LOPEZ, ERICA LOPEZ, VANESSA LOPEZ, LEO JIMENEZ,
MICHELLE JIMENEZ, MAYLEEN JIMENEZ, LEONARDO JIMENEZ,23 FELICIANO
MIRALLES, VIRGINIA ECIJA, LEONARDO AHORRO, MA. GINA SORIO, ARNEL
SORIO, JOENNY PAVILLAR, SALVACION PAVILLAR, JOHNNY BALDERAMA,
MARY JANE BALDERAMA, FERDINAND MALAQUE, MARK ADELCHI
MALAQUE, CLIO JOY MALAQUE, IRISH MADLANGBAYAN, EFFERSON
MADLANGBAYAN, ROBERTO MALAQUE, HELARIA MALAQUE,24 ARBIE MAY
MALAQUEROY,25 GILBERT MALAQUE,26 SARRY LEGASPI, TERESITA
LEGASPI, ROSEANN CRUZ, SHE ANN CRUZ, EXELEN LEGASPI, GREGORIO
RAMOS, NENITA RAMOS, FELINO TEGIO, JOYZAIRRA ACULA, JUANITO
CALUGAY,27 GEMMA CALUGAY, CARLITO ANTONIO, CELIA
28 29 30
ANTONIO, PRINCES MARGARET, JOSE CECILIO, JEROME
31
CZAR, RAMON SISON, DANILO SISON, MARILOU SISON, ALEX RIVERA,
NARCISO DEL ROSARIO, BRIAN DEL ROSARIO,32 CHARLINE DEL ROSARIO,
CARMELA DEL ROSARIO, KEVIN DEL ROSARIO, BEHNSIN JOHN DEL
PACIS,33 MELRON ANTONIO,ANGEO ANTONIO,34DAISY ANN ANTONIO, IVAN
ANTONIO, RAYMART ANTONIO, PRESCILLA PAGKALIWANGAN, MARK
KENNETH PAGKALIWANGAN, MARK JULIUS PAGKALIWANGAN, VINCENT
PAGKALIWANGAN, DOLORES ORTEZA, JONECA ORTEZA,35 YUMI ORTEZA,
NICANOR ORTEZA, RAUL BALINGINT, KATRINA CASSANDRA BAES,
CHRISTOPHER BAES, MARK GIL BAES, BIENVENIDO BAES, ARTEMIO
SANTOS, CATHERINE UMINGA, ROLANDO UMINGA, SR., ERLINDA TUAZON,
CHRISTIAN TUAZON, ARGEL ANGELO SANTOS, MONTANO
PAGKALIWANGAN, in their own behalf and as members of Samahang
Magkakapitbahay ng Villa Reyes Compound Association. Respondents.

DECISION
DEL CASTILLO, J.:

This Petition for Certiorari36 filed under Rule 65 of the Rules of Court seeks to annul:
(i) the January 3, 2005 Resolution37 of the Court of Appeals (CA) in CA-G.R. SP No.
86363, which granted herein respondents’ ancillary prayer for injunctive relief: and (ii)
the February 10, 2005 Writ of Preliminary Injunction38 issued pursuant thereto. Said
writ enjoined the Regional Trial Court (RTC), Branch 71, Pasig City from
implementing its August 9, 2004 Order39 directing the issuance of a Writ of Demolition
against the respondents.

Factual Antecedents

Siblings Tomas M. Reyes and Sidra M. Reyes and their father Alfredo Reyes (the
Reyeses) were the registered owners of a 4.044-square meter lot, (TCT) No. PT-
107508.40 On August 12, 1999, they obtained a loan from AntoniaB. Aldover (Aldover)
secured by a Real Estate Mortgage (REM)41 over the said property.

When the Reyeses failed to pay, Aldover caused the extrajudicial foreclosure of
mortgage. At the foreclosure sale conducted, Aldover emerged as the winning bidder.
A Certificate of Sale was issued in her favor which was annotated at the back of TCT
No. PT-107508 on September 2, 2002.42

Thereafter, Aldover filed with the RTC of Pasig City a verified Petition for the Issuance
of a Writ of Possession docketed as LRC Case No. R-6203.43 On August 26, 2003,
Branch 71 of the RTC of Pasig City issued a Decision44granting Aldover’s Petition for
Issuance of a Writ of Possession subject to the posting of a bond.

On December 12, 2003, the Reyeses filed a Motion to Recall and Lift Issuance of Writ
of Possession45 claiming, among others, that the mortgage and the auction sale of
property are both null and void as the mortgagee (Aldover) was not armed with a
special power of attorney to foreclose the mortgaged property extrajudicially. This
drew Aldover’s Opposition46 where she also prayed for the issuance of the writ sans
the requisite bond as the property was not redeemed within the one-year redemption
period.

In the meantime, Aldover also caused the consolidation of title over the foreclosed
property in her name. On December 17, 2003, TCT No. PT-107508was cancelled
and, in lieu thereof, TCT No. PT-12231147 was issued in Aldover’s name.

On March 17, 2004, Branch 71 issued an Order48 denying the Reyeses’ Motion to
Recall and granting Aldover’s motion to dispense with the posting of a bond. On the
same date, a Writ of Possession49 was issued directing the Branch Sheriff to place
Aldover in possession of subject lot.

In compliance with the writ, the Branch Sheriff issued a Notice to Vacate50 dated April
1, 2004. Then on April 23, 2004, he issued a Sheriff’s Partial Report51 informing the
court that he cannot fully implement the writ because there are several other persons
who occupy portions of subject lot claiming to be the owners thereof.

On May 17, 2004, respondents filed before the RTC of Pasig City a Complaint for
Declaration of Nullity of Documents and Title, Reconveyance and Damages with
Prayer for Temporary Restraining Order and/or Preliminary Injunction52 against
Aldover and her husband Carmelito (petitioners), the Reyeses, the Branch Sheriff,
and the Registrar of Deeds of Pasig City. In said Complaint docketed as Civil Case
No. 69979 and raffled to Branch 268 of said court, respondents alleged that they have
been residing in the same lot subject of LRC Case No. R-6203 since the 1960’s by
virtue of lease contracts wherein they were allowed by the Reyeses to build their
houses. Subsequently, their occupation became in the concept of owners after the
Reyeses sold to them portions of the lot they respectively occupy. Respondents
insisted that petitioners were aware of the lease and subsequent sale. Respondents
also claimed that the REM is a fictitious transaction because at the time of its
execution the Reyeses were no longer the owners of the entire property subject
thereof. Hence, the mortgage as well as the subsequent foreclosure sale is null and
void.

Respondents sought the issuance of a Temporary Restraining Order (TRO)and/or

Writ of Preliminary Injunction to immediately restrain petitioners from further
committing acts of dispossession and prayed for the cancellation of TCT No. PT-
122311. On July 5, 2004, however, they filed a Motion to Admit Attached Amended
Complaint as a matter of right (with prayer for withdrawal of TRO and injunction). 53

On July 26, 2004, Branch 268 issued an Order 54 denying respondents’ prayer for
TRO on the ground that it cannot interfere with the order of a coordinate court. This
was followed by an Order55 dated August 27, 2004 granting respondents’ Motion to
Admit and admitting respondents’ Amended Complaint where they withdrew their
ancillary prayer for injunctive relief.

Meanwhile, in LRC Case No. R-6203, in view of the Sheriff’s Partial Report, Aldover
filed a Motion for Special Order of Demolition.56 Branch 71granted the Motion in an
Order57 dated August 9, 2004, thus:

WHEREFORE, in view of the foregoing, the Motion for Special Order of Demolition is
hereby GRANTED. Let a writ issue.

The respondents and all other persons deriving rights from them are given sixty (60)
days from receipt of this Order to vacate the premises.

SO ORDERED.58

On September 14, 2004, respondents filed before the CA a Petition for Certiorari,
Prohibition, Injunction with prayer for the issuance of a Temporary Restraining Order
(TRO) and/or Writ of Preliminary Injunction59 against the petitioners and the Reyeses,
which they later on amended.60 Respondents alleged that on August 23, 2004 they
were surprised to receive the August 9, 2004 Order of demolition directing them to
vacate the premises within 60 days from notice since they were neither impleaded
nor notified of the proceedings conducted in LRC Case No. R-6203, as well as in the
foreclosure sale. Respondents postulated that they are not, therefore, bound by the
August 9, 2004 Order of Branch 71 for want of jurisdiction over their persons.
Respondents reiterated their claim in Civil Case No. 69979 that they own the portions
of subject lot which they respectively occupy. Thus, the implementation of said Order
would deprive them of their property without due process of law and would render
Civil Case No. 69979 pending before Branch 268 moot.

Respondents also asserted that the right they sought to be protected in their Petition
is clear and unmistakable and that the invasion of such right is material and
substantial. They thus prayed for the issuance of a TRO and/or Writ of Preliminary
Injunction to enjoin the implementation of Branch 71’s Order of demolition.61

On September 23, 2004, the CA issued a Resolution62 outrightly dismissing the

Petition on procedural grounds.
Invoking substantial justice and great and irreparable damage that may be caused by
the impending demolition of their homes, respondents filed an Omnibus Motion for
Reconsideration and Motion to Admit Attached Amended Petition.63 This was
followed by an Extremely Urgent Omnibus Motion for Re-Raffle and for Early
Resolution64since the Justice to whom the case was assigned was then on official
leave.

In a Resolution65 dated October 22, 2004, the CA reconsidered its resolution of

dismissal and granted respondents’ prayer for the issuance of a TRO. It restrained
the implementation of the Order of demolition as well as of the Notice to Vacate. In
the same Resolution, the CA required petitioners to file their comment to the Petition.

After the parties’ filing of pleadings66 and upon respondents’ motion,67 the CA set for
hearing on January 4, 2005 the propriety of issuing a Writ of Preliminary Injunction.
This hearing, however, did not push through since the CA already issued the
challenged January 3, 2005 Resolution68 granting respondents’ ancillary prayer for
injunctive relief. It disposed thus:

WHEREFORE, we resolve to:

1. GRANT respondents’ prayer for the issuance of a writ of preliminary injunction

enjoining petitioners from enforcing the Notice to Vacate and Order of Demolition.

2. ORDER the respondents to file a bond in the amount of Three Hundred Thousand
(₱300,000.00) Pesos within five (5) days from notice hereof, which shall answer for
whatever damages petitioners may sustain by reason of the injunction in the event
that we finally decide that respondents were not entitled thereto.

3. CANCEL the hearing set on January 4, 2005.

4. CONSIDER the main petition submitted for decision.

SO ORDERED.69

On January 12, 2005, petitioners filed a Motion for Reconsideration70 which was
denied by the CA in its January 24, 2005 Resolution.71 Then on February 8, 2005,
respondents posted the required injunction bond72 and the CA accordingly issued the
Writ of Preliminary Injunction73 on February 10, 2005.

Petitioners subsequently filed a Motion for Inhibition of the CA Sixth (6th)

Division74 which the CA granted in a Resolution75 dated March 28, 2005. Thereafter,
petitioners sought recourse before us via this Petition for Certiorari ascribing grave
abuse of discretion on the part of the CA for the following reasons:

Issues

THE COURT OF APPEALS, IN EFFECT, GAVE ITS IMPRIMATUR ONTHE VERY

CLEAR ACT OF FORUM SHOPPING DONE BY THEPRIVATE RESPONDENTS.

II

THE PETITION FOR CERTIORARI FILED BY PRIVATE RESPONDENTSBEFORE

THE COURT OF APPEALS WAS AN IMPROPER REMEDY.
III

IN ANY CASE, EVEN ASSUMING THE PETITION FOR CERTIORARIWAS A

PROPER REMEDY THE SAME, HOWEVER, WAS CLEARLYFILED OUT OF TIME.

IV

THE WRIT OF PRELIMINARY INJUNCTION THE COURT OF APPEALSISSUED

GOES AGAINST ESTABLISHED JURISPRUDENCE ON THEMATTER.VPRIVATE
RESPONDENTS, EVEN ASSUMING THEIR FACTUALCLAIMS TO BE TRUE,
CANNOT HAVE A BETTER RIGHT OVER THESUBJECT PROPERTY THAN
HEREIN PETITIONERS.76

Petitioners’ Arguments

Petitioners contend that the CA gravely abused its discretion in issuing the assailed
January 3, 2005 Resolution and the Writ of Preliminary Injunction. They maintain that
the CA did not only condone respondents’ clear and blatant act of forum shopping; it
actually rewarded them for pursuing the same. According to the petitioners,
respondents’ Complaint in Civil Case No. 69979 pending before Branch 268 already
included an ancillary relief for TRO and/or Preliminary Injunction for the purpose of
stopping Branch 71 from implementing its Order of demolition and dispossessing
them of the disputed property. However, since Branch 268 did not favorably act on
their prayer for such provisional remedy, respondents withdrew the same by
amending their Complaint, only to later on file an original action for certiorari,
prohibition and injunction before the CA practically raising the same issues, same
cause of action, and the very same prayer to temporarily and then permanently
restrain Branch 71 from implementing its Order of demolition. Petitioners assert that
what respondents actually did was to split a single cause of action as they could have
pursued their prayer for injunction in CA-G.R. SP No. 86363 as a mere ancillary relief
in Civil Case No. 69979 pending before Branch 268. Petitioners also accuse
respondents of misleading the CA by concealing the fact that their Complaint in Civil
Case No. 69979 included an ancillary relief for injunction and by not attaching a copy
thereof to their Petition filed with the CA.

Petitioners likewise contend that respondents’ recourse to the CA was premature

because they did not give Branch 71 an opportunity to correct its alleged errors.
Petitioners point out that before resorting to a special civil action for certiorari before
the CA, respondents should have first appealed or filed the appropriate motion or
pleading before Branch 71 so that said court could correct any of its perceived errors.
But they did not. Hence, no error or grave abuse of discretion can be attributed to
Branch 71. And even assuming that respondents’ Petition before the CA is not
premature, petitioners assert that the same was filed out of time. Respondents
received the Notice to Vacate on April 1, 2004 and, therefore, had only until May 31,
2004 within which to file a petition for certiorari. However, it was only on September
14, 2004 when they invoked the certiorari jurisdiction of the CA. Petitioners maintain
that respondents erroneously reckoned the 60-day period for filing a petition for
certiorari on the date they received the Order of demolition because the same was a
mere off shoot of the Writ of Possession and Notice to Vacate issued by Branch 71.

Petitioners further argue that the pendency of Civil Case No. 69979 will not bar the
issuance and implementation of the Writ of Possession in LRC Case No.R-6203.

Lastly, petitioners asseverate that respondents’ ancillary prayer for injunctive relief
lacked basis as they have no clear and unmistakable right that must be protected.
Only 15 out of the 315 respondents are armed with proof of ownership.77 And of these
15, only five have deeds of absolute sale; the remaining 10 have only contracts to sell
containing incomplete details of payment. In addition, the alleged proofs of ownership
do not bear the signatures of all the co-owners and some of those proofs are not even
notarized. And assuming further that the titles of these 15 respondents are true, their
collective rights over the subject lot cannot prevail over the rights of the petitioners.
The total area they occupy constitute only about 1,371.66 square meters, or a little
over 30% of the disputed 4,432-square meter lot.78 Above all, petitioners registered
their claim as early as January 3, 2000 while none of respondents’ alleged proofs of
ownership were ever registered.79

Respondents’ Arguments

Respondents, on the other hand, deny having misled the CA. They claim that on July
5, 2004 they filed their Motion to Admit Attached Amended Complaint as a matter of
right seeking the withdrawal of their prayer for TRO and on August 27, 2004 Branch
268 issued its Order admitting their Amended Complaint. Thus, when they filed their
Petition in CA-G.R. SP No. 86363 on September 14, 2004, they found it unnecessary
to state that, previously, their Complaint in Civil Case No. 69979 contained a prayer
for the issuance of a TRO.

With regard to the second and third assigned errors, respondents assert that the
instant Petition for Certiorari assails only the propriety of the CA’s January 3,2005
Resolution and February 10, 2005 Writ of Preliminary Injunction. This Court cannot
thus pass upon the correctness of respondents’ recourse to the CA as well as the
prematurity and timeliness of such legal remedy, as the same is still pending with said
court.

Respondents further assert that the issue of who have a better right over the property
in question is an extraneous matter that is totally irrelevant in the present controversy.
They emphasize that the issue to be resolved in this Petition for Certiorari is whether
the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction
in granting their ancillary prayer for injunction. They claim that the points raised by the
petitioners in support of their contention should be threshed out in Civil Case No.
69979 (declaration of nullity of documents and title, reconveyance, and damages)
pending before Branch 268.

Our Ruling

The review we are bound to undertake

in this Petition for Certiorari is limited
to the determination of whether the CA
committed grave abuse of discretion in
granting respondents’ ancillary prayer
for preliminary injunction.

We stress at the outset that this Petition for Certiorari merely assails the CA’s
interlocutory resolutions granting respondents’ ancillary prayer for injunctive relief.
This does not pertain to the main action for certiorari , prohibition and injunction in
CA-G.R. SP No. 86363, which is still pending before the CA. We will thus limit
ourselves to the determination of whether the CA gravely abused its discretion in
issuing the questioned Resolutions and avoid matters that will preempt or render moot
whatever final decision it may render in CA-G.R. SP No. 86363. More specifically, we
will not touch on petitioners’ contentions that respondents are guilty of forum shopping
and that the latter’s filing of a Petition for Certiorari before the CA was premature and
out of time for the assailed CA Resolutions pertained only to the propriety of the
issuance of the Writ of Preliminary Injunction.

A Petition for Certiorari lies only to correct acts rendered without or in excess of
jurisdiction or with grave abuse of discretion. "Its principal office is only to keep the
inferior court within the parameters of its jurisdiction or to prevent it from committing
such a grave abuse of discretion amounting to lack or excess of jurisdiction."80 "Grave
abuse of discretion in the issuance of writs of preliminary injunction implies a
capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction,
or where the power is exercised in an arbitrary or despotic manner by reason of
passion, prejudice or personal aversion amounting to an evasion of positive duty or
to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of
law."81

A Petition for Certiorari is not the proper remedy to review the intrinsic correctness of
the public respondent’s ruling. It is settled that as long as a court or quasi-judicial body
acts within its jurisdiction, any alleged errors committed in the exercise of its
jurisdiction will amount to nothing more than errors of judgment which are not
reviewable in a special civil action of certiorari. Thus, whether the CA committed
errors in proceedings, misappreciated the facts, or misapplied the law is beyond our
power of review in this Petition for Certiorari for it cannot be used for any purpose
except to limit the action of the respondent court within the bounds of its jurisdiction.82

CA did not commit grave abuse of discretion

From our review of the case, nothing indicates that the CA acted without or in excess
of jurisdiction or with grave abuse of discretion in ordering the issuance of the Writ of
Preliminary Injunction. Measured against jurisprudentially established parameters, its
disposition to grant the writ was not without basis and, hence, could not have been
arrived at capriciously, whimsically, arbitrarily or despotically. Respondents amply
justified the grant of the provisional relief they prayed for. A Writ of Preliminary
Injunction is issued at any stage of an action prior to judgment or final order to prevent
threatened or continuous irremediable injury to some of the parties before their claims
can be thoroughly studied or adjudicated. To justify its issuance, the applicants must
prove the following requisites: (1) that they have a clear and unmistakable right to be
protected, that is a right in esse; (2) there is a material and substantial invasion of
such right; (3)there is an urgent need for the writ to prevent irreparable injury to the
applicants; and, (4) there is no other ordinary, speedy, and adequate remedy to
prevent the infliction of irreparable injury.83

It is true that the buyer in a foreclosure sale becomes the absolute owner of the
property if it is not redeemed within one year from registration of the sale and title is
consolidated in his name. "As the confirmed owner, the purchaser’s right to
possession becomes absolute. There is even no need for him to post a bond, and it
becomes the ministerial duty of the courts," upon application and proof of title, to issue
a Writ of Possession to place him in possession.84This rule is clear from the language
of Section 33, Rule 39 of the Rules of Court. The same provision of the Rules,
however, provides as an exception that when a third party is actually holding the
property adversely to the judgment debtor, the duty of the court to issue a Writ of
Possession ceases to be ministerial. Thus:

SEC. 33. Deed and possession to be given at expiration of redemption period; by

whom executed or given. – If no redemption be made within one (1) year from the
date of the registration of the certificate of sale, the purchaser is entitled to a
conveyance and possession of the property; or, if so redeemed whenever sixty (60)
days have elapsed and no other redemption has been made, and notice thereof
given, and the time for redemption has expired, the last redemptioner is entitled to the
conveyance and possession; but in all cases the judgment obligor shall have the
entire period of one (1) year from the date of the registration of the sale to redeem the
property. The deed shall be executed by the officer making the sale or by his
successor in office, and in the latter case shall have the same validity as though the
officer making the sale had continued in office and executed it.

Upon the expiration of the right of redemption, the purchaser or redemptioner shall
be substituted to and acquire all the rights, title, interest and claim of the judgment
obligor to the property as of the time of the levy. The possession of the property shall
be given to the purchaser or last redemptioner by the same officer unless a third party
is actually holding the property adversely to the judgment obligor. (Emphasis
supplied)

Jurisprudence abounds applying this exception to the ministerial duty of the court in
issuing the Writ of Possession.85

Here, respondents alleged in their CA Petition that they possess and own portions of
the property subject of the Writ of Demolition.1âwphi1 In support thereof, they
annexed to their Petition and Reply deeds of conveyances, contracts to sell, receipts,
etc. showing that the Reyeses already sold to them the portions of the subject lot they
respectively occupy. A number of these documents predate the REM which the
Reyeses executed in favor of Aldover while others were executed subsequent
thereto. Respondents’ allegation of actual possession is likewise confirmed by the
Sheriff’s Partial Report86 which states that there are several other persons who
occupy portions of subject lot and claim to be the owners thereof. In fine, respondents
have indubitably shown that they are in actual possession of the disputed portions of
subject property. Their possession, under Article 433 of the Civil Code, raises a
disputable presumption that they are the owners thereof.87 Thus, petitioners cannot
resort to procedural shortcut in ousting them by the simple expedient of filing a Motion
for Special Order of Demolition in LRC Case No. R-6203 for under the same Article
433 petitioners have to file the appropriate judicial process to recover the property
from the respondents. This "judicial process," as elucidated in Villanueva v. Cherdan
Lending Investors Corporation,88 "could mean no less than an ejectment suit or a
reinvindicatory action, in which the ownership claims of the contending parties may
be properly heard and adjudicated." Moreover, to dispossess the respondents based
on the proceedings taken in LRC Case No. R-6203 where they were not impleaded
and did not take part would be tantamount to taking of real property without due
process of law.89

But petitioners downplayed respondents’ documentary evidence as unreliable for

being unnotarized and unregistered compared to their TCT No. PT-122311 which was
duly issued after the Reyeses failed to redeem the property and they (petitioners)
consolidated their title thereto. However, "between an unrecorded sale of a prior date
and a recorded mortgage of a later date the former is preferred to the latter for the
reason that if the original owner had parted with his ownership of the thing sold then
he no longer had the ownership and free disposal of that thing so as to be able to
mortgage it again."90

In fine, the CA cannot be said to have acted capriciously, whimsically, arbitrarily or

despotically in issuing its January 3, 2005 Resolution and February10, 2005 Writ of
Preliminary Injunction to prevent a threatened or continuous irremediable injury.
There is preliminary showing that respondents have clear and unmistakable right over
the disputed portions of the property which must be protected during the pendency of
CA-G.R. SP No. 86363. Indeed, the precipitate demolition of their houses would
constitute material and substantial invasion of their right which cannot be remedied
under any standard compensation. Hence, the need for a Writ of Preliminary
Injunction.

Besides, it has been held that the trial court (or the CA in this case) has a wide latitude
in determining the propriety of issuing a Writ of Preliminary Injunction. The
assessment and evaluation of evidence in the issuance of a Writ of Preliminary
Injunction involve findings of facts ordinarily left to it for its determination. Hence,
absent a clear showing of grave abuse of discretion, the trial court’s disposition in
injunctive matters is not generally interfered with by the appellate courts.91

Furthermore, we note that although the scheduled January 4, 2005 hearing on the
propriety of issuing a Writ of Preliminary Injunction did not push through, the parties
were nonetheless amply heard thru their pleadings. At the time the CA issued its
challenged January 3, 2005 Resolution, petitioners had already filed their
Comment92 and Rejoinder93 where they argued at length why no injunctive relief
should be granted in favor of the respondents. In Land Bank of the Phils. v.
Continental Watchman Agency, Inc,94 we reiterated our ruling that there can be no
grave abuse of discretion on the part of the respondent court in issuing a Writ of
Preliminary Injunction when the parties were amply heard thereon. Thus:

We have consistently held that there is no grave abuse of discretion in the issuance
of a Writ of Preliminary Injunction where a party was not deprived of its day in court,
as it was heard and had exhaustively presented all its arguments and defenses.
Hence, when contending parties were both given ample time and opportunity to
present their respective evidence and arguments in support of their opposing
contentions, no grave abuse of discretion can be attributed to the x x x court which
issued the Writ of Preliminary Injunction, as it is given a generous latitude in this
regard, pursuant to Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as
amended.

We emphasize though that the evidence upon which the CA based its January 3,
2005 Resolution is not conclusive as to result in the automatic issuance of a final
injunction. "The evidence submitted for purposes of issuing a Writ of Preliminary
Injunction is not conclusive or complete for only a ‘sampling’ is needed to give the x
x x court an idea of the justification for the preliminary injunction pending the decision
of the case on the merits."95 In the same vein, our Decision in this case is without
prejudice to whatever final resolution the CA and Branch 268 may arrive at in CA-
G.R. SP No. 86363 and Civil Case Nos. 69979 and 69949, respectively.

WHEREFORE, the instant Petition for Certiorari is DISMISSED. The Resolutions

dated January 3, 2005 and January 24, 2005 of the Court of Appeals in CA-G.R. SP
No. 86363 are AFFIRMED. This case is REMANDED to the Court of Appeals for the
immediate resolution of the main petition in CA-G.R. SP No. 86363.

SO ORDERED.

11. [G.R. NO. 157494 : December 10, 2004]

BACOLOD CITY WATER DISTRICT, Petitioner, v. THE HON. EMMA C. LABAYEN,

Presiding Judge, RTC of Bacolod City, Br. 46 and the City of
Bacolod, Respondents.

DECISION
PUNO, J.:

First, the chronology of facts. Petitioner Bacolod City Water District (BACIWA) is a
water district established pursuant to Presidential Decree No. 198 as a government-
owned and controlled corporation with original charter. It is in the business of
providing safe and potable water to Bacolod City.

Public respondent City of Bacolod is a municipal corporation created by

Commonwealth Act No. 326, otherwise known as the Charter of Bacolod.

On March 26, 1999, respondent City filed a case for Injunction With a Prayer for
Temporary Restraining Order And/Or Preliminary Mandatory Injunction against
petitioner in the sala of public respondent judge. The petition stated that on January
15, 1999, BACIWA published in the Visayan Daily Star,1 a local paper of general
circulation, a Schedule of Automatic Water Rates Adjustments for the years 1999,
2000 and 2001. The rates were supposed to take effect seven (7) days after its
posting in the local papers or on January 22, 1999. The increase was aborted after
petitioner unilaterally suspended the January 22, 1999 scheduled implementation. On
March 15, 1999, however, petitioner announced that the rate hike will be implemented
on April 1, 1999.2

Respondent City opposed. It alleged that the proposed water rates would violate due
process as they were to be imposed without the public hearing required under Letter
of Instructions No. 7003 and Presidential Decree No. 1479.4 Hence, it prayed that
before the hearing of the main case, a temporary restraining order or a preliminary
injunction be issued.5

On March 30, 1999, the court a quo issued an Order6 summoning the parties with
their counsels to attend the preliminary hearing for the issuance of a temporary
restraining order or preliminary mandatory injunction. On April 8, 1999, it required the
parties to simultaneously submit their respective memoranda on whether it had
jurisdiction over the case and whether a public hearing was conducted re the
proposed increase in water rates.7

Petitioner filed its Position Paper dated April 15, 1999. It attached documents
evidencing the conduct of extensive and lengthy public hearings in fifty-eight (58) of
the sixty-one (61) barangays of Bacolod City. It opined that original jurisdiction over
cases on rate review is vested in the Local Water Utilities Administration (LWUA);
appellate jurisdiction is vested in the National Water Resources [Board] (NWRB)
whose decisions shall be appealable to the Office of the President.8

On May 5, 1999, petitioner also filed a Motion to Dismiss. In an Order9 dated May 7,
1999, the court directed respondent City to file its Opposition to petitioner's Motion to
Dismiss within fifteen (15) days.

On June 17, 1999, respondent City filed a Motion to Set [for] Hearing10 its application
for a temporary restraining order or preliminary mandatory injunction. It alleged that
the parties had already submitted their respective memoranda and it has already
submitted its Opposition to petitioner's Motion to Dismiss. It also alleged that petitioner
had already effected the water rates increase and collection, hence, causing
irreparable injury to the public.

Petitioner opposed the Motion. On July 20, 1999, respondent City filed its Reply to
Opposition and reiterated that the application for the issuance of a temporary
restraining order or preliminary mandatory injunction be heard since petitioner
continued to violate the right of the public to due process and it might take time before
the case would be finally resolved.11 On the same date, petitioner filed a Manifestation
and Motion12 stating that the hearing may no longer be necessary as the respective
positions of both parties have already been presented and amplified in their pleadings
and memoranda.

On July 22, 1999, respondent trial court issued an Order13 stating that there was no
more need to hear the case on the merits 14 as both parties have already submitted
their position papers and documents to prove their respective allegations.

On July 23, 1999, petitioner filed its Reply15 to respondent City's Opposition to the
Motion to Dismiss reiterating that petitioner failed to exhaust administrative remedies
provided by law hence the petition be dismissed for utter lack of merit.

After a hiatus of nearly seven (7) months, or on February 18, 2000, respondent City
filed an Urgent Motion for the Issuance of Temporary Restraining Order And[/]Or Writ
of Preliminary Injunction16 praying that the case be set for hearing on February 24,
2000. On the same date requested, respondent court heard respondent's application
for temporary restraining order and issued an Order17 commanding petitioner to stop,
desist and refrain from implementing the proposed water rates for the year 2000 which
were then supposed to take effect on March 1, 2000.

On March 7, 2000, petitioner filed an Urgent Motion for Reconsideration and

Dissolution of the Temporary Restraining Order.18 Respondent court a quo issued on
March 10, 2000 an Order19 directing respondent City to file an Opposition to the
Urgent Motion. In its Opposition, respondent City20 contended that the temporary
restraining order issued was not infirmed with procedural and substantive defects. It
also averred that respondent court has jurisdiction over the case since the sole
question of the lack of public hearing does not require the special knowledge or
expertise of an administrative agency and may be resolved by respondent court,
hence the doctrine of primary jurisdiction does not apply.

Respondent court continued with the proceedings by receiving the evidence of

petitioner in support of its Motion for Reconsideration and Dissolution of Temporary
Restraining Order. It further issued Orders dated March 17, 200021 and March 20,
2000.22

On April 6, 2000, respondent court issued an Order23 finding petitioner's Urgent

Motion for Reconsideration and Dissolution of Temporary Restraining Order moot and
academic considering petitioner's compliance of said temporary restraining order.

Four (4) days after, in an Order24 dated April 10, 2000, it denied petitioner's Motion to
Dismiss for lack of merit.

On April 19, 2000, respondent City filed a Manifestation praying that respondent trial
court issue a writ of preliminary injunction against petitioner, stating thus:

A Temporary Restraining Order was issued against the respondents which, however,
expired before the parties were able to finish the presentation of their respective
witnesses and evidences;

The instant case was submitted for resolution and decision of this Honorable Court
during the last week of March but while awaiting the decision of this Honorable Court,
several complaints had reached the petitioner that the respondents had already
reflected in the water billings for the month of April the new water rates for the year
2000;
x x x 25

Petitioner, for its part, filed a Motion for Reconsideration26 of respondent trial court's
Order denying its Motion to Dismiss. Respondent City filed an Opposition to [the]
Motion for Reconsideration27 on June 1, 2000.

Respondent court did not act upon petitioner's Motion for Reconsideration until
respondent City filed an [Ex Parte] Motion for Speedy Resolution28 of the case on
October 6, 2000 praying that the case be resolved before the year 2000 ends in order
to prevent the implementation of the water rates increase for the year 2001 which was
to be imposed allegedly without the benefit of a public hearing.

On December 21, 2000, respondent court issued the assailed Decision29 granting the
final injunction which allegedly confirmed the previous preliminary injunction.

Petitioner filed its Motion for Reconsideration30 of the assailed Decision on January
11, 2001 asserting, among others, that the case was not yet ripe for decision when
the court granted the final injunction, the petitioner having had no opportunity to file
its answer, avail of the mandatory pre-trial conference and have the case tried on the
merits.

Respondent court denied the Motion for Reconsideration for lack of merit in an
Order31 dated January 24, 2001. Petitioner then filed a special civil action
for certiorari under Rule 65 in the Court of Appeals. It alleged that public respondent
judge acted without or in excess of jurisdiction and/or with grave and patent abuse of
discretion amounting to lack or excess of jurisdiction when she issued the final
injunction in disregard of petitioner's basic right to due process.32

The Court of Appeals dismissed the Petition for Review on Certiorari, ratiocinating
thus:

In the case at bar, the [O]rder of public respondent dated 24 February 2000, though
termed by BACIWA as a temporary restraining order, is in fact a preliminary injunction.
The period of the restraint was not limited. By its wordings, it can be safely inferred
that the increased water rates must not be effected until final disposition of the main
case. This note of semi-permanence simply cannot issue from a mere temporary
restraining order. It must be further noted that the temporary restraining order has
been elevated to the same level as the preliminary injunction in the procedure,
grounds and requirements of its obtention by S[ection] 4, Rule 58. Thus, to set [a]
distinction, the present practice is to categorically refer to it as a temporary restraining
order. In which case, the omission by the public respondent in referring to the 24
February 2000 order as a temporary restraining order could not have been a mere
oversight but deliberate.33

Resorting to this Court, petitioner raises the following issues:

THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED AND REFUSED

TO RULE THAT RESPONDENT COURT HAD ACTED WITHOUT OR IN EXCESS
OF JURISDICTION AND/OR WITH GRAVE ABUSE OF DISCRETION FOR
ARBITRARILY AND CAPRICIOUSLY RENDERING A DECISION PURPORTING TO
ISSUE A FINAL INJUNCTION AND CONFIRMING ITS ALLEGED PRELIMINARY
INJUNCTION, DESPITE THE FACT THAT:

A. NO PRELIMINARY INJUNCTION HAD BEEN ISSUED;

B. THE RESPONDENT LOWER COURT DID NOT RESOLVE HEREIN
PETITIONER'S MOTION FOR RECONSIDERATION OF THE ORDER DENYING
PETITIONER'S MOTION TO DISMISS;

C. THE HEREIN PETITIONER HAD NOT YET FILED ITS ANSWER TO THE
PETITION;

D. THERE WAS STILL NO JOINDER OF THE ISSUES SINCE NO ANSWER HAD

YET BEEN FILED;

E. THE MANDATORY PRE-TRIAL CONFERENCE WAS NOT YET CONDUCTED;

F. THERE WAS NO TRIAL ON THE MERITS FOR THE MAIN CASE.

II

THE COURT OF APPEALS GRAVELY ERRED WHEN IT INSISTED THAT THE 24

FEBRUARY 2000 ORDER (ANNEX R) ISSUED BY THE TRIAL COURT WAS A
PRELIMINARY INJUNCTION WHEN THE RECORDS CLEARLY AND
INDUBITABLY SHOW THAT IT WAS A TEMPORARY RESTRAINING ORDER
(TRO).

III

BY DISMISSING THE PETITION FOR CERTIORARI, THE COURT OF APPEALS

GRAVELY ERRED WHEN IT EFFECTIVELY PREVENTED PETITIONER FROM
FULLY VENTILATING ITS CASE IN THE MAIN ACTION DUE TO THE IRREGULAR
AND CONFUSED PROCEEDINGS CONDUCTED BY THE RESPONDENT
COURT.34

We rule in favor of petitioner.

The initial issue is the proper characterization of the Order dated February 24, 2000.

The sequence of events and the proceedings that transpired in the trial court make a
clear conclusion that the Order issued was a temporary restraining order and not a
preliminary injunction.

First. We quote the pertinent parts of the questioned Order:

xxx

When this motion was called for hearing wherein both parties have argued
exhaustedly their respective sides, this court denied the ten (10) days extension for
further amplification of the arguments of the respondent to oppose the said motion for
issuance of a temporary restraining order.

It appearing therefore, that the acts of the defendant will actually affect the plaintiff
before the decision of this court can be rendered and in order to afford the court to
pass on the issues without the same becoming moot and academic and considering
the urgency of the matter that immediate action should be taken, and pursuant to
Administrative Circular No. 6, Paragraph 4 and sub-paragraph 15 and The Interim
Rules and Guidelines [set forth] by the Rules of Court, this court hereby orders the
respondent[,] its agents, representatives or any person acting in his behalf to
stop, desist and refrain from implementing in their billings the new water rate
increase which will start on March 1, 2000. The Deputy Provincial Sheriff of this
court is hereby ordered to furnish copy of this order to the respondent Bacolod City
Water District as well as to its agents or representatives acting [o]n his behalf.

x x x 35 (emphases supplied)

It can be gleaned from the afore-quoted Order that what the trial court issued was a
temporary restraining order and not a preliminary injunction. The trial court has always
referred to it as a temporary restraining order in the succeeding Orders it issued on
March 10, 200036 and April 6, 2000.37

The parties, in their succeeding pleadings,38 also referred to the assailed Order as a
temporary restraining order. The petitioner filed an Urgent Motion for Reconsideration
and Dissolution of Temporary Restraining Order (TRO) 39 on March 1, 2000. This
was opposed by respondent City itself in its Opposition to Motion for Reconsideration
and Dissolution of Temporary Restraining Order (TRO) 40dated March 14, 2000.
Further, respondent City, in its Manifestation dated April 19, 2000 stated, viz:

xxx

A Temporary Restraining Order was issued against the respondents which,

however, expired before the parties were able to finish the presentation of their
respective witnesses and evidences;

xxx

WHEREFORE, it is most respectfully prayed that while waiting for the decision
and order of the Honorable Court, a preliminary injunction as prayed for in the
petition be issued against the respondents.

x x x41 (emphases supplied)

It can be gleaned from the foregoing that both parties and respondent trial court have
consistently referred to the directive as a temporary restraining order. It was only in
the respondent court's assailed Decision that the Order was referred to as a
preliminary injunction, viz:

xxx

This Court therefore grants the final injunction prayed for restraining the respondent
from the commission of the act complained of for the year 2001 and hereby
confirming the preliminary injunction previously ordered.

x x x 42 (emphasis supplied)

Again, it was only when petitioner expressed its vehement objection on the ruling that
the final injunction confirmed the preliminary injunction previously issued, when the
respondent City and the respondent trial court started to insist that the questioned
Order was a preliminary injunction. Given the previous undeviating references to it as
a temporary restraining order, respondents cannot now consider it as a preliminary
injunction to justify the validity of the assailed Decision. The attendant facts and
circumstances clearly show that the respondent trial court issued a temporary
restraining order.

Second. Injunction is a judicial writ, process or proceeding whereby a party is

ordered to do or refrain from doing a certain act. It may be the main action or merely
a provisional remedy for and as an incident in the main action.43
The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of an
independent action or proceeding. As a matter of course, in an action for injunction,
the auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may
issue. Under the law, the main action for injunction seeks a judgment embodying a
final injunction which is distinct from, and should not be confused with, the provisional
remedy of preliminary injunction, the sole object of which is to preserve the status
quo until the merits can be heard.44 A preliminary injunction is granted at any stage
of an action or proceeding prior to the judgment or final order. It persists until it is
dissolved or until the termination of the action without the court issuing a final
injunction.45

A restraining order, on the other hand, is issued to preserve the status quo until the
hearing of the application for preliminary injunction which cannot be issued ex
parte. Under Rule 5846 of the Rules of Court, a judge may issue a temporary
restraining order with a limited life of twenty (20) days from date of issue. If before the
expiration of the twenty (20)-day period the application for preliminary injunction is
denied, the temporary restraining order would be deemed automatically vacated. If
no action is taken by the judge on the application for preliminary injunction within the
said twenty (20) days, the temporary restraining order would automatically expire on
the 20th day by the sheer force of law, no judicial declaration to that effect being
necessary.47

Hence, in the case at bar, since no preliminary injunction was issued, the temporary
restraining order granted automatically expired after twenty (20) days under the
Rules. The fact that respondent court merely ordered "the respondent[,] its agents,
representatives or any person acting in his behalf to stop, desist and refrain from
implementing in their billings the new water rate increase which will start on March 1,
2000"48 without stating the period for the restraint does not convert the temporary
restraining order to a preliminary injunction.

The rule against the non-extendibility of the twenty (20)-day limited period of effectivity
of a temporary restraining order is absolute if issued by a regional trial court. The
failure of respondent court to fix a period for the ordered restraint did not lend the
temporary restraining order a breath of semi-permanence which can only be
characteristic of a preliminary injunction. The twenty (20)-day period provided by the
Rules of Court should be deemed incorporated in the Order where there is an
omission to do so. It is because of this rule on non-extendibility that respondent City
was prompted to move that hearings be set for its application of a preliminary
injunction. Respondent City cannot take advantage of this omission by respondent
trial court.

Third. Even if we assume that the issued Order was a preliminary injunction,
petitioner is correct in contending that the assailed Decision is premature.

The records reveal that respondent court did not resolve petitioner's Motion for
Reconsideration of the Order denying its Motion to Dismiss before it issued the
assailed Decision. Consequently, there was no answer filed by petitioner, no joinder
of issues, no mandatory pre-trial conference, and no trial on the merits, yet, a Decision
was handed down by the respondent trial court.

The short circuiting of the procedural process denied the petitioner due process of
law. It was not able to allege its defenses in an answer and prove them in a hearing.
The convoluted procedure allowed by the respondent trial court and the pleadings
filed by the parties which are not models of clarity certainly created confusion. But this
confusion should not be seized as a reason to deny a party the constitutional right to
due process. Over and above every desideratum in litigation is fairness. All doubts
should be resolved in favor of fairness.

IN VIEW WHEREOF, the petition is GRANTED. The Decision and Resolution of the
Court of Appeals dated November 27, 2002 and February 28, 2003, respectively, are
REVERSED and SET ASIDE. The case is remanded to the court a quo for further
proceedings.

SO ORDERED.

12. G.R. No. 207412 August 7, 2013

FLORD NICSON CALAWAG, PETITIONER,

vs.
UNIVERSITY OF THE PHILIPPINES VISAYAS AND DEAN CARLOS C.
BAYLON, RESPONDENTS.

x-----------------------x

G.R. No. 207542

MICAH P. ESPIA, JOSE MARIE F. NASALGA AND CHE CHE B.

SALCEPUEDES, PETITIONERS,
vs.
DR. CARLOS C. BA YLON, DR. MINDA J. FORMACI ON AND DR. EMERLINDA
ROMAN (TO BE SUBSTITUTED BY ALFREDO E. PASCUAL, BEING THE NEW
UP PRESIDENT), UNIVERSITY OF THE PHILIPPINES BOARD OF
REGENTS, RESPONDENTS.

RESOLUTION

BRION, J.:

This case involves the consolidated petitions of petitioner Flord Nicson Calawag in
G.R. No. 207412 and petitioners Micah P. Espia, Jose Marie F. Nasalga and Che Che
B. Salcepuedes in G.R. No. 207542 (hereinafter collectively known as petitioners),
both assailing the decision1 dated August 9, 2012 of the Court of Appeals (CA) in CA-
G.R. CEB-SP No. 05079. The CA annulled the Order2 of the Regional Trial Court
(RTC) of Guimbal, Iloilo, Branch 67, granting a writ of preliminary mandatory
injunction against respondent Dean Carlos Baylon of the University of the Philippines
Visayas (UP Visayas).

The petitioners enrolled in the Master of Science in Fisheries Biology at UP Visayas

under a scholarship from the Department of Science and Technology-Philippine
Council for Aquatic and Marine Research and Development. They finished their first
year of study with good grades, and thus were eligible to start their thesis in the first
semester of their second year. The petitioners then enrolled in the thesis program,
drafted their tentative thesis titles, and obtained the consent of Dr. Rex Baleña to be
their thesis adviser, as well as the other faculty members’ consent to constitute their
respective thesis committees. These details were enclosed in the letters the
petitioners sent to Dean Baylon, asking him to approve the composition of their thesis
committees. The letter contained the thesis committee members and the thesis
adviser’s approval of their titles, as well as the approval of Professor Roman Sanares,
the director of the Institute of Marine Fisheries and Oceanology.
Upon receipt of the petitioners’ letters, Dean Baylon wrote a series of memos
addressed to Professor Sanares, questioning the propriety of the thesis topics with
the college’s graduate degree program. He subsequently disapproved the
composition of the petitioners’ thesis committees and their tentative thesis topics.
According to Dean Baylon, the petitioners’ thesis titles connote a historical and social
dimension study which is not appropriate for the petitioners’ chosen master’s degrees.
Dean Baylon thereafter ordered the petitioners to submit a two-page proposal
containing an outline of their tentative thesis titles, and informed them that he is
forming an ad hoc committee that would take over the role of the adviser and of the
thesis committees.

The petitioners thus filed a petition for certiorari and mandamus before the RTC,
asking it to order Dean Baylon to approve and constitute the petitioners’ thesis
committees and approve their thesis titles. They also asked that the RTC issue a writ
of preliminary mandatory injunction against Dean Baylon, and order him to perform
such acts while the suit was pending.

The RTC granted a writ of preliminary mandatory injunction, which Dean Baylon
allegedly refused to follow. UP Visayas eventually assailed this order before the CA
through a Rule 65 petition for certiorari, with prayer for a temporary restraining order
(TRO).

The CA’s Ruling

The CA issued a TRO against the implementation of the RTC’s order, holding that the
petitioners had no clear right to compel Dean Baylon to approve the composition of
their thesis committees as a matter of course. As the college dean, Dean Baylon
exercises supervisory authority in all academic matters affecting the college.
According to the CA, the petitioners’ reliance on Article 51 of the Graduate Program
Manual of UP Visayas is misplaced. Article 51 provides:

Art. 51. The composition of the thesis committee shall be approved by the dean of the
college/school upon the recommendation of the chairperson of the major
department/division/institute. The GPO shall be informed of the composition of the
thesis committee and/or any change thereof.3

Despite the mandatory language provided for composing the thesis committee under
Article 51 of the Graduate Program Manual of UP Visayas, the CA construed it to
mean that the Dean’s approval is necessary prior to the composition of a thesis
committee.

Lastly, the CA held that the case presents issues that are purely academic in
character, which are outside the court’s jurisdiction. It also noted that Dean Baylon
has been accommodating of the petitioners, and that the requirements he imposed
were meant to assist them to formulate a proper thesis title and graduate on time.

The Petitions for Review on Certiorari

In G.R. No. 207412, Calawag argues that the CA’s decision should be set aside for
the following reasons:

First, Calawag was entitled to the injunction prayed for, as he has clear rights under
the law which were violated by Dean Baylon’s actions. These are the right to
education, the right to due process, and the right to equal protection under the law.
According to Calawag, Dean Baylon violated his right to due process when he added
to and changed the requirements for the constitution of his thesis committee, without
prior publication of the change in rules. Calawag’s right to equal protection of the law,
on the other hand, was allegedly violated because only students like him, who chose
Dr. Baleña for their thesis adviser, were subjected to the additional requirements
imposed by the dean, while the other students’ thesis committees were formed
without these impositions. Hence, Calawag and the three other petitioners in G.R. No.
207542 were unduly discriminated against.

Second, a reading of Executive Order No. 628, s. 1980,4 and Republic Act No.
95005 shows that the college dean’s functions are merely administrative, and, hence,
the CA erred in its construction of Article 51 of the Graduate Program Manual of UP
Visayas, as well as its proclamation that the college dean has supervisory authority
over academic matters in the college.

On the other hand, in G.R. No. 207542, petitioners Espia, Nasalga and Salcepuedes
argue that the CA’s decision should be set aside for the following reasons:

First, the Graduate Program Manual of UP Visayas and the Guidelines for the Master
of Science in Fisheries Program are clear in providing that Dean Baylon has a formal
duty to approve the composition of the petitioners’ thesis committees upon the latter’s
compliance with several requirements. Thus, when the petitioners complied with
these requirements and Dean Baylon still refused to approve the composition of their
thesis committees, the petitioners had a right to have him compelled to perform his
duty.

Second, Dean Baylon cannot arbitrarily change and alter the manual and the
guidelines, and cannot use academic freedom as subterfuge for not performing his
duties.

Third, the thesis adviser and the thesis committees, in consultations with the students,
have the right to choose the thesis topics, and not the dean.

The Court’s Ruling

Having reviewed the arguments presented by the petitioners and the records they
have attached to the petitions, we find that the CA did not commit an error in judgment
in setting aside the preliminary mandatory injunction that the RTC issued against
Dean Baylon. Thus, there could be no basis for the Court’s exercise of its
discretionary power to review the CA’s decision.

"To be entitled to a writ of preliminary injunction, x x x the petitioners must establish

the following requisites: (a) the invasion of the right sought to be protected is material
and substantial; (b) the right of the complainant is clear and unmistakable; and (c)
there is an urgent and permanent necessity for the writ to prevent serious damage.
Since a preliminary mandatory injunction commands the performance of an act, it
does not preserve the status quo and is thus more cautiously regarded than a mere
prohibitive injunction. Accordingly, the issuance of a writ of preliminary mandatory
injunction [presents a fourth requirement: it] is justified only in a clear case, free from
doubt or dispute. When the complainant’s right is thus doubtful or disputed, he does
not have a clear legal right and, therefore, the issuance of injunctive relief is
improper."6

The CA did not err in ruling that the petitioners failed to show a clear and unmistakable
right that needs the protection of a preliminary mandatory injunction. We support the
CA’s conclusion that the dean has the discretion to approve or disapprove the
composition of a thesis committee, and, hence, the petitioners had no right for an
automatic approval and composition of their thesis committees.

Calawag’s citation of Executive Order No. 628, s. 1980 and Republic Act No. 9500 to
show that the dean of a college exercises only administrative functions and, hence,
has no ascendancy over the college’s academic matters, has no legal ground to stand
on. Neither law provides or supports such conclusion, as neither specifies the role
and responsibilities of a college dean. The functions and duties of a college dean are
outlined in the university’s Faculty Manual, which details the rules and regulations
governing the university’s administration. Section 11.8.2, paragraph b of the Faculty
Manual enumerates the powers and responsibilities of a college dean, which include
the power to approve the composition of a thesis committee, to wit:

11.8.2 Administration

xxxx

b. Dean/Director of UP System or UP Diliman-based Programs * The Dean/Director

shall be responsible for the planning and

implementation of the graduate programs. In particular, the Dean/Director shall

exercise the following powers and responsibilities based on the recommendations
forwarded to him/her, through channels:

xxxx

Approve the composition of the Thesis, Dissertation or Special Project** Committees

and Master’s or doctoral examination/oral defense panel for each
student[.]7 (emphases and italics ours)

By necessary implication,8 the dean’s power to approve includes the power to

disapprove the composition of a thesis committee. Thus, under the UP System’s
faculty manual, the dean has complete discretion in approving or disapproving the
composition of a thesis committee. Harmonizing this provision with the Graduate
Program Manual of UP Visayas, and the Guidelines for the Master of Science in
Fisheries Program, we agree with the CA’s interpretation that the thesis committee’s
composition needs the approval of the dean after the students have complied with the
requisites provided in Article 51 of the Graduate Program Manual and Section IX of
the Guidelines for the Master of Science in Fisheries Program.9

Anent the petitioners’ argument that Dean Baylon acted arbitrarily in imposing
additional requirements for the composition of the thesis committee, which according
to Calawag violated their right to due process, we hold that the dean’s authority to
approve or disapprove the composition of a thesis committee includes this discretion.
We also note the CA’s finding that these additional requirements were meant to assist
the petitioners in formulating a thesis title that is in line with the college’s master of
fisheries program. Absent any finding of grave abuse of discretion, we cannot
interfere with the exercise of the dean’s prerogative without encroaching on the
college’s academic freedom.

Verily, the academic freedom accorded to institutions of higher learning gives them
the right to decide for themselves their aims and objectives and how best to attain
them.10 They are given the exclusive discretion to determine who can and cannot
study in them, as well as to whom they can confer the honor and distinction of being
their graduates.11
This necessarily includes the prerogative to establish requirements for graduation,
such as the completion of a thesis, and the manner by which this shall be
accomplished by their students. The courts may not interfere with their exercise of
discretion unless there is a clear showing that they have arbitrarily and capriciously
exercised their judgment.12

Lastly, the right to education invoked by Calawag cannot be made the basis for
issuing a writ of preliminary mandatory injunction. In Department of Education,
Culture and Sports v. San Diego,13 we held that the right to education is not absolute.
Section 5(e), Article XIV of the Constitution provides that "[e]very citizen has a right
to select a profession or course of study, subject to fair, reasonable, and equitable
admission and academic requirements." The thesis requirement and the compliance
with the procedures leading to it, are part of the reasonable academic requirements
a person desiring to complete a course of study would have to comply with.

WHEREFORE, the Court resolves to DENY giving due course to the petitions in G.R.
No. 207412 and G.R. No. 207542.

SO ORDERED.

13. October 11, 2017

G.R. No. 207938

EVY CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner

vs.
VALIANT ROLL FORMING SALES CORPORATION, Respondent

DECISION

LEONEN, J.:

In every application for provisional injunctive relief, the applicant must establish the
actual and existing right sought to be protected. The applicant must also establish the
urgency of a writ's issuance to prevent grave and irreparable injury. Failure to do so
will warrant the court's denial of the application. Moreover, the application for the
issuance of a writ of preliminary injunction may be denied in the same summary
hearing as the application for the issuance of the temporary restraining order if the
applicant fails to establish requisites for the entitlement of the writ.

This is a Petition for Review on Certiorari1 assailing the October 22, 2012
Decision2 and June 25, 2013 Resolution3of the Court of Appeals in CA-G.R. SP No.
112737. The assailed judgments found that the Regional Trial Court did not gravely
abuse its discretion when it denied Evy Construction and Development Corporation's
(Evy Construction) application for the issuance of a temporary restraining order. This
application sought to restrain the Register of Deeds from compelling Evy Construction
to surrender its owner's copy of Transfer Certificate of Title (TCT) No. 168590 and
from further annotating encumbrances relative to a civil case between its
predecessor-in-interest and a third party.

On September 4, 2007, Evy Construction purchased a parcel of land covered by TCT

No. 134890 in Lipa, Batangas from Linda N. Ang (Ang) and Senen T. Uyan
(Uyan).1âwphi1 They executed a Deed of Absolute Sale, which was notarized on
September 11, 2007. At the time of the sale, no lien or encumbrance was annotated
on the title, except for a notice of adverse claim filed by Ang.4

On September 18, 2007, the Register of Deeds annotated a Notice of Levy on

Attachment on TCT No. 134890.5This annotation was by virtue of the Writ of
Preliminary Attachment issued by Branch 46, Regional Trial Court, San Fernando,
Parnpanga in Civil Case No. 13442 entitled Valiant Roll Forming Sales Corporation
v. Angeli Lumber and Hardware, Inc., and Linda Ngo Ang.6 Two (2) other
encumbrances were also annotated on the title.7

Evy Construction registered the Deed of Absolute Sale with the Register of Deeds on
November 20, 2007. TCT No. 168590 was issued in its name; however, it contained
the annotation of the prior Notice of Levy on Attachment, as well as a Notice of
Attachment/Levy upon Realty dated October 2, 2007 and a Notice of Levy on
Preliminary Attachment dated November 8, 2007.8

Subsequently, the Regional Trial Court rendered a Decision in Civil Case No. 13442
in favor of Valiant Roll Forming Sales Corporation (Valiant). A Writ of Execution and
a Notice of Levy were issued against the property covered by TCT No. 134890.9

Evy Construction filed a Notice of Third-Party Claim in Civil Case No. 13442, informing
the court that it had already filed with the sheriff an Affidavit of Title/Ownership on
May 20, 2008, in accordance with Rule 57 of the Rules of Court. 10 Valiant posted an
Indemnity Bond of ₱745,700.00 to answer for any damages that Evy Construction
may suffer should execution of the Regional Trial Court Decision proceed.11

By virtue of the July 18, 2008 Writ of Execution issued in Civil Case No. 13442, the
Sheriff issued a Notice of Sale on Execution of Real Property of Ang's properties,
including the property covered by TCT No. 134890.12 A Certificate of Sale was
eventually issued to Valiant as the winning bidder of the property covered by TCT No.
134890.13

On October 29, 2009, Evy Construction filed with the Regional Trial Court of Lipa City,
Batangas its Complaint for Quieting of Title/Removal of Cloud, Annulment of
Execution Sale and Certificate of Sale, and Damages, with application for temporary
restraining order and/or preliminary injunction.14

It prayed for the issuance of a temporary restraining order and/or writ of preliminary
injunction to enjoin the Register of Deeds from compelling it to surrender its copy of
TCT No. 168590 and from annotating any further transactions relating to Civil Case
No. 13442.15

In the hearing for its application for the issuance of a temporary restraining order, Evy
Construction claimed that it would suffer great and irreparable injury if the Register of
Deeds were restrained from compelling it to surrender the owner's duplicate copy
ofTCT No. 168590. It claimed that potential investors interested in developing the
property "[would] back out of their investment plans if there [was a] cloud of doubt
hovering over the title on the property."16

On November 9, 2009, the Regional Trial Court issued an Order denying the
application for the issuance of a temporary restraining order for having no legal basis.
Evy Construction's Motion for Reconsideration was likewise denied in an Order dated
December 11, 2009.17 Hence, it filed a Petition for Certiorari18 with the Court of
Appeals.
On October 22, 2012, the Court of Appeals rendered its Decision. 19 It held that Evy
Construction failed to sufficiently establish its right to the issuance of a temporary
restraining order.

According to the Court of Appeals, Evy Construction failed to sufficiently establish that
it would suffer grave and irreparable injury if additional recording and annotation of
further transactions, orders, or processes relating to the sale of the property to Valiant
were made on the title. It observed that the grounds raised already touched on the
merits of its Complaint, resolution of which would amount to prejudgment of the
case.20

The Court of Appeals likewise pointed out that Evy Construction could still sue for
damages if the trial court eventually finds that the sale of the property to Valiant was
invalid. It also reminded Evy Construction that it had the remedy of proceeding against
the indemnity bond posted by Valiant for any damages it might suffer as a result of
the sale.21

Evy Construction filed a Motion for Reconsideration, which was denied by the Court
of Appeals in its Resolution22dated June 25, 2013. Hence, this Petition23 was filed.

Petitioner argues that it was denied due process when its application for preliminary
injunction was denied in the same summary proceeding as the denial of its application
for a temporary restraining order.24 Petitioner likewise submits that it was entitled to
the injunctive writ applied for since "real estate development is an industry built on
trust and public perception.''25 It explains that the doubt cast by the auction sale and
its annotation to the title caused investors to withdraw their investments from
petitioner's housing development project, despite the expenses it already incurred.26

Petitioner avers that the issuance of an injunctive writ is necessary to prevent further
damage since its "business reputation and goodwill as a real estate developer, once
tarnished and sullied, cannot be restored."27 It insists that respondent's indemnity
bond in the amount of ₱745,700.00 was not only inadequate compared to petitioner's
investment in the property; it was immaterial since it would be insufficient to restore
buyer and investor confidence in the project or in petitioner's competence and
reputation as a property developer.28

On the other hand, respondent counters that the application for preliminary injunction
was never actually set for hearing or resolved by the trial court; thus, it was misleading
for petitioner to argue that it was denied due process by the trial court. 29 It maintains
that the Court of Appeals did not err in finding that petitioner failed to establish the
requisites for the issuance of a temporary restraining order and that petitioner still had
adequate remedies in the indemnity bond.30 Respondent likewise reiterates the Court
of Appeals' finding that petitioner already touches on the merits of its Complaint before
the trial court, which effectively prejudges the case.31

This Court is asked to resolve the following issues:

First, whether or not petitioner Evy Construction and Development Corporation was
denied due process when its application for a writ of preliminary injunction was denied
in the same proceeding as its application for a temporary restraining order; and

Second, whether or not the trial court committed grave abuse of discretion in denying
petitioner Evy Construction and Development Corporation's application for injunctive
relief.

I
Injunction is defined as "a judicial writ, process or proceeding whereby a party is
ordered to do or refrain from doing a certain act."32 It may be filed as a main action
before the trial court33 or as a provisional remedy in the main action.34 Bacolod City
Water District v. Hon. Labayen35 expounded:

The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of an
independent action or proceeding. As a matter of course, in an action for injunction,
the auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may
issue. Under the law, the main action for injunction seeks a judgment embodying a
final injunction which is distinct from, and should not be confused with, the provisional
remedy of preliminary injunction, the sole object of which is to preserve the status quo
until the merits can be heard. A preliminary injunction is granted at any stage of an
action or proceeding prior to the judgment or final order. It persists until it is dissolved
or until the termination of the action without the court issuing a final injunction. 36

Petitioner claims that it was denied due process when "no valid hearing for the
application for preliminary injunction was ever set" by the trial court and it "was NOT
even allowed to present its summary arguments and its witness in support of its
application for a [temporary restraining order]."37

A temporary restraining order may be issued ex parte "to preserve the status quo until
the hearing of the application for preliminary injunction [,] which cannot be issued ex
parte."38 Otherwise stated, a trial court may issue a temporary restraining order even
without a prior hearing for a limited period of 72 hours "if the matter is of extreme
urgency and the applicant will suffer grave injustice and in-eparable injury."39 In this
instance, a summary hearing, separate from the application of the preliminary
injunction, is required only to determine if a 72-hour temporary restraining order
should be extended.40

A trial court may also issue ex parte a temporary restraining order for 20 days H[i]f it
shall appear from facts shown by affidavits or by the verified application that great or
irreparable injury would result to the applicant before the matter can be heard on
notice."41 The trial court has 20 days from its issuance to resolve the application for
preliminary injunction. If no action is taken on the application for preliminary injunction
during this period, the temporary restraining order is deemed to have
expired.42 Notably, the Rules do not require that a hearing on the application for
preliminary injunction be conducted during this period.

While Rule 58, Section 4(d)43 requires that the trial court conduct a summary hearing
in every application for temporary restraining order regardless of a grant or denial,
Rule 58, Section 5 requires a hearing only if an application for preliminary injunction
is granted. Thus, Section 5 states that "[n]o preliminary injunction shall be granted
without hearing and prior notice to the party or person sought to be enjoined."
Inversely stated, an application for preliminary injunction may be denied even without
the conduct of a hearing separate from that of the summary hearing of an application
for the issuance of a temporary restraining order.

In this case, the November 9, 2009 hearing was denominated as a "hearing on the
application for temporary restraining order and preliminary injunction."44 Petitioner's
counsel was allowed to present its arguments45 and its witness46 but conceded that
the issues before the trial court were legal in nature.47 Thus, the trial court resolved
that there was no need to present the witness, which petitioner's counsel accepted
without objection:
COURT

[T]he only issue now is purely legal, so there is no need to present your witness.

ATTY. LIMBO

Yes[,] Your Honor.

COURT

We are submitting the Motion for Issuance of Temporary Restraining Order for
resolution.

ATTY. LIMBO

Yes, Your Honor.

COURT

Alright, submitted.48

Petitioner cannot insist on a separate hearing for the application for preliminary
injunction, considering that it accepted that its application would be submitted for
decision without the presentation of its witness. The trial court did not find any need
to conduct a further hearing on the application for preliminary injunction since
petitioner was unable to substantiate its entitlement to a temporary restraining order.
In any case, even if a separate hearing was granted, petitioner would have presented
the same arguments and evidence in the November 9, 2009 hearing. Thus, there can
be no denial of due process if the party alleging it has already been granted an
opportunity to be heard.

II.A

Under Rule 58 of the Rules of Court, 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" or an order
"requir[ing] the performance of a particular act or acts."49 It is an ancillary relief
granted by the court where the main action or proceeding is pending.50

In order to be granted the writ, it must be established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring perforn1ance of an act or acts, either for a limited period
or perpetually;

(b) That the commission, continuance or non-performance of the act or acts

complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to

do, or is procuring or suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.51

The issuance of a writ of preliminary injunction is considered an "extraordinary event,"

being a ''strong arm of equity or a transcendent remedy."52 Thus, the power to issue
the writ "should be exercised sparingly, with utmost care, and with great caution and
deliberation."53

An injunctive writ is granted only to applicants with "actual and existing substantial
rights"54 or rights in esse. Further, the applicant must show "that the invasion of the
right is material and substantial and that there is an urgent and paramount necessity
for the writ to prevent serious damage."55 Thus, the writ will not issue to applicants
whose rights are merely contingent or to compel or restrain acts that do not give rise
to a cause of action.56

In this case, petitioner alleges that as the registered owner of the property covered by
TCT No. 168590, "[i]t has the undeniable right to the full use and possession [of it]."57

At the time of the sale between petitioner Evy Construction, Uyan, and Ang, TCT No.
134890 in Uyan's and Ang's names did not contain any liens or encumbrances, except
for a notice of adverse claim by Ang dated January 21, 1999. However, petitioner
admitted that while the Deed of Absolute Sale was executed on September 4, 2007,
the property was only registered in its name on November 20, 2007.58 The
encumbrances in respondent's favor were annotated on September 18, 2007,
October 2, 2007, and November 8, 2007,59 or when the property was still registered
under Uyan's and Ang's names.

Under the Torrens system of registration, a person who deals with the registered
owner of the property is not bound to look beyond the title for any liens or
encumbrances that have not been annotated.60 TCT No. 134890 did not contain a
notice of lis pendens that could have warned petitioner that the property was under
litigation.

The sale between petitioner Evy Construction? Uyan, and Ang was not annotated on
TCT No. 134890 at the time of its sale.1âwphi1 A sale of property that is not registered
under the Torrens system is binding only between the buyer and the seller and does
not affect innocent third persons.61 The Regional Trial Court could not have been
faulted for ordering the annotation of the notice of levy on attachment on TCT No.
134890 considering that when the September 18, 2007 Order was issued1 the
property was still in Uyan's and Ang's names.

Thus, in determining whether or not petitioner is entitled to injunctive relief, the courts
would have to pass upon the inevitable issue of which between petitioner and
respondent has the better right over the property, the very issue to be resolved in the
main case.

The facts of this case mirror that of Spouses Chua v. Hon. Gutierrez,62 where this
Court was confronted with the issue of whether or not a registered lien of attachment
is superior to that of an unregistered deed of sale. In Spouses Chua, the property was
already registered in the Spouses Chua's names when the property was levied. Thus,
they argued that, not being the judgment debtors, the property should not have been
subjected to an execution sale.

This Court found the argument unmeritorious and held:

[A] levy on attachment, duly registered, has preference over a prior unregistered sale
and, even if the prior unregistered sale is subsequently registered before the sale on
execution but after the levy is made, the validity of the execution sale should be
upheld because it retroacts to the date of levy.63
The prior levy on attachment carries over to the new certificate of title, effectively
placing the buyers in the position of their vendor under litigation.

However, Spouses Chua stated an exception in that "[k]nowledge of an unregistered

sale is equivalent to registration."64 If a party presents evidentiary proof that the
judgment creditor had knowledge of a valid sale between the judgment debtor and an
innocent third party, that knowledge would have the effect of registration on the
judgment creditor.

As in Spouses Chua, respondent's attachment liens dated September 18, 2007,

October 2, 2007, and November 8, 2007, if valid, may have been superior to whatever
right petitioner may have acquired by virtue of the Deed of Absolute Sale, which was
only registered on November 20, 2009. However, the validity of the liens and the
validity of the Deed of Absolute Sale are factual matters that have yet to be resolved
by the trial court. The trial court must also determine whether or not respondent had
prior knowledge of the sale.

Thus, no injunctive writ could be issued pending a final determination of petitioner's

actual and existing right over the property.1âwphi1 The grant of an injunctive writ
could operate as a prejudgment of the main case.

II.B

Even assuming that there is already a final determination of petitioner's right over the
property, petitioner still failed to prove the urgent and paramount necessity to enjoin
the Register of Deeds from making further annotations on TCT No. 168590.

Petitioner prays for the issuance of an injunctive writ to prevent grave and irreparable
damage to its reputation as a real estate developer.65 Indeed, injunctive relief could
be granted to prevent grave and irreparable damage to a business entity's goodwill
and business reputation.66

Injury is considered irreparable if "there is no standard by which [its] amount can be

measured with reasonable accuracy."67 The injury must be such that its pecuniary
value cannot be estimated, and thus, cannot fairly compensate for the loss.68 For this
reason, the loss of goodwill and business reputation, being unquantifiable, would be
considered as grave and irreparable damage.

In Yu v. Court of Appeals,69 this Court granted an exclusive distributor's prayer for an

injunctive writ to prevent a competitor from selling the same product on the ground
that the continued sale would "[render] illusory . . . the very purpose for which the
exclusive distributorship was conceptualized, at the expense of the sole authorized
distributor."70

In Semirara Coal Corporation v. HGL Development Corporation,71 this Court upheld

the issuance of a writ of mandatory injunction to prevent Semirara Coal Corporation's
(Semirara) continued intrusion on HGL Development Corporation's (HGL) property. It
also found that Semirara damaged HGL's business standing when it prevented HGL
from operating its cattle-grazing business on its property, which ''[was] perceived as
an inability by HGL to comply with the demands of its customers and sow[ed] doubts
in HGL's capacity to continue doing business."72

In Philippine National Bank v. RJ Ventures Realty & Development Corporation, 73 this

Court affirmed the issuance of a writ of preliminary injunction to enjoin the extrajudicial
foreclosure of Rajah Broadcasting Network's radio equipment pending the resolution
of the main case questioning the mortgage. This Court found that the foreclosure
would stop the operations of Rajah Broadcasting Network's radio stations. The loss
of its listenership and the damage to its image and reputation would not be
quantifiable, and thus, would be irreparable.

However, in applications for provisional injunctive writs the applicant must also prove
the urgency of the application.1âwphi1The possibility of a grave and irreparable injury
must be established, at least tentatively, to justify the restraint of the act complained
of.74 It is "[a]s the term itself suggests ... temporary, subject to the final disposition of
the principal action."75 Its sole objective is "to preserve the status quo until the merits
can be heard."76

Petitioner alleges that the execution sale and the prior annotations on its title caused
"crucial investors and buyers"77to withdraw, "notwithstanding the considerable costs
and expenses [it] already incurred."78This is the grave and irreparable damage it
sought to be protected from. However, the feared "damage" was caused by the
execution sale and the annotations already made on the title. It even admits that the
annotations were "impairing the progress of [its] housing development."79 In other
words, petitioner failed to establish the urgent and paramount necessity of preventing
further annotations on the title.

Thus, what petitioner actually seeks is the removal of the annotations on its title, which
is precisely what it asked for in its Complaint for Quieting of Title/Removal of Cloud,
Annulment of Execution Sale and Certificate of Sale, and Damages before the trial
court. Injunctive relief would have no practical effect considering that the purported
damage it seeks to be protected from has already been done. Therefore, its proper
remedy is not the issuance of an injunctive writ but to thresh out the merits of its
Complaint before the trial court.

In Cortez-Estrada v. Heirs of Samut,80 this Court held:

[T]he grant or denial of a writ of preliminary injunction in a pending case rests in the
sound discretion of the court taking cognizance of the case since the assessment and
evaluation of evidence towards that end involve findings of facts left to the said court
for its conclusive determination.81

The court's discretion is not interfered with unless there is a showing that the grant or
denial was tainted with grave abuse of discretion.82

The trial court, in the exercise of its discretion, denied petitioner's application for the
issuance of a temporary restraining order and writ of preliminary injunction on the
ground that petitioner would still have sufficient relief in its prayer for damages in its
Complaint.83 In the event that the annotations on petitioner's title are found by the trial
court to be invalid, petitioner would have adequate relief in the removal of the
annotations and in the award of damages. Therefore, the trial court acted within the
bounds of its discretion.

WHEREFORE, the Petition is DENIED,

SO ORDERED.

14. January 25, 2017

G.R. No. 215807

ROSARIO E. CAHAMBING, Petitioner
vs.
VICTOR ESPINOSA and JUANA ANG, Respondent

DECISION

PERALTA, J.:

Before this Court is the Petition for Keview on Certiorari under Rule 45 of the Rules
of Court dated November 28, 2014 of petitioner Rosario E. Cahambing that seeks to
reverse and set aside the Decision1 dated November 29, 2013 and Resolution dated
October 28, 2014 of the Court of Appeals (CA), affirming the Order2 dated September
22, 2009 and Resolution dated February 25, 2010 of the Regional Trial Court (RTC),
Branch 25, Maasin City, Southern Leyte regarding the issuance of a writ of preliminary
injunction in Civil Case No. R-2912 for Annulment of Deed of Extra-Judicial Partition.

The facts follow.

Petitioner and respondent Victor Espinosa are siblings and the children of deceased
spouses Librado and Brigida Espinosa, the latter bequeathing their properties, among
which is Lot B or Lot 3 54 with an area of 1,341 square meters, more or less, situated
in Maasin City, Southern Leyte, to the said siblings in the same deceased spouses'
respective Last Wills and Testaments which were duly probated.

Deceased Librado and Brigida bequeathed their respective shares over Lot 354 to
respondent Victor Espinosa, however, Brigida subsequently revoked and cancelled
her will, giving her one-half (1/2) share over Lot 354 to petitioner.

Brigida Espinosa and respondent Victor Espinosa, after the death of Librado
Espinosa, entered into an Extrajudicial Partition of Real Estate subdividing Lot 354
into Lot 354-A, with an area of 503.5 square meters adjudicated to Brigida Espinosa,
and Lot 354-B, with an area of 837.5 square meters, adjudicated to respondent Victor
Espinosa, who eventually obtained a certificate of title in his name.

Not being included in the partition of Lot 354, petitioner filed a complaint against
respondent Victor Espinosa and his representative, respondent Juana Ang, for,
among others, the annulment of the Extrajudicial Partition of Real Property which was
docketed as Civil Case No. R-2912.

Incidentally, a commercial building named as Espinosa Building stands on Lot No.

354. At the time of the filing of the complaint, the same building had twelve (12)
lessees, four (4) of whom pay rentals to petitioner, namely: Pacifica Agrivet Supplies,
Family Circle, Ariane's Gift Items, and Julie's Bakeshop. Petitioner alleged that
respondent Juana Ang prevailed upon Pacifica Agrivet Supplies not to renew its lease
contract with petitioner but to enter into a contract of lease with respondent Victor
Espinosa instead. According to petitioner, respondent Juana Ang also threatened to
do the same thing with Julie's Bakeshop.

In one of the pre-trial conferences, the Clerk of Court, acting as Commissioner, issued
an Order dated April 16, 1998 directing the parties to maintain the status quo.

Thereafter, respondent Victor Espinosa filed an Application for the Issuance of a Writ
of Preliminary Injunction with Prayer for the Issuance of a Temporary Restraining
Order dated March 3, 2009 against petitioner alleging that the latter violated the status
quo ante order by allowing her sons to occupy the space rented by Jhanel' s
Pharmacy which is one of respondent Victor Espinosa's tenants. Respondent Victor
Espinosa, through his attorney-in-fact, private respondent Juana Ang, alleged that
petitioner's sons constructed a connecting door through the partition separating their
cellular phone shop from Jhanel' s Pharmacy and that the contract of lease between
the latter and respondent Victor Espinosa is still subsisting, hence, the entry by
petitioner's sons into the pharmacy's commercial space disturbed the status quo ante.

The RTC, finding merit to the application for temporary restraining order filed by
respondent Victor Espinosa, granted the same on March 6, 2009. Thereafter, the
RTC, on September 22, 2009, issued an Order for the issuance of a writ of preliminary
injunction, the dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING, the defendant's prayer for the issuance of a writ of
preliminary injunction is GRANTED. Accordingly, upon defendant's filing, within ten
(10) days from receipt hereof, of the injunction bond in the sum of fifty thousand pesos
(PhP50,000.00) conditioned on defendant's paying all damages, the plaintiff may
sustain by reason of this injunction in case the Court should finally decide that the
defendant is not entitled thereto, let a writ of preliminary injunction issue enjoining or
restraining the plaintiff and all those claiming rights under her from disturbing the
possession of the defendant to the leased premises or the "status quo ante" until after
this case shall have been decided on the merits and/or until further orders from this
Court.

SO ORDERED.

After the denial of petitioner's motion for reconsideration in a Resolution dated

February 25, 2010, petitioner filed a petition on certiorari under Rule 65 of the Rules
of Court, with the CA imputing grave abuse of discretion on the part. of the RTC when
it granted the application for the issuance of a writ of preliminary injunction filed by
respondent Victor Espinosa. According to petitioner, respondents themselves
violated the status quo ante order when they wrested the space rented by Pacifica
Agrivet Supplies from petitioner's control and that there was no compliance with the
requisites for the issuance of the writ of preliminary injunction.

The CA, on November 29, 2013, dismissed petitioner's petition on certiorari, thus:

WHEREFORE, the petition is DENIED. The Order and the Resolution, dated
September 22, 2009 and February 25, 2010, respectively, both issued by respondent
court in Civil Case No. R-2912 STAND.

SO ORDERED.

In a Resolutior1 dated October 28, 2014, the CA denied petitioner's motion for
reconsideration. Hence, the present petition.

Petitioner comes before this Court with the following issues for

resolution:

I.

ISSUES FOR RESOLUTION

A.

HE WHO SEEKS EQUITY MUST DO EQUITY. PRIVATE RESPONDENTS TOOK

THE LAW INTO THEIR OWN HANDS BY WRESTING CONTROL OF THE SPACE
BEING RENTED OUT TO PACIFICA AGRIVET SUPPLIES AND UNDER THE
CONTROL OF MRS. ROSARIO CAHAMBING. THE HONORABLE COURT OF
APPEALS COMMITTED LEGAL ERROR IN VALIDATING THE WRIT OF
PRELIMINARY INJUNCTION GRANTED BY THE HONORABLE RTC IN FAVOR OF
PRIVATE RESPONDENTS DESPITE THE LATTER'S CONDUCT WHICH DIRTIED
AND SULLIED THEIR HANDS.

B.

THE WRIT OF PRELIMINARY INJUNCTION IS GRANTED ONLY IN

EXTRAORDINARY CASES WHERE THE REQUISITES ARE COMPLIED WITH.
THE HONORABLE COURT OF APPEALS COMMITTED LEGAL ERRORS IN
VALIDATING THE WRIT OF PRELIMINARY INJUNCTION GRANTED BY THE
HONORABLE RTC OF MAASIN CITY DESPITE THE LACK OF URGENCY AND
DESPITE THE FACT THAT RESPONDENTS' CLAIM FOR DAMAGES ARE
QUANTIFIABLE.

According to petitioner, the CA turned a blind eye and failed to consider respondents'
violation of the status quo when it wrested possession and control of the space leased
to Pacifica Agrivet Supplies and tried to do the same with Lhuillier Pawnshop; thus,
committing a grave error and amounts to discrimination since the CA recognized the
status quo as the situation where petitioner was the lessor of Pacifica Agrivet
Supplies.

Petitioner further claims that respondents failed to prove the elements before an
injunction could be issued and that the CA committed an error in validating the writ of
preliminary injunction without those requisites. In particular, petitioner avers the
following contentions: (1) the damage claimed by respondents is quantifiable at
₱12,000.00 per month, hence, not irreparable; (2) respondent, Victor Espinosa is at
best a co-owner of the subject property, while respondent Juana Ang is a stranger,
and a co-owner cannot exclude another co-owner, hence, respondent Victor
Espinosa's right is not clear and unmistakable; (3) there is no urgency involved
because the application for injunction was filed more than one year after the incident
in question; (4) contrary to the conclusion of the CA, the space occupied by Jhanel' s
Pharmacy was voluntarily surrendered to petitioner by the lessee; and (5) the CA
committed grave legal errors when it failed to correct the RTC's issuance of the writ
of preliminary injunction.

In their Comment3 dated June 4, 2015, respondents argue that they did not have
sullied hands when they applied for the writ of preliminary injunction. They also point
out that the issuance of the writ of preliminary injunction was strictly in accordance
with the Revised Rules on Civil Procedure.

Petitioner, in her Reply4 dated August 14, 2015, reiterated her arguments contained
in the petition for review.1âwphi1

The present petition is void of any merit.

A close reading of the arguments raised by petitioner would show that they are factual
in nature. A petition for review filed under Rule 45 may raise only questions of
law.5 The factual findings of the Court of Appeals, when supported by substantial
evidence, are generally conclusive and binding on the parties and are no longer
reviewable unless the case falls under the recognized exceptions. 6 This court is not
a trier of facts and we are not dutybound to re-examine evidence.7
Nevertheless, the CA did not err in ruling that the RTC did not commit any grave
abuse of discretion in issuing the questioned writ of preliminary injunction.

In Philippine National Bank v. RJ Ventures Realty and Development Corporation, et

al., 8 this Court exhaustively discussed the nature of a writ of preliminary injunction,
thus:

Foremost, we reiterate that the sole object of a preliminary injunction is to maintain

the status quo until the merits can be heard.9 A preliminary injunction 10 is an order
granted at any stage of an action prior to judgment or final order, requiring a party,
court, agency, or person to refrain from a parti.cular act or acts. It is a preservative
remedy to ensure the protection of a party's substantive rights or interests pending
the final judgment in the principal action. A plea for an injunctive writ lies upon the
existence of a claimed emergency or extraordinary situation which should be avoided
for otherwise, the outcome of a litigation
11
would be useless as far as the party applying for the writ is concerned.

The grounds for the issuance of a Writ of Preliminary Injunction are

prescribed in Section 3 of Rule 58 of the Rules of Court. Thus:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may

be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts

complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to

do, or is procuring or suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.

Otherwise stated, for a Writ of Preliminary Injunction to issue, the following requisites
must be present, to wit: (1) the existence of a clear and unmistakable right that must
be protected, and (2) an urgent and paramount necessity for the writ to prevent
serious damage.12 Indubitably, this Court has likewise stressed that the very
foundation of the jurisdiction to issue a writ of injunction rests in the existence of a
cause of action and in the probability of irreparable injury, inadequacy of pecuniary
compensation, and the prevention of multiplicity of suits. 13 Sine dubio, the grant or
denial of a writ of preliminary injunction in a pending case, rests in the sound
discretion of the court taking cognizance of the case since the assessment and
evaluation of evidence towards that end involve findings of facts left to the said court
for its conclusive determination. 14 Hence, the exercise of judicial discretion by a court
in injunctive matters must not be interfered with except when there is grave abuse of
discretion. 15 Grave abuse of discretion in the issuance of writs of preliminary
injunction implies a capricious and whimsical exercise of judgment that is equivalent
to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic
manner by reason of passion, prejudice or personal aversion amounting to an evasion
of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in
contemplation of law.16
This Court agrees with the CA and the RTC that the elements for the issuance of a
writ of preliminary injunction are present in this case. As aptly ruled by the CA:

In this case, respondent court correctly found that private respondent Victor Espinosa
had established a clear and unmistakable right to a commercial space heretofore
occupied by Jhanel's Pharmacy. He had an existing Contract of Lease with the
pharmacy up to December 2009. Without prejudging the main case, it was
established that, at the time of the issuance of the status quo order dated April 16,
1998, Jhanel' s Pharmacy was recognized as one of private respondent Victor
Espinosa' s tenants. In fact, petitioner identified only Pacifica Agrivet Supplies, Family
Circle, Ariane's Gift Items and Julie's Bakeshop. As such, pursuant to the status quo
order, it is private respondent Victor Espinosa who must continue to deal with Jhanel's
Pharmacy. Correspondingly, the commercial space occupied by Jhanel' s Pharmacy
must be deemed to be under the possession and control of private respondent Victor
Espinosa as of the time of the issuance of the status quo order. The right of
possession and control is a clear right already established by the circumstances
obtaining at that time. Hence, petitioner's act of entering the premises of Jhanel's
Pharmacy, through her sons, is a material and substantial violation of private
respondent Victor Espinosa's right, which act must be enjoined.

The RTC was also able to make the following factual findings that shows the urgency
and the necessity of the issuance of the writ of preliminary injunction in order to
prevent serious damage:

By allowing the plaintiff to disturb the status quo ante which, for purposes of this
instant application, is limited to the admission by the plaintiff regarding the lease by
twelve lessees, including Jhanel's Pharmacy, of the subject commercial building, the
rentals of which only four pertains to her, excluding Jhanel's Pharmacy, great and
irreparable injury would result to defendant not just because he would be deprived of
his right to collect rent from Jhanel's Pharmacy but more importantly, because it would
make doing business with him risky, unstable and unsound, especially with respect
to his other tenants having existing contracts with the defendant.

All of the above findings and considerations expounded in the CA' s assailed decision
and resolution contain no reversible error, thus, they should not be disturbed. It must
always be remembered that the issuance of a writ of preliminary injunction rests
entirely on the discretion of the court and is generally not interfered with except in
cases of manifest abuse. 17 In this case, no manifest abuse can be attributed to the
RTC that issued the questioned writ. This Court has also held that no grave abuse of
discretion can be attributed to a judge or body issuing a writ of preliminary injunction
where a party has not been deprived of its day in court as it was heard and it
exhaustively presented all its arguments and defenses. 18 Verily, petitioner was given
her day in court to present her side but as in all litigations, only one party prevails.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of
Court dated November 28, 2014 of petitioner Rosario E. Cahambing is DENIED.
Consequently, the Decision dated November 29, 2013 and Resolution dated October
28, 2014 of the Court of Appeals, affirming the Order dated September 22, 2009 and
Resolution dated February 25, 2010 of the Regional Trial Court, Branch 25, Maasin
City, Southern Leyte, are AFFIRMED.

SO ORDERED.

15. G.R. No. 179257, November 23, 2015

UNITED ALLOY PHILIPPINES CORPORATION, Petitioner, v. UNITED COCONUT
PLANTERS BANK [UCPB] AND/OR PHILIPPINE DEPOSIT INSURANCE
CORPORATION [PDIC], JAKOB VAN DER SLUIS AND ROBERT
T.CHUA, Respondent.

DECISION

DEL CASTILLO, J.:

"[T]he dismissal of the principal action x x x [carries] with it the denial, disallowance
or revocation of all reliefs ancillary to the main remedy sought in that action." 1

Challenged in this Petition for Review on Certiorari2 is the August 17, 2007
Decision3 of the Court of Appeals, Cagayan de Oro City Station (CA CDO) in CA-G.R.
SP No. 67079 dismissing petitioner United Alloy Philippines Corporation's (UniAlloy)
Petition for Certiorari and Mandamus filed therewith. In said Petition, UniAlloy sought
to nullify the Orders dated September 134 and 14,5 2001 of the Regional Trial Court
(RTC), Branch 40, Cagayan de Oro City in Civil Case No. 2001-219 that dismissed
its Complaint for Annulment and/or Reformation of Contract and Damages with
Prayer for A Writ of Preliminary Injunction or Temporary Restraining Order
(TRO)6 and ordered it to surrender the possession of the disputed premises to
respondent United Coconut Planters Bank (UCPB).

Factual Antecedents

UniAlloy is a domestic corporation engaged in the business of manufacturing and

trading on wholesale basis of alloy products, such as ferrochrome, ferrosilicon and
ferromanganese. It has its principal office and business address at Phividec Industrial
Area, Tagaloan, Misamis Oriental. Respondent UCPB, on the other hand, is a
banking corporation while respondent Robert T. Chua (Chua) is one of its Vice-
Presidents. Respondent Jakob Van Der Sluis is a Dutch citizen and was the Chairman
of UniAlloy. Respondent Philippine Deposit Insurance Corporation is the assignee-in-
interest of UCPB as regards the loan account of UniAlloy.

On September 10, 1999, UniAlloy and UCPB entered into a Lease Purchase
Agreement7 (LPA) wherein UniAlloy leased from UCPB several parcels of land with a
total area of 156,372 square meters located in Barangay Gracia, Tagoloan, Misamis
Oriental,8 The three-year lease commenced on August 1, 1999 to run until July 31,
2002 for a monthly rent: of P756/700.00. The parties stipulated that upon the
expiration of the lease, UniAlloy shall purchase the leased properties for P300 million
to be paid on staggered basis. UniAlloy also obtained loans from UCPB.

On August 27, 2001, however, UniAlloy filed the aforesaid Complaint9 against
respondents. It claimed that, thru misrepresentation and manipulation, respondent
Jakob Van Der Sluis took foil control of the management and operation of UniAlloy;
that respondents connived with one another to obtain fictitious loans purportedly for
UniAlloy as evidenced by Promissory Note Nos. 8111-00-00110-6, 8111-00-20031-
1, and 8111-01-20005-6 for P6 million, US$10,000.00, and US$320,000.00,
respectively; that UCPB demanded payment of said loans; and, that UCPB
unilaterally rescinded the LPA. UniAlloy prayed that judgment be issued: (i) ordering
the annulment and/or reformation of the three Promissory Notes; (ii) nullifying UCPB's
unilateral rescission of the LPA; (iii) enjoining UCPB from taking possession of the
leased premises; and (iv) ordering respondents to jointly and severally pay nominal
and exemplary damages, as well as attorney's fees of P500,000.00 each. As ancillary
relief, UniAlloy prayed for the issuance of a temporary restraining order and/or writ of
preliminary injunction.

On the same day, the Executive Judge of the RTC, Cagayan de Oro City issued a
72-hour TRO directing UCPB to cease and desist from taking possession of the
disputed premises.10 The following day, respondent Jakob Van Der Sluis filed a
Motion to Dismiss and Opposition to the Application for Injunction or TRO11 on the
grounds of improper venue, forum-shopping,12 litis pendentia, and for being a
harassment suit under the Interim Rules of Procedure for Intra-Corporate Cases. He
argued that the LPA specifically provides that any legal action aiising therefrom
should be brought exclusively in the proper courts of Makati City. The Complaint did
not disclose the pendency of Civil Case No. 2001-156 entitled "Ernesto Paraiso and
United Alloy Philippines Corporation v. Jakob Van Der Sluis" before Branch 40, as
well as CA-G.R. SP No, 66240 entitled "Jakob Van Der Sluis v. Honorable Epifanio
T. Nacaya, et al." He further averred that what UniAlloy sought to enjoin is already fait
accompli.

Respondents UCPB and Chua, on the other hand, filed a Motion to Dismiss & Motion
to Recall Temporary Restraining Order.13 In addition to the ground of improper venue,
they raised the issue of lack of authority of the person who verified the Complaint as
no secretary's certificate or a board resolution was attached thereto.

During the hearing on the writ of preliminary injunction on August 30, 2001, the RTC
directed the parties to maintain the status quo by not disturbing the possession of the
present occupants of the properties in question pending resolution of respondents'
motions,

On September 13, 2001, the RTC, acting as Special Commercial Court, issued an
Order14 granting the motions to dismiss and ordering the dismissal of the case on the
grounds of improper venue, forum-shopping and for being a harassment suit. The
RTC held that venue was improperly laid considering that the Promissory Notes
sought to be annulled were issued pursuant to a Credit Agreement which, in turn,
stipulates that any legal action relating thereto shall be initiated exclusively in the
proper courts of Makati City. It also opined that UniAlloy committed forum-shopping
for failing to disclose in its certificate of non-forum-shopping the pendency of Civil
Case No, 2001-156 which involves the same parties, the same transactions and the
same essential facts and circumstances. The cases, as ruled by the RTC, have also
identical causes of action, subject matter and issues. The dispositive portion of the
September 13, 2001 Order reads:chanRoblesvirtualLawlibrary

ACCORDINGLY, finding meritorious that the venue is improperly laid and the
complain[an]t engaged in forum-shopping and harassment of defendant Jakob Van
der Sluis, this case is hereby DISMISSED rendering the prayer issuance of a writ of
preliminary injunction moot and academic, and ordering plaintiff to turn over
possession of the subject premises of the properties in question at Barangay Gracia,
Tagoloan, Misamis Oriental to defendant United Coconut Planters Bank.

SO ORDERED.15ChanRoblesVirtualawlibrary
cralawlawlibrary

Upon UCPB's motion, the RTC issued another Order16 dated September 14, 2001
directing the issuance of a writ of execution to enforce its September 13, 2001 Order.
Accordingly, a Writ of Execution17 was issued directing the Sheriff to put UCPB in
possession of the disputed premises. It was satisfied on September 17, 2001.18 The
employees of UniAlloy were evicted from the leased premises and UCPB's
representatives were placed in possession thereof.

On September 25, 2001, UniAlloy received copies of the RTC Orders.19 And on
October 9, 2001, it filed with the Court of Appeals, Manila Station (CA Manila) its
petition in CA-G.R. SP No. 67079 attributing grave abuse of discretion on the part of
the court a quo in (i) dismissing its petition on the grounds of improper venue, forum-
shopping and harassment, (ii) ordering the turnover of the property in question to
UCPB after the dismissal of the Complaint, and (iii) applying the Interim Rules of
Procedure for Intra-corporate Controversies.

On October 18,2001, the CA Manila issued a TRO. After hearing, the CA Manila
issued a Resolution20dated February 18, 2002 granting UniAlloy's ancillary prayer for
the issuance of a writ of preliminary injunction upon posting of a bond in the amount
of P300,000.00.

UniAlloy posted the requisite bond.

However, no writ of preliminary injunction was actually issued by the CA Manila

because of this Court's March 18, 2002 Resolution21 in G.R. No. 152238 restraining
it from enforcing its February 18, 2002 Resolution. G.RNo. 152238 is a Petition
for Certiorari initiated by UCPB assailing said Resolution of CA Manila. And, in
deference to this Court, the CA Manila refrained from taking further action in CA-G.R.
SP No. 67079 until G.R. No. 152238 was resolved.22

On January 28, 2005, this Court rendered its Decision23 in G.R. No. 152238 finding
no grave abuse of discretion on the part of the CA in issuing its February 18, 2002
Resolution and, consequently, denying UCPB's petition.

Thereafter, and since this Court's Decision in G.R. No. 152238 attained finality,
UniAUoy filed with the CA Manila a Motion to Issue and Implement Writ of Preliminary
Mandatory Injunction.24 In the meantime, the records of CA-G.R. SP No. 67079 were
forwarded to CA CDO pursuant to Republic Act No. 8246.25cralawred

On May 31, 2006, the CA CDO issued a Resolution26 denying UniAlloy's motion. It
found that UniAUoy had lost its right to remain in possession of the disputed premises
because it defaulted in the payment of lease rentals and it was duly served with a
notice of extrajudicial termination of the LPA. Said court also found that UniAUoy
vacated the leased premises and UCPB was already in actual physical possession
thereof as of August 24, 2001, or three days before UniAUoy filed its complaint with
the RTC. Hence, it could no longer avail of the remedy of preliminary injunction to
regain possession of the disputed premises.

UniAUoy filed a Motion for Reconsideration,27 which was denied in the CA CDO's
November 29,2006 Resolution.28

On August 17, 2007, the CA CDO issued the assailed Decision denying UniAlloy's
petition and affirming the RTC's questioned Orders. It opined inter alia that UniAUoy
erred in resorting to a Rule 65 petition because its proper recourse should have been
to appeal the questioned Orders of the RTC, viz.:chanRoblesvirtualLawlibrary

It is plain from the record, though, that Unialloy had lost its right to appeal. The time
to make use of that remedy is gone. It is glaringly obvious that Unialloy resorted to
this extraordinary remedy of certiorari and mandamus as a substitute vehicle for
securing a review and reversal of the questioned order of dismissal which it had, by
its own fault, allowed to lapse into finality. Unfortunately, none of the arguments and
issues raised by Unialloy in its petition can adequately brand the 13 September 2001
Order as void on its face for being jurisdietionaily flawed, nor mask the fact that it
became final and executory by Unialloy's failure to file an appeal on time. And so,
even if the assailed order of dismissal might arguably not have been entirely free from
some errors in substance, or lapses in procedure or in findings of fact or of law, and
which that account could have been reversed or modified on appeal, the indelible fact,
however is that it was never appealed. It had become final and executory. It is now
beyond the power of this Court to modify it.29ChanRoblesVirtualawlibrary
cralawlawlibrary

Hence, this Petition raising the following issues for Our resolution:

1. Whether the Court of Appeals (Cagayan de Oro City) erred, or acted

without, or in excess of jurisdiction, or committed grave abuse of discretion arnounting
to lack, or excess of jurisdiction in DENYING United Alloy's Motion to Issue and
Implement Writ of Preliminary Mandatory Injunction in this case, DESPITE the earlier
resolution dated February 18, 2002 issued by the same Court of Appeals (Manila) of
coordinate and co-equal jurisdiction which granted United Alloy's Motion for Issuance
of Preliminary Injunction upon bond of P300,000.00, and DESPITE this Honorable
Court's decision dated January 28, 2005 in the certiorari case G.R. No. 152238 filed
by UCPB to assail the Court of Appeals's Resolution of February 18, 2002, which
decision sustained the said resolution of February 18, 2002, and DENIED UCPB's
petition in said G.R. No. 152238.

As sub-issue - Whether the Court of Appeals (Cagayan de Oro City) disregarded the
rule that every court must take cognizance of decisions the Supreme Court has
rendered, because they are proper subjects of mandatory judicial notice. The said
decisions more importantly, form part of the legal system, and failure of any court to
apply them shall constitute an abdication of its duty to resolve a dispute in accordance
with law and shall be a ground for administrative action against an inferior court
magistrate x x x
2. Whether x x x the Court of Appeals (Cagayan de Qro City) decided this
case in accord with law and the evidence, and so far departed from the accepted and
usual course of judicial proceedings as to call for an exercise of the supervisory power
of this Honorable Court, and to entitle this petition to allowance and the review sought
in this case.30

cralawlawlibrary

Issue

The basic issue to be resolved in this case is whether the CA CDO erred in dismissing
UniAlloy's Petition for Certiorari and Mandamus. For if the said court did not commit
an error then it would be pointless to determine whether UniAlloy is entitled to a writ
of preliminary injunction pursuant to CA Manila's February 18, 2002 Resolution which
was issued as a mere ancillary' remedy in said petition.

Our Ruling

The Petition is devoid of merit.

Before delving on the focal issue, the Court shall first pass upon some procedural
matters.

UniAlloy availed of the proper remedy

in assailing the RTC's September 13, 2001
Order dismissing its Complaint

In its Comment,31 UCPB defends the CA CDO in denying due course to UniAlloy's
Petition for Certiorariand Mandamus. It posits that UniAlloy should have filed with the
RTC a Notice of Appeal from the Order dated September 13, 2001 instead of a Rule
65 petition before the CA, Respondents Jakob Van der Sluis and Chua echo UCPB's
contention that UniAlloy resorted to a wrong mode of remedy and that the dismissal
of its complaint had become final and executory which, in turn, rendered UniAlloy's
Rule 65 petition before the CA moot and academic.32

In its Consolidated Reply,33 UniAlloy counter-argues that it filed a Rule 65 petition with
the CA because the remedy of appeal is inadequate as the RTC had already directed
the issuance of a writ of execution and that the RTC Orders are patently illegal.

UniAlloy availed of the correct remedy. Under Section 1 Rule 16 of the Rules of Court,
the following may be raised as grounds in a motion to
dismiss:chanRoblesvirtualLawlibrary

SECTION 1. Grounds. — Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made on any of
the following grounds:chanRoblesvirtualLawlibrary

(a) That the court has no jurisdiction over the person of the defending party;

(b) That the court has no jurisdiction over the subject matter of the claim;

(c) That venue is improperly laid;

(d) That the plaintiff has no legal capacity to sue;

(e) That there is another action pending between the same parties for the same
cause;
(f) That the cause of action is barred by a prior judgment or by the statute of limitations;

(g) That the pleading asserting the claim states no cause of action;

(h) That the claim or demand set forth in the plaintiffs pleading has been paid, waived,
abandoned, or otherwise extinguished;

(i) That the claim on which the action is founded is unenforceable under the provisions
of the statute of frauds; and

(j) That a condition precedent for filing the claim has not been complied
with.cralawlawlibrary

Except for cases falling under paragraphs (f), (h), or (i), the dismissal of an action
based on the above-enumerated grounds is without prejudice and does not preclude
the refiling of the same action. And, under Section l(g) of Rule 41,34 an order
dismissing an action without prejudice is not appealable. The proper remedy
therefrom is a special civil action for certiorari under Rule 65,35 But, if the reason for
the dismissal is based on paragraphs (f), (h), or (i) (i.e., res judicata, prescription,
extinguishment of the claim or demand, and unenforceability under the Statute of
Frauds) the dismissal, under Section 5,36 of Rule 16, is with prejudice and the remedy
of the aggrieved party is to appeal the order granting the motion to dismiss.

Here, the dismissal of UniAlloy's Complaint was without prejudice. The September
13, 2001 Order of the RTC dismissing UniAlloy's Complaint was based on the
grounds of improper venue, forum-shopping and for being a harassment suit, which
do not fall under paragraphs (f), (h), or (i) of Section 1, Rule 16. Stated differently,
none of the grounds for the dismissal of UniAlloy's Complaint is included in Section 5
of Rule 16 of the Rules of Court. Hence, since the dismissal of its Complaint was
without prejudice, the remedy then available to UniAlloy was a Rule 65 petition.

CA CDO did not err in affirming the

dismissal of UniAlloy's Complaint on the
grounds of improper venue, forum-shopping
and for being a harassment suit

The RTC was correct in dismissing UniAlloy's Complaint on the ground of improper
venue. In general, personal actions must be commenced and tried (i) where the
plaintiff or any of the principal plaintiffs resides, (ii) where the defendant or any of the
principal defendants resides, or (III) in the case of a resident defendant where he may
be found, at the election of the plaintiff.37 Nevertheless, the parties may agree in
writing to limit the venue of future actions between them to a specified place. 38

In the case at bench, paragraph 18 of the LPA expressly provides that "[a]ny legal
action arising out of or in connection with this Agreement shall be
brought exclusively in the proper courts of Makati City, Metro Manila."39 Hence,
UniAlloy should have filed its complaint before the RTC of Makati City, and not with
the RTC of Cagayan de Oro City.

But to justify its choice of venue, UniAlloy insists that the subject matter of its
Complaint in Civil Case No. 2001-219 is not the LPA, but the fictitious loans that
purportedly matured on April 17, 2001.40

UniAlloy's insistence lacks merit. Its Complaint unequivocally sought to declare "as
null and void the unilateral rescission made by defendant UCPB of its subsisting
Lease Purchase Agreement with [UniAlloy]."41 What UCPB unilaterally rescinded is
the LPA and without it there can be no unilateral rescission to speak of. Hence, the
LPA is the subject matter or at least one of the subject matters of the Complaint.
Moreover, and to paraphrase the aforecited paragraph 18 of the LPA, as long as the
controversy arises out of or is connected therewith, any legal action should be filed
exclusively before the proper courts of Makati City. Thus, even assuming that the LPA
is not the main subject matter, considering that what is being sought to be annulled is
an act connected and inseparably related thereto, the Complaint should have been
filed before the proper courts in Makati City.

With regard forum-shopping, our review of the records of this case revealed that
UniAlloy did not disclose in the Verification/Certification of the Complaint the
pendency of Civil Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy
Philippines Corporation v. Jakob Van Der Sluis." The trial court took judicial notice of
its pendency as said case is also assigned and pending before it. Thus, we adopt the
following unrebutted finding of the RTC:chanRoblesvirtualLawlibrary
These two civil cases have identical causes of action or issues against defendant
Jakob Van Der Sluis for having misrepresented to plaintiff and its stockholders that
he can extend financial assistance in running the operation of the corporation, such
that on April 6, 2001 plaintiff adopted a Stockholders Resolution making defendant
Jakob chairman of the corporation for having the financial capability to provide the
financial needs of plaintiff and willing to finance the operational needs thereof; that a
Memorandum of Agreement was subsequently entered between the parties whereby
defendant Jakob obligated to provide sufficient financial loan to plaintiff to make it
profitable; that Jakob maliciously and willfiilly reneged [on] his financial commitments
to plaintiff prompting the stockholders to call his attention and warned him of avoiding
the said agreement; that defendant who had then complete control of plaintiffs bank
account with defendant UCPB, through fraudulent machinations and manipulations,
was able to maliciously convince David C. Chua to pre-sign several checks; that
defendant Jakob facilitated several huge loans purportedly obtained by plaintiff which
defendant himself could not even account and did not even pay the debts of the
corporation but instead abused and maliciously manipulated plaintiffs account.

Forum-shopping indeed exists in this case, for both actions involve the same
transactions and same essential facts and circumstances as well as identical causes
of action, subject matter and issues, x x x42cralawlawlibrary

The dismissal of UniAlloy's main

action carries with it the dissolution of
any ancillary relief previously granted
therein.

UniAlloy argues that the CA CDO erred in denying its petition considering that this
Court has already sustained with finality the CA Manila's February 18, 2002
Resolution granting its prayer for the issuance of a writ of preliminary mandatory
injunction.

The contention is non sequitur.

"Provisional remedies [also known as ancillary or auxiliary remedies], are writs and
processes available during the pendency of the action which may be resorted to by a
litigant to preserve and protect certain rights and interests pending rendition, and for
purposes of the ultimate effects, of a final judgment in the case. They are provisional
because they constitute temporary measures availed of during the pendency of the
action, and they are ancillary because they are mere incidents in and are dependent
upon the result of the main action."43 One of the provisional remedies provided in the
Rules of Court is preliminary injunction, which may be resorted to by a litigant at any
stage of an action or proceeding prior to the judgment or final order to compel a party
or a court, agency or a person to refrain from doing a particular act or
acts.44 In Bacolod City Water District v. Hon. Labayen,45 this Court elucidated that the
auxiliary remedy of preliminary injunction persists only until it is dissolved or until the
tepnination of the main action without the court issuing a final injunction,
viz.:chanRoblesvirtualLawlibrary

x x x Injunction is a judicial writ, process or proceeding whereby a party is ordered to

do or refrain from doing a certain act, It may be the main action or merely a provisional
remedy for and as an incident in the main action.

The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of an
independent action or proceeding. As a matter of course, in an action for injunction,
the auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may
issue. Under the law, the main action for injunction seeks a judgment embodying a
final injunction which is distinct from, and should not be confused with, the provisional
remedy of preliminary injunction, the sole object of which is to preserve the status quo
until the merits can be heard. A preliminary injunction is granted at any stage of an
action or proceeding prior to the judgment or final order. It persists until it is dissolved
or until the termination of the action without the court issuing a final
injunction.46cralawlawlibrary

Based on the foregoing, it is indubitably clear that the August 17, 2007 Decision of
CA CDO dismissing UniAlloy's Petition for Certiorari and Mandamus effectively
superseded the February 18, 2002 Resolution of the CA Manila granting UniAUoy's
ancillary prayer for the issuance of a writ of preliminary injunction. It wrote finis not
only to the main case but also to the ancillary relief of preliminary injunction issued in
the main case.

For the same reason, there is no merit in UniAUoy's contention that the RTC
grievously erred in ordering it to turn over the possession of the subject premises to
UCPB considering that the latter never prayed for it. As borne out by the records of
the case, UCPB was already in actual possession of the litigated premises prior to
the filing of the Complaint on August 27, 2001. This conforms with the finding of the
CA CDO which pronounced that "an actual turnover of the premises x x x was really
effected on August 24, 2001, prior to the institution of the complaint a quo."47 UniAlloy
was able to regain possession of the disputed premises only by virtue of the RTC's
72-hour TRO. With the issuance of the RTC's September 13, 2001 Order dismissing
the Complaint of UniAlloy, however, the RTC's 72-hour TRO and August 30, 2001
order to maintain status quo, which are mere incidents of the main action, lost their
efficacy. As discussed above, one of the inevitable consequences of the dismissal of
the main action is the dissolution of the ancillary relief granted therein. Besides, the
RTC issued the status quo order with the express caveat that the same shall remain
in force until it has resolved respondents' motions to dismiss, which it subsequently
granted. Consequently, UniAlloy has no more bases to remain in possession of the
disputed premises. It must, therefore, restitute whatever it may have possessed by
virtue of the dissolved provisional remedy, even if the opposing party did not pray for
it.

The August 17, 2007 Decision neither

violated this Court's January 28, 2005
Decision in G.R. No. 152238 nor contradicted
the CA Manila's February 18, 2002 Resolution.

UniAlloy further argues that in denying its petition, CA CDO contradicted the earlier
Resolution of a coordinate court, the CA Manila, and the January 28, 2005 Decision
of this Court in G.R. No. 152238. It insists that no court can interfere with the
judgment, orders or decrees of another court of concurrent or coordinate jurisdiction.

We are not persuaded.

True, under the doctrine of judicial stability or non-interference, "no court can interfere
by injunction with the judgments or orders of another court of concurrent jurisdiction
having the power to grant the relief sought by injunction. The rationale for the rule is
founded on the concept of jurisdiction: a court that acquires jurisdiction over the case
and renders judgment therein has jurisdiction over its judgment, to the exclusion of
all other coordinate courts, for its execution and over all its incidents, and to control,
in furtherance of justice,, the conduct of ministerial officers acting in connection with
this judgment."48 But said doctrine is not applicable to this case. Here, the proceeding
in CA CDO is a continuation of the proceeding conducted in CA Manila. There is only
one case as what was resolved by CA CDO is the same case, CA-G.R. SP No. 67079
earlier filed with and handled by CA Manila. It was referred to CA CDO pursuant to
Republic Act No. 8246 creating three divisions of the CA each in Cebu and Cagayan
de Qro. Section 5 thereof provides:chanRoblesvirtualLawlibrary
SECTION 5. Upon the effectivity of this Act, all pending cases, except those which
have been submitted for resolution, shall be referred to the proper division of the Court
of Appeals.cralawlawlibrary

In fine, CA CDO did not intrude into an order issued by another co-equal court in a
different case. Rather, it continued to hear the petition until its termination after the
CA Manila referred the same to it by virtue of a law.

The fact that said February 18, 2002 Resolution of CA Manila was affirmed by this
Court in its January 28, 2005 Decision in G.R. No. 152238 is likewise of no moment.
Said Resolution of CA Manila only granted UniAlloy's ancillary prayer for injunctive
relief. It did not touch on the issues of improper venue, forum-shopping, and
harassment. Thus, neither did this Court tackle said issues in its January 28, 2005
Decision. In fact, this Court cautiously limited its discussions on the propriety of the
CA's directive temporarily restraining the RTC from placing UCPB in possession of
the disputed premises and deliberately reserved to the CA the determination of
whether the RTC erred in dismissing the main case.
Thus:chanRoblesvirtualLawlibrary

The dismissal of Civil Case No. 2001-219 on the grounds of forum-shopping,

improper venue and harassment - although raised, too, by Unialloy in its Petition
before the Court of Appeals - was not passed upon in the assailed interlocutory CA
Resolution. As a consequence, it would be premature and improper for us to pass
upon the RTC's dismissal of the case. Hence, we shall limit our discussion to the
assailed Resolutions temporarily stopping the trial court's turnover of the litigated
property to petitioner.49ChanRoblesVirtualawlibrary
cralawlawlibrary

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.chanroblesvirtuallawlibrary

C. RECEIVERSHIP RULE 59

16. G.R. No. 61508 March 17, 1999

Citibank, N.A. (Formerly First National City Bank), petitioner,

vs.
The Honorable Court of Appeals and Douglas F. Anama, respondents.

PURISIMA, J.:

At bar is a special civil action for certiorari with prayer for a temporary restraining
order faulting the Court of Appeals 1 with grave abuse of discretion for nullifying the
lower court's order of seizure of mortgaged properties subject of a case for sum of
money and replevin.

The facts leading to the institution of the case are as follows:

In considering for a loan obtained from Citibank, N.A. (formerly First National City
Bank), the defendant (private respondent herein) Douglas Anama executed a
promissory note, dated November 10, 1972, 2 to pay the plaintiff bank the sum of
P418,000.00 in sixty (60) equal successive monthly installments of P8,722.25,
starting on the 10th day of December 1972 and on the 10th of every month thereafter.
The said Promissory Note stipulated further that:

(a) the loan is subject to interest at the rate of twelve percent (12%) per annum;

(b) the promissory note and the entire amount therein stated shall become
immediately due and payable without notice or demand upon —

(aa) default in the payment of any installment of principal or interest at the time when
the same is due;

(bb) the occurrence of any change in the condition and affairs of the defendant, which
in the opinion of the plaintiff shall increase its credit risk;

(c) the defendant agrees to pay all costs, expenses, handling and insurance charges
incurred in the granting of the loan;

(d) in case the services of a lawyer is made necessary for collection, defendant shall
be liable for attorney's fees of at least ten percent (10%) of the total amount due. 3

To secure payment of the loan, private respondent Anama also constituted a Chattel
Mortgage of even date in favor of petitioner, on various machineries and equipment
located at No. 1302 Epifanio delos Santos Avenue, Quezon City, under the following
terms and conditions:

(a) The machineries and equipment subject of the mortgage, stand as security for
defendant's account.

(b) All replacement, substitutions, additions, increases and accretions to the

properties mortgaged shall also be subject to the mortgage.

(c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter
the premises of the defendant and take actual possession of the mortgaged chattels
without any court order, to sell said property to any party.

(d) All expenses in carrying into effect the stipulations therein shall be for the account
of the defendant and shall form part of the amount of the obligation secured by the
mortgage.

(e) In case the plaintiff institutes proceedings for the foreclosure of the mortgage, the
plaintiff shall be entitled to the appointment of a receiver without a bond.

(f) In case of default, the defendant shall be liable for attorney's fees and cost of
collection in the sum equal to twenty-five (25%) of the total amount of the
indebtedness outstanding and unpaid. 4
On November 25, 1974, for failure and refusal of the private respondent to pay the
monthly installment due under the said promissory note since January 1974, despite
repeated demands, petitioner filed a verified complaint against private respondent
Anama for the collection of his unpaid balance of P405,820.52 on the said promissory
note, for the delivery and possession of the chattels covered by the Chattel Mortgage
preparatory to the foreclosure thereof as provided under Section 14 of the Chattel
Mortgage Law, docketed as Civil Case No. 95991 before the then Court of First
Instance of Manila.

On February 20, 1975, the defendant Anama submitted his Answer with
Counterclaim, denying the material averments of the complaint, and averring inter
alia (1) that the remedy of replevin was improper and the writ of seizure should be
vacated; (2) that he signed the promissory note for P418,000.00 without receiving
from plaintiff Citibank any amount, and was even required to pay the first installment
on the supposed loan in December 1974; (3) that the understanding between him and
the Citibank was for the latter to release to him the entire loan applied for prior to and
during the execution of his promissory note, but Citibank did not do so and, instead,
delayed the release of any amount on the loan even after the execution of the
promissory note thereby disrupting his timetable of plans and causing him damages;
(4) that the amount released by Citibank to him up to the present was not the amount
stated in the promissory note, and his alleged default in paying the installment on the
loan was due to the delay in releasing the full amount of the loan as agreed upon; (5)
that the macheniries and equipment described in the chattel mortgage executed by
him are really worth more than P1,000,000.00 but he merely acceded to the valuation
thereof by Citibank in said document because of the latter's representation that the
same was necessary to speed up the granting of the loan applied for by him; (6) that
the properties covered by said chattel mortgage are real properties installed in a more
or less permanent nature at his (defendant's) premises in Quezon City, as admitted
by Citibank in said mortgage document; (7) that the mortgage contract itself stipulated
that the manner and procedure for affecting the sale or redemption of the mortgage
properties, if made extrajudicial, shall be governed by Act No. 1508 and other
pertinent laws which all pertain to real properties; and (8) that because of the filing of
this complaint without valid grounds therefor, he suffered damages and incurred
attorney's fees; the defendant, now private respondent, averred.

On December 2, 1974, the trial court upon proof of default of the private respondent
in the payment of the said loan, issued an Order of Replevin over the macheneries
and equipment covered by the Chattel Mortgage.

However, despite the issuance of the said order of seizure of subject chattels, actual
delivery of possession thereof to petitioner did not take place because negotiations
for an amicable settlement between the parties were encouraged by the trial court.

On March 24, 1975, a pre-trial conference was held and the lower court issued an
order for joint management by the petitioner and the private respondent of the latter's
business for ten (10) days, after which the former would appointed receiver for the
said business.

On April 1, 1975, the petitioner took over private respondent's business as receiver.
When further proposals to settle the case amicably failed, the lower court proceeded
to try the case on the merits.

On January 29, 1977, petitioner presented a Motion for the Issuance of an Alias Writ
of Seizure, ordering the sheriff to seize the properties involved and dispose of them
in accordance with the Revised Rules of Court. The lower court then gave private
respondent five (5) days to oppose the said motion and on February 22, 1977, he
sent in his opposition thereto on the grounds: (1) that Citibank's P400,000 replevin
bond to answer for damages was grossly inadequate because the market value of
the properties involved is P1,710,000 and their replacement cost is P2,342,300.00
per the appraisal report of the Appraisal and Research Corp.; (2) that he was never
in default to justify the seizure; (3) that the Civil Case No. 18071 of the Court of First
Instance, entitled Hernandes vs. Anama, et al., which, according to Citibank,
supposedly increased its credit risk in the alleged obligation, had already been
dismissed as against him and the case terminated with the dismissal of the complaint
against the remaining defendant, First National City Bank, by the Court in its orders
of January 12, 1977 and February 7, 1977; (4) that his (defendant's) supposed
obligations with Citibank were fully secured and his mortgaged properties are more
than sufficient to secure payment thereof; and (5) that the writ of seizure if issued
would stop his business operations and contracts and expose him to lawsuits from
customers, and also dislocate his employees and their families entirely dependent
thereon for their livelihood.

On February 28, 1977, acting on the said Motion and private respondent's opposition,
the trial court issued an Order granting the Motion for Alias Writ of Seizure, ruling
thus:

WHEREFORE, the motion for alias writ of seizure is hereby granted. At any rate, this
Order gives another opportunity for defendant and the intervenor who claims to be a
part owner to file a counterbond under Sec. 60 of Rules of Court. 5

Private respondent moved for reconsideration of the aforesaid order but the same
was denied by the Resolution of March 18, 1977, to wit:

In view of the foregoing, the motion for reconsideration is hereby denied.

At any rate, as already stated, the defendant has still a remedy available which is to
file a bond executed to the plaintiff in double the value of the properties as stated in
the plaintiff's affidavit. The Court at this instance therefore has no authority to stop or
suspended the writ of seizure already ordered. 6

Accordingly, by virtue of the Alias writ of Seizure, petitioner took possession of the
mortgaged chattels of private respondent. As a consequence, the sheriff seized
subject properties, dismantled and removed them from the premises where they were
installed, delivered them to petitioner's possession on March 17, 18 and 19, 1977 and
advertised them for sale at public auction scheduled on March 22, 1977.

On March 21, 1977, private respondent filed with the Court of Appeals a Petition
for Certiorari and Prohibition 7 with Injunction to set aside and annul the questioned
resolution of the trial court on the ground that they were issued "in excess of
jurisdiction and with grave abuse of discretion" because of the "lack of evidence and
clear cut right to possession of First National City Bank (herein petitioner)" top the
machineries subject of the Chattel Mortgage.

On July 30, 1982, finding that the trial court acted with grave abuse of discretion
amounting to excess of lack of jurisdiction in issuing the assailed resolutions, the
Court of Appeals granted petition, holding that the provision of the Rules of Court on
Replevin and Receivership have not been complied with, in that (1) there was no
Affidavit of Merit accompanying the Complaint for Replevin; (2) the bond posted by
Citibank was insufficient; and (3) there was non-compliance with the requirement of
a receiver's bond and oath of office. The decretal portion of the assailed decision of
the Court of Appeals, reads:

WHEREFORE, the petition is granted. The questioned resolutions issues by the

respondent judge in Civil Case No. 95991, dated February 28, 1977 and March 18,
1977, together with the writs and processes emanating or deriving therefrom, are
hereby declare null and void ab initio.

The respondent ex-officio sheriff of Quezon City and the respondent First National
City Bank are hereby ordered to return all the machineries and equipment with their
accessories seized, dismantled and hauled, to their original and respective places
and position in the shop flooring of the petitioner's premises where these articles
were, before they were dismounted, seized and hauled at their own expense. The
said respondents are further ordered to cause the repair of the concrete foundations
destroyed by them including the repair of the electrical wiring and facilities affected
during the seizure, dismanting and hauling.

The writ of preliminary injunction heretofore in effect is hereby made permanent.

Costs against the private respondents.

SO ORDERED 8

Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing
grave abuse of discretion to the Court of Appeals and assigning as errors, that:

THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT

RENDERING JUDGMENT ON THE MERITS AGAINST THE HEREIN PETITIONER
BY ORDERING THE RETURN OF THE MACHINERIES AND EQUIPMENT AND ITS
ACCESSORIES TO THEIR ORIGINAL AND RESPECTIVE PLACES AND
POSITIONS.

II

THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF THE

PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2, RULE 60
OF THE RULES OF COURT.

III

THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND

POSTED BY THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT.

IV

THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER DID

NOT COMPLY WITH THE PROVISIONS OF SEC. 5, RULE 59 BY FAILING TO
POST A RECEIVER'S BOND.

THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA

ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OR
LACK OF JURISDICTION IN DEALING WITH THE SITUATION.
I

Anent the first assigned error, petitioner contends that the Court of Appeals, by
nullifying the writ of seizure issued below, in effect, rendered judgment on the merits
and adjudged private respondent Anama as the person lawfully entitled to the
possession of the properties subject of the replevin suit. It is theorized that the same
cannot be done, as the case before the court below was yet at trial stage and lower
court still had to determine whether or not private respondent was in fact in default in
the payment of his obligation to petitioner Citibank, which default would warrant the
seizure of subject machineries and equipment.

The contention is untenable. A judgment is on the merits when it determines the rights
and liabilities of the parties on the basis of the disclosed facts, irrespective of formal
technical or dilatory objections, and it is not necessary that there should have been a
trial. 9 The assailed decision of the Court of Appeals did not make any adjudication
on the rights and liabilities between Citibank and Douglas Anama. There was no
finding yet of the fact of default. The decision only ruled on the propriety of the
issuance of the writ of seizure by the trial court. As worded by the respondent court
itself, "the main issues to be resolved are whether there was lack or excess of
jurisdiction, or grave abuse of discretion, in the issuance of the orders in question,
and there is no appeal nor any plain, speedy, and adequate remedy in the ordinary
course of law." 10

In resolving the issue posed by the petition, the Court of Appeals limited its disposition
to a determination of whether or not the assailed order of seizure was issued in
accordance with law, that is, whether the provisions of the Rules of Court on delivery
of personal property or replevin as a provisional remedy were followed. The Court of
Appeals relied on Ruled 60 of the Rules of Court, which prescribed the procedure for
the recovery of possession of personal property, which Rule, provides:

Sec. 2. Affidavit and Bond. — Upon applying or such order the plaintiff must show by
his own affidavit or that of some other person who personally knows the facts:

(a) That the plaintiff is the owner of the property claimed particularly describing it, or
is entitled to the possession thereof;

(b) That the property is wrongfully detained by the defendant, alleging the cause of
detention thereof according to his best of knowledge, information and belief;

(c) That it has nor been taken for a tax assessment or fine pursuant to law, or seized
under an execution, or an attachment against the property of the plaintiff, or is so
seized, that is exempt from such seizure; and

(d) The actual value of the property.

The plaintiff must also give a bond, executed to the defendant in double of the value
of the property as stated in the affidavit aforementioned, for the property to the
defendant of such sum as he may recover from the plaintiff in the action.

The Court of Appeals did not pass upon the issue of who, as between Douglas Anama
and Citibank, is entitled to the possession of subject machineries, as asserted by the
latter. When it ordered the restoration of the said machineries to Douglas Anama (now
the private respondent), it merely defendant to the possession of his properties, since
there was a finding that the issuance of the writ was not in accordance with the
specific rules of the Rules of Court.
II

In its second assignment of errors, petitioner theorizes that the Court of Appeals erred
in finding that it did not comply with Section 2, Rule 60 of the Rules of Court requiring
the replevin plaintiff to attach an affidavit of merit to the compliant.

Petitioner maintains that although there was no affidavit of merit accompanying its
complaint, there was nonetheless substantial compliance with the said rule as all that
is required to be alleged in the affidavit of merit was set forth in its verified complaint.
Petitioner argues further that assuming arguendo that there was non-compliance with
the affidavit of merit requirement, such defense can no longer be availed of by private
respondent Anama as it was not alleged in his Answer and was only belatedly
interposed in his Reply to the Petitioner's Comment on the Petitioner
for Certiorari before the Court of Appeals.

Petitioner is correct insofar as it contends that substantial compliance with the affidavit
requirement may be permissible. There is substantial compliance with the rule
requiring that an affidavit of merit to support the complaint for replevin if the complaint
itself contains a statements of every fact required to be stated in the affidavit of merit
and the complaint is verified like an affidavit. On the matter of replevin, Justice Vicente
Francisco's Comment on the Rules of Court, states:

Although the better practice is to keep the affidavit and pleading separate, if plaintiff's
pleading contains a statement of every fact which the statute requires to be shown in
the affidavits, and the pleading is verified by affidavit covering every statement
therein, this will be sufficient without a separate affidavit; but in no event can the
pleading supply the absence of the affidavit unless all that the affidavit is required to
contain is embodied in the pleading, and the pleading is verified in the form required
in the case of a separate affidavit. (77 CJS 65 cited in Francisco, Rules of Court of
the Philippines, Vol. IV-A, p. 383)

And similarly, in the case of an attachment which likewise requires an affidavit of

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

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

But, as correctly taken note of by the Court of Appeals, petitioner's complaint does
not allege all the facts that should be set forth in an affidavit of merit. Although the
complaint alleges that petitioner is entitled to the possession of subject properties by
virtue of the chattel mortgage executed by the private respondent, upon the latter's
default on its obligation, and the defendant's alleged "wrongful detention" of the same,
the said complaint does not state that subject properties were not taken by virtue of
a tax assessment or fine imposed pursuant to law or seized under execution or
attachment or, if they were so seized, that they are exempt from such seizure.

Then too, petitioner stated the value of subject properties at a "probable value of
P200,000.00, more or less". Pertinent rules require that the affidavit of merit should
state the actual value of the property subject of a replevin suit and not just its probable
value. Actual value (or actual market value) means "the price which an article would
command in the ordinary course of business, that is to say, when offered for sale by
one willing to sell, but not under compulsion to sell and purchased by another who is
willing to buy, but under no obligation to purchase it".13Petitioner alleged that the
machineries and equipment involved are valued at P200,000.00 while respondent
denies the same, claiming that per the appraisal report, the market value of the said
properties is P1,710,000.00 and their replacement cost is P2,342,300.00. Petitioner's
assertion is belied by the fact that upon taking possession of the aforesaid properties,
it insured the same for P610,593.74 and P450,000.00, separately. It bears stressing
that the actual value of the properties subject of a replevin is required to be in the
affidavit because such actual value will be the basis of the replevin bond required to
be posted by the plaintiff. Therefore, when the petitioner failed to declare the actual
value of the machineries and equipment subject of the replevin suit, there was non-
compliance with Section 2, Rule 60 of the Revised Rules of Court.

It should be noted, however, that the private respondent interposed the defense of
lack of affidavit of merit only in his Reply to the Comment of Citibank on the Petition
for Certiorari which respondent filed with the Court of Appeals. Section 2, Rule 9 of
the Revised Rules of Court, provides:

Sec. 2. Defenses and objections not pleaded deemed waived — Defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in later
pleading, . . . .

This Rule has been revised and amended, as follows:

Sec. 1. Defenses and objection not pleaded. — Defenses and objections not pleaded
in a motion to dismiss or in the answer are deemed waived. However, when it appears
from the pleadings or the evidence on record that the court has no jurisdiction over
the subject matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by statute of
limitations, the court shall dismiss the claim.

Thus, although respondent's defense of lack of affidavit of merit is meritorious,

procedurally, such a defense is no longer available for failure to plead the same in the
Answer as required by the omnibus motion rule.

III

Petitioner also faults the Court of Appeals for finding that the bond posted by the
petitioner is questionable and/or insufficient. It is averred that, in compliance with
Section 2, Rule 60 requiring the replevin plaintiff to post a bond in double the value of
the properties involved, it filed a bond in the amount P400,000.00 which is twice the
amount of P200,000.00 declared in its complaint.

The Court reiterates its findings on the second assignment of errors, particularly on
the issue of the actual of subject properties as against their probable value. Private
respondent, at the onset, has put into issues the value of the said properties. In the
Special Defenses contained in his Answer, private respondent averred:

That while defendant admits that he executed a Chattel Mortgage in favor of plaintiff,
he vigorously denies that the machineries covered therein are worth P200,000.00.
The fact is that plaintiff knew fully well that said chattels are worth no less than
P1,000,000.00, said defendant having acceded to said valuation upon plaintiff's
representation that it would be necessary to speed up the granting of the loan.

As here was a disagreement on the valuation of the properties in the first place, proper
determination of the value of the bond to be posted by the plaintiff cannot be
sufficiently arrived at. Though the rules specifically require that the needed bond be
double the value of the properties, since plaintiff merely denominated a probable
value of P200,000.00 and failed to aver the properties' actual value, which is claimed
to be much greater than that declared by plaintiff, the amount of P400,000.00 would
indeed be insufficient as found by the Court of Appeals. The Rules of Court requires
the plaintiff to "give a bond, executed to the defendant in double the value of the
property as stated in the affidavit
. . . ." Hence, the bond should be double the actual value of the properties involved.
In this case, what was posted was merely an amount which was double the probable
value as declared by the plaintiff and, therefore, inadequate should there be a finding
that the actual value is actually far greater than P200,000.00. Since the valuation
made by the petitioner has been disputed by the respondent, the lower court should
have determined first the actual value of the properties. It was thus as error for the
said court to approve the bond, which was based merely on the probable value of the
properties.

It should be noted that a replevin bond is intended to indemnify the defendant against
any loss that he may suffer by reason of its being compelled to surrender the
possession of the disputed property pending trial of the
14
action. The same may also be answerable for damages if any when judgment is
rendered in favor of the defendant or the party against whom a writ of replevin was
issued and such judgment includes the return of the property to him. 15 Thus, the
requirement that the bond be double the actual value of the properties litigated upon.
Such is the case because the bond will answer for the actual loss to the plaintiff, which
corresponds to the value of the properties sought to be recovered and for damages,
if any.

Petitioner also maintains that, assuming for the sake of argument that its replevin
bond was grossly inadequate or insufficient, the recourse of the respondent should
be to post a counterbound or a redelivery bond as provided under Section 5 of Rule
60.

Sec. 5 and 6, Rule 60 of the Rules of Court, read:

Sec. 5. Return of property. — If the defendant objects to the sufficient of the plaintiff's
bond, or of the surety or sureties thereon, he cannot require the return of the property
as in this section provided; but if he does not so object, he may, at any time before
the delivery of the property to the plaintiff, if such delivery be adjudge, and for the
payment of such sum to him as may be recovered against the defendant, and by
serving a copy of such bond on the plaintiff or his attorney.

Sec. 6. Disposition of property by officer. — If within five (5) days after the taking of
the property by the officer, the defendant does not object to the sufficiecy of the bond,
or of the surety or sureties thereon, or require the return of the property as provided
in the last preceding section; or if the defendant so objects, and the plaintiff's first or
new bond is approved; or if the defendant so require, and his bond is object to and
found insufficient and he does not forthwith file an approved bond, the property shall
be delivered to the plaintiff, the officer must return it to the defendant.
The Court held in a prior case 16 that the remedies provided under Section 5, Rule 60,
are alternative remedies. ". . . If a defendant in a replevin action wishes to have the
property taken by the sheriff restored to him, he should, within five days from such
taking, (1) post a counter-bond in double the value of said property, and (2) serve
plaintiff with a copy thereof, both requirements as well as compliance therewith within
the five-day period mentioned — being mandatory." 17 This course of action is
available to the defendant for as long as he does not object to the sufficiency of the
plaintiff's bond.

Conformably, a defendant in a replevin suit may demand the return of possession of

the property replevined by filing a redelivery bond executed to the plaintiff in double
the value of the property as stated in the plaintiff's affidavit within the period specified
in Section 5 and 6.

Alternatively, "the defendant may object to the sufficiency of the plaintiff's bond, or of
the surety or sureties thereon;" but if he does so, "he cannot require the return of the
property" by posting a counter-bond pursuant to Section 5 and 6. 18

In the case under consideration, the private respondent did not opt to cause redelivery
of the properties to him by filing a counter-bond precisely because he objected to the
sufficiency of the bond posted by plaintiff. Therefore, he need not file a counter-bond
or redelivery bond. When such objection was not given due course in the court below
— when, instead of requiring the plaintiff to post a new bond, the court approved the
bond in the amount of P400,000.00, claimed by respondent to be insufficient, and
ordered the seizure of the properties — recourse to a petition for certiorari before the
Court of Appeals assailing such order is proper under the circumstances.

IV

As its fourth assignment of errors, petitioner contends that the Court of Appeals made
an error of judgment in finding that the petitioner did not comply with the provisions of
Section 5, Rule 59 by failing to post a receiver's bond. Petitioner contends that
although it is in agreement with the Court of Appeals that a receiver's bond is separate
and distinct from a replevin bond, under the circumstances it was not required to file
a receiver's bond because it did not assume receivership over the properties. It is
further argued that assuming that it did assume receivership, the Chattel Mortgage
expressly provides, that:

In case the MORTGAGEE institutes proceedings, judicially or otherwise, for the

foreclosure of this Chattel Mortgage, or to enforce any of its rights hereunder, the
MORTGAGEE shall be entitled as a matter of right to the appointment of a receiver,
without bond, of the mortgaged properties and of such properties, real or personal,
claims and rights of the MORTGAGOR as shall be necessary or proper to enable the
said receiver to property control and dispose of the mortgaged properties. 19

The order of the trial court dated March 24, 1975 provided, among others, that the
properties shall be under joint management for a period of ten days, after which period
"the bank, by virtue of the stipulations under the chattel mortgage, becomes the
Receiver to perform all the obligations as such Receiver" and "in the event that the
bank decides not to take over the receivership, the joint management continues." 20

From the evidence on record, it is palpably clear that petitioner Citibank did, in fact,
assume receivership. A letter 21dated April 1, 1975 sent by petitioner to the private
respondent, reads:
April 1, 1975

Anama Engineering Service Group

114 R. Lagmay Street

San Juan, Rizal

Attention: Mr. Douglas Anama

Gentlemen:

Pursuant to the Court order, we have decided to take over your machine shop as
Receiver.

We are hereby appointing Mr. Artemio T. Gonzales as our representative.

Very truly yours,

FIRST NATIONAL CITY BANK

By:

P.R. REAL, JR.

Assistant Manager

Petitioner cannot therefore deny that nine days after the trial court issued the order of
receivership, it informed he private respondent that it would, as it did, assume
receivership.

The Court of Appeals found that the requirements of Section 5, Rule 59 on

receivership were not complied with by the petitioner, particularly the filing or posting
of a bond and the taking of an oath.

It should be noted that under the old Rules of Court which was in effect at the time
this case was still at trial stage, a bond for the appointment of a receiver was not
generally required of the applicant, except when the application was ex
parte. 22 Therefore, petitioner was not absolutely required to file a bond. Besides, as
stipulated in the chattel mortgage contract between the parties, petitioner, as the
mortgagee, is entitled to the appointment of a receiver without a bond.

However, the Court of Appeals was right in finding a defect in such assumption of
receiver in that the requirement of taking an oath has not been complied with Section
5, Rule 59, states:

Sec. 5. Oath and bond of receiver. — Before entering upon his duties, the receiver
must be sworn to perform them faithfully, and must file a bond, executed to such
person and in such sum as the court or judge may direct, to the effect that he will
faithfully discharge the duties of receiver in the action and obey the orders of the court
therein.

Consequently, the trail court erred in allowing the petitioner to assume receivership
over the machine shop of private respondent without requiring the appointed receiver
to take an oath.

V
In light of the foregoing, the answer to the fifth assignment of errors is in the negative.
For erroneously issuing the alias writ of seizure without inquiring into the sufficiency
of the replevin bond and for allowing petitioner to assume receivership without the
requisite oath, the Court of Appeals aptly held that the trial court acted with grave
abuse of discretion in dealing with situation.

Under the Revised Rules of Court, the property seized under a writ of replevin is not
to be delivered immediately to the plaintiff. 23 This is because a possessor has every
right to respected in its possession and may not be deprived of it without due
process. 24

As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of
Appeals, 25

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

WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No

pronouncement as to costs.

SO ORDERED.

17. G.R. No. 111174 March 9, 2000

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HON. BERNARDO V. SALUDARES, Presiding Judge, RTC, Br. 28, Lianga,
Surigao del Sur, and HUNG MING KUK, respondents.

QUISUMBING, J.:

This special civil action for certiorari assails the decision1 of the Regional Trial Court
of Lianga, Surigao del Sur, Branch 28, dated March 19, 1993. At issue is the
jurisdiction of the trial court over properties owned by Lianga Bay Logging Company,
Inc. (LBLC), but allegedly sequestered by the Presidential Commission on Good
Government (PCGG).

The facts on record show that on April 2, 1986, the PCGG issued a writ of
sequestration,2 which reads:

IN THE MATTER OF THE SEQUESTRATION OF LIANGA BAY LOGGING

x-----------------------x

TO: MR. ARISTIDES M. ESCOSORA

Baganga, Davao Oriental
WRIT OF SEQUESTRATION

By virtue of the power vested unto this Commission and by authority of the President
of the Philippines, LIANGA BAY LOGGING, with offices at 2nd Floor, Emerald
Building, Emerald Ave., Ortigas Office Bldg. Complex, Pasig, Metro Manila is hereby
sequestered.

Mr. Aristides Escosora is hereby appointed Fiscal Agent of this Commission and as
such, he is hereby ordered to:

1. To implement this sequestration order with a minimum disruption of business

activities.

2. To preserve and safeguard, as well as prevent the removal concealment of records

and the disposition and dissipation of assets, funds and resources.

3. To prevent undue removal or withdrawal of funds, until further orders to the

Commission.

4. To report to the Commission on Good Government within five (5) days.

Further, you are authorized to request the Commission for security support from the
Military/Police authorities only if necessary.

xxx xxx xxx

FOR THE COMMISSION:

Originally Signed

MARY CONCEPCION BAUTISTA

Commissioner

The writ of sequestration was based on the ground that the shares of stocks in LBLC
owned by Peter A. Sabido formed part of "illegally acquired wealth." On July 27, 1987,
the Republic of the Philippines through the PCGG and the Office of the Solicitor
General filed before the Sandiganbayan a complaint3 for reconveyance, reversion,
accounting, restitution and damages against, among others, Peter A. Sabido.

On August 12, 1991, Sabido filed a Motion to Lift the Writs of Sequestration before
the Sandiganbayan. On November 29, 1991, the Sandiganbayan granted the motion,
disposing as follows:

WHEREFORE, the "Motion (to Lift Writs of Sequestration)" dated August 12, 1991, is
granted. Accordingly, the Writs of Sequestration issued against the Philippine
Integrated Meat Corporation on March 17, 1986, and Lianga Bay Logging
Company, Inc. on April 2, 1986, are declared to have been deemed automatically
lifted upon the lapse of six months from the ratification of the 1987 Constitution on
February 2, 1987, without prejudice to the continuation of the proceedings against
PIMECO and Lianga. . . . (emphasis supplied)

xxx xxx xxx

SO ORDERED.4
On December 11, 1991, PCGG filed a motion for reconsideration of the decision of
Sandiganbayan praying for the nullification of the order which lifted the writ of
sequestration of LBLC.

In the meantime, on February 11, 1993, private respondent Hung Ming Kuk filed a
complaint5 for sum of money against LBLC, with a prayer for a writ of preliminary
attachment, with the Regional Trial Court, Branch 28, of Lianga, Surigao del Sur. The
PCGG was not impleaded by Hung Ming Kuk as party-defendant nor was the
sequestration case referred to the RTC's proceedings.

Thus, the Republic of the Philippines filed a special civil action6 for certiorari under
Rule 65, dated March 29, 1993, with the Supreme Court. This petition, docketed as
G.R. No. 109314, was later on consolidated with other similar cases.

Meantime, on February 15, 1993, the Sandiganbayan denied the motion for
reconsideration of PCGG, dated December 11, 1991.

On February 17, 1993, the trial court granted the writ of preliminary attachment in
favor of Hung Ming Kuk.

Thereafter, Hung Ming Kuk filed a motion to declare LBLC in default for failure to file
responsive pleadings pursuant to Sec. 1, Rule 18 of the Rules of Court. The RTC of
Lianga, acting on the motion of Hung Ming Kuk, issued an order dated March 4, 1993,
declaring LBLC as in default. Consequently, on March 19, 1993, the RTC rendered
judgment by default, and decreed thus:

WHEREFORE, premised on the foregoing evidences and findings, this court hereby
renders judgment in favor of the plaintiff, and ordering the defendant-Corporation to
pay, as follows:

1. To pay plaintiff the principal amount of the accrued unpaid obligation in the total
amount of P18,031,563.78, with interests at 14% per annum reckoned from July 1992
to February 1993 in the computed total of P1,250,666.66, the same to continue until
said obligation is fully paid;

2. To pay plaintiff moral and exemplary damages in the total amount of P150,000.00,
plus Appearance Fee for the counsel in the sum of P5,000.00;

3. To pay plaintiff the total amount of P4,857,195.45 for Sheriff's Expenses, Attached
Properties Guards' Fees, Filing Fees, Litigation Expenses, and Attorneys Fees
computed at 25% of the principal obligation, or P4,507,890.95, or a total amount of
P4,857,195.45;

4. To pay the costs of the suit.

IT IS SO ORDERED.7

On August 11, 1993, petitioner filed this special civil action under Rule 65 of the Rules
of Court, raising the sole issue as follows:

WHETHER, THE TRIAL COURT FAULTED IN DECIDING THE CLAIM OF PRIVATE

RESPONDENT WHICH INVOLVED THE PROPERTIES OF LIANGA BAY LOGGING
CO. INC.

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.

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 decision8 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:

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

xxx xxx xxx

(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
orders 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.

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

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'spetition to declare
the lifting of the writ of sequestration by the Sandiganbayan null and void. The
Court's en bancresolution pertinently reads:

WHEREFORE, judgment is hereby rendered:

A. NULLIFYING AND SETTING ASIDE:

xxx xxx xxx

17) in G.R. No. 109314, its impugned Resolutions 10 dated November 29, 1991 and
February 16, 1993.

In the same en banc Resolution, the Court observed:

II. Provisional Remedies in Pursuance of Policy

Special adjective tools or devices were provided by the Revolutionary Government

for the recovery of that "ill-gotten wealth." These took the form of provisional remedies
akin to preliminary attachment (Rule 57), writ of seizure of personalty (Rule 60) and
receivership (Rule 59). They were (a) sequestration and (b) freeze orders, as regards
"unearthed instance of "ill-gotten wealth"; and (c) provisional takeover, as regards
"business enterprises and properties taken over by the government of the Marcos
Administration or by entities or persons close to former President Marcos."

A. Executive Orders Re Sequestration, Freezing and Takeover

These special remedies were prescribed and defined in Executive Orders Numbered
1 and 2, promulgated by President Corazon C. Aquino in March, 1986. Their validity
and propriety were sustained by this Court on May 27, 1987, against claims that they
were unconstitutional as being bills of attainder, or as violative of the right against
self-incrimination and the guaranty against unreasonable searches and seizures. In
the same case, the Court also set the parameters for and restrictions on the proper
exercise of the remedies.

In BASECO vs. PCGG, 150 SCRA 181, 182 (1987), sequestration is defined as the
process, which may be employed as a conservatory writ whenever the right of the
property is involved, to preserve, pending litigation, specific property subject to
conflicting claims of ownership or liens and privileges. 11

The Court also noted the relationship between attachment and receivership, on one
hand, and sequestration, freeze order and provisional takeover on the other. The
latter there are ancillary remedies in prosecuting the ill-gotten wealth of the previous
Marcos regime. The Court observed that sequestration, freezing and provisional
takeover are akin to the provisional remedy of preliminary attachment or
receivership.1âwphi1

By an order of attachment, a sheriff seizes property of a defendant in a civil suit so

that it may stand as security for the satisfaction of any judgment that may be obtained,
and not disposed of, or dissipated, or lost intentionally, or otherwise, pending the
action. 12 When a writ of attachment has been levied on real property or any interest
therein belonging to the judgment debtor, the levy creates a lien which nothing can
destroy but its dissolution. 13 This well-settled rule is likewise applicable to a writ of
sequestration.

Attachment is in the nature of a proceeding in rem. It is against a particular property

of a debtor. The attaching creditor thereby acquires a specific lien upon the attached
property which ripens into a judgment against the res when the order of sale is made.
Such a proceeding is in effect a finding that the property attached is an indebted thing
and results in its virtual condemnation to pay for the owner's debt. The law does not
provide the length of time during which an attachment lien shall continue after the
rendition of the judgment, and it must therefore continue until the debt is paid, or sale
is had under execution issued in the judgment, or until the judgment is satisfied, or
the statement discharged or vacated in some manner provided by law. 14

In our view, the disputed properties of LBLC were already under custodia legis by
virtue of a valid writ of sequestration 15 issued by the PCGG on April 2, 1986, when
respondent Judge Saludares issued the assailed writ of attachment in favor of private
respondent Hung Ming Kuk. At that time the writ of sequestration issued by PCGG
against LBLC was subsisting. Said writ of the PCGG could not be interfered with by
the RTC of Lianga, because the PCGG is a coordinate and co-equal body. The PCGG
had acquired by operation of law the right of redemption over the property until after
the final determination of the case or until its dissolution.

WHEREFORE, the instant petition is partially GRANTED. The default Order issued
by the public respondent dated March 19, 1993, is AFFIRMED, but should be held in
abeyance until the sequestration case involving LBLC before the Sandiganbayan is
determined. The Order of Attachment issued by the public respondent is declared
NULL and VOID. No pronouncement as to costs.1âwphi1.nêt

SO ORDERED.

18. G.R. No. 203585 July 29, 2013

MILA CABOVERDE TANTANO and ROSELLER CABOVERDE, Petitioners,

vs.
DOMINALDA ESPINA-CABOVERDE, EVE CABOVERDE-YU, FE CABOVERDE-
LABRADOR, and JOSEPHINE E. CABOVERDE, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Assailed in this petition for review under Rule 45 are the Decision and Resolution of
the Court of Appeals (CA) rendered on June 25, 2012 and September 21, 2012,
respectively, in CA-G.R. SP. No. 03834, which effectively affirmed the Resolutions
dated February 8, 20 I 0 and July 19, 2010 of the Regional Trial Court (RTC) of
Sindangan, Zamboanga del Norte, Branch 11, in Civil Case No. S-760, approving
respondent Dominalda Espina-Caboverde's application for receivership and
appointing the receivers over the disputed properties.

The Facts

Petitioners Mila Caboverde Tantano (Mila) and Roseller Caboverde (Roseller) are
children of respondent Dominalda Espina-Caboverde (Dominalda) and siblings of
other respondents in this case, namely: Eve Caboverde-Yu (Eve), Fe Caboverde-
Labrador (Fe), and Josephine E. Caboverde (Josephine).

Petitioners and their siblings, Ferdinand, Jeanny and Laluna, are the registered
owners and in possession of certain parcels of land, identified as Lots 2, 3 and 4
located at Bantayan, Sindangan and Poblacion, Sindangan in Zamboanga del Norte,
having purchased them from their parents, Maximo and Dominalda Caboverde.1

The present controversy started when on March 7, 2005, respondents Eve and Fe
filed a complaint before the RTC of Sindangan, Zamboanga del Norte where they
prayed for the annulment of the Deed of Sale purportedly transferring Lots 2, 3 and 4
from their parents Maximo and Dominalda in favor of petitioners Mila and Roseller
and their other siblings, Jeanny, Laluna and Ferdinand. Docketed as Civil Case No.
S-760, the case was raffled to Branch 11 of the court.

In their verified Answer, the defendants therein, including Maximo and Dominalda,
posited the validity and due execution of the contested Deed of Sale.

During the pendency of Civil Case No. S-760, Maximo died. On May 30, 2007, Eve
and Fe filed an Amended Complaint with Maximo substituted by his eight (8) children
and his wife Dominalda. The Amended Complaint reproduced the allegations in the
original complaint but added eight (8) more real properties of the Caboverde estate
in the original list.

As encouraged by the RTC, the parties executed a Partial Settlement Agreement

(PSA) where they fixed the sharing of the uncontroverted properties among
themselves, in particular, the adverted additional eight (8) parcels of land including
their respective products and improvements. Under the PSA, Dominalda’s daughter,
Josephine, shall be appointed as Administrator. The PSA provided that Dominalda
shall be entitled to receive a share of one-half (1/2) of the net income derived from
the uncontroverted properties. The PSA also provided that Josephine shall have
special authority, among others, to provide for the medicine of her mother.

The parties submitted the PSA to the court on or about March 10, 2008 for approval.2

Before the RTC could act on the PSA, Dominalda, who, despite being impleaded in
the case as defendant, filed a Motion to Intervene separately in the case. Mainly, she
claimed that the verified Answer which she filed with her co-defendants contained
several material averments which were not representative of the true events and facts
of the case. This document, she added, was never explained to her or even read to
her when it was presented to her for her signature.

On May 12, 2008, Dominalda filed a Motion for Leave to Admit Amended Answer,
attaching her Amended Answer where she contradicted the contents of the aforesaid
verified Answer by declaring that there never was a sale of the three (3) contested
parcels of land in favor of Ferdinand, Mila, Laluna, Jeanny and Roseller and that she
and her husband never received any consideration from them. She made it clear that
they intended to divide all their properties equally among all their children without
favor. In sum, Dominalda prayed that the reliefs asked for in the Amended Complaint
be granted with the modification that her conjugal share and share as intestate heir
of Maximo over the contested properties be recognized.3

The RTC would later issue a Resolution granting the Motion to Admit Amended
Answer.4

On May 13, 2008, the court approved the PSA, leaving three (3) contested properties,
Lots 2, 3, and 4, for further proceedings in the main case.

Fearing that the contested properties would be squandered, Dominalda filed with the
RTC on July 15, 2008 a Verified Urgent Petition/Application to place the controverted
Lots 2, 3 and 4 under receivership. Mainly, she claimed that while she had a legal
interest in the controverted properties and their produce, she could not enjoy them,
since the income derived was solely appropriated by petitioner Mila in connivance
with her selected kin. She alleged that she immediately needs her legal share in the
income of these properties for her daily sustenance and medical expenses. Also, she
insisted that unless a receiver is appointed by the court, the income or produce from
these properties is in grave danger of being totally dissipated, lost and entirely spent
solely by Mila and some of her selected kin. Paragraphs 5, 6, 7, and 8 of the Verified
Urgent Petition/Application for Receivership5 (Application for Receivership) capture
Dominalda’s angst and apprehensions:

5. That all the income of Lot Nos. 2, 3 and 4 are collected by Mila Tantano, thru her
collector Melinda Bajalla, and solely appropriated by Mila Tantano and her selected
kins, presumably with Roseller E. Caboverde, Ferdinand E. Caboverde, Jeanny
Caboverde and Laluna Caboverde, for their personal use and benefit;

6. That defendant Dominalda Espina Caboverde, who is now sickly, in dire need of
constant medication or medical attention, not to mention the check-ups, vitamins and
other basic needs for daily sustenance, yet despite the fact that she is the conjugal
owner of the said land, could not even enjoy the proceeds or income as these are all
appropriated solely by Mila Tantano in connivance with some of her selected kins;

7. That unless a receiver is appointed by the court, the income or produce from these
lands, are in grave danger of being totally dissipated, lost and entirely spent solely by
Mila Tantano in connivance with some of her selected kins, to the great damage and
prejudice of defendant Dominalda Espina Caboverde, hence, there is no other most
feasible, convenient, practicable and easy way to get, collect, preserve, administer
and dispose of the legal share or interest of defendant Dominalda Espina Caboverde
except the appointment of a receiver x x x;

xxxx

9. That insofar as the defendant Dominalda Espina Caboverde is concerned, time is

of the utmost essence. She immediately needs her legal share and legal interest over
the income and produce of these lands so that she can provide and pay for her
vitamins, medicines, constant regular medical check-up and daily sustenance in life.
To grant her share and interest after she may have passed away would render
everything that she had worked for to naught and waste, akin to the saying "aanhin
pa ang damo kung patay na ang kabayo."

On August 27, 2009, the court heard the Application for Receivership and persuaded
the parties to discuss among themselves and agree on how to address the immediate
needs of their mother.6

On October 9, 2009, petitioners and their siblings filed a Manifestation formally

expressing their concurrence to the proposal for receivership on the condition, inter
alia, that Mila be appointed the receiver, and that, after getting the 2/10 share of
Dominalda from the income of the three (3) parcels of land, the remainder shall be
divided only by and among Mila, Roseller, Ferdinand, Laluna and Jeanny. The court,
however, expressed its aversion to a party to the action acting as receiver and
accordingly asked the parties to nominate neutral persons.7

On February 8, 2010, the trial court issued a Resolution granting Dominalda’s

application for receivership over Lot Nos. 2, 3 and 4. The Resolution reads:

As regards the second motion, the Court notes the urgency of placing Lot 2 situated
at Bantayan, covered by TCT No. 46307; Lot 3 situated at Poblacion, covered by TCT
No. T-8140 and Lot 4 also situated at Poblacion covered by TCT No. T-8140, all of
Sindangan, Zamboanga del Norte under receivership as defendant Dominalda
Espina Caboverde (the old and sickly mother of the rest of the parties) who claims to
be the owner of the one-half portion of the properties under litigation as her conjugal
share and a portion of the estate of her deceased husband Maximo, is in dire need
for her medication and daily sustenance. As agreed by the parties, Dominalda Espina
Caboverde shall be given 2/10 shares of the net monthly income and products of the
said properties.8

In the same Resolution, the trial court again noted that Mila, the nominee of
petitioners, could not discharge the duties of a receiver, she being a party in the
case.9 Thus, Dominalda nominated her husband’s relative, Annabelle Saldia, while
Eve nominated a former barangay kagawad, Jesus Tan.10

Petitioners thereafter moved for reconsideration raising the arguments that the
concerns raised by Dominalda in her Application for Receivership are not grounds for
placing the properties in the hands of a receiver and that she failed to prove her claim
that the income she has been receiving is insufficient to support her medication and
medical needs. By Resolution11 of July 19, 2010, the trial court denied the motion for
reconsideration and at the same time appointed Annabelle Saldia as the receiver for
Dominalda and Jesus Tan as the receiver for Eve. The trial court stated:

As to the issue of receivership, the Court stands by its ruling in granting the same,
there being no cogent reason to overturn it. As intimated by the movant-defendant
Dominalda Caboverde, Lots 2, 3 and 4 sought to be under receivership are not among
those lots covered by the adverted Partial Amicable Settlement. To the mind of the
Court, the fulfilment or non-fulfilment of the terms and conditions laid therein
nonetheless have no bearing on these three lots. Further, as correctly pointed out by
her, there is possibility that these Lots 2, 3, and 4, of which the applicant has interest,
but are in possession of other defendants who are the ones enjoying the natural and
civil fruits thereof which might be in the danger of being lost, removed or materially
injured. Under this precarious condition, they must be under receivership, pursuant
to Sec. 1 (a) of Rule 59. Also, the purpose of the receivership is to procure money
from the proceeds of these properties to spend for medicines and other needs of the
movant defendant Dominalda Caboverde who is old and sickly. This circumstance
falls within the purview of Sec. 1(d), that is, "Whenever in other cases it appears that
the appointment of a receiver is the most convenient and feasible means of
preserving, administering, or disposing of the property in litigation."

Both Annabelle Saldia and Jesus Tan then took their respective oaths of office and
filed a motion to fix and approve bond which was approved by the trial court over
petitioners’ opposition.

Undaunted, petitioners filed an Urgent Precautionary Motion to Stay Assumption of

Receivers dated August 9, 2010 reiterating what they stated in their motion for
reconsideration and expressing the view that the grant of receivership is not
warranted under the circumstances and is not consistent with applicable rules and
jurisprudence. The RTC, on the postulate that the motion partakes of the nature of a
second motion for reconsideration, thus, a prohibited pleading, denied it via a
Resolution dated October 7, 2011 where it likewise fixed the receiver’s bond at PhP
100,000 each. The RTC stated:

[1] The appointed receivers, JESUS A. TAN and ANNABELLE DIAMANTE-SALDIA,

are considered duly appointed by this Court, not only because their appointments
were made upon their proper nomination from the parties in this case, but because
their appointments have been duly upheld by the Court of Appeals in its Resolution
dated 24 May 2011 denying the herein defendants’ (petitioners therein) application
for a writ of preliminary injunction against the 8 February 2010 Resolution of this Court
placing the properties (Lots 2, 3 and 4) under receivership by the said JESUS A. TAN
and ANNABELLE DIAMANTE-SALDIA, and Resolution dated 29 July 2011 denying
the herein defendants’ (petitioners therein) motion for reconsideration of the 24 May
2011 Resolution, both, for lack of merit. In its latter Resolution, the Court of Appeals
states:

A writ of preliminary injunction, as an ancillary or preventive remedy, may only be

resorted to by a litigant to protect or preserve his rights or interests and for no other
purpose during the pendency of the principal action. But before a writ of preliminary
injunction may be issued, there must be a clear showing that there exists a right to be
protected and that the acts against which the writ is to be directed are violative of the
said right and will cause irreparable injury.

Unfortunately, petitioners failed to show that the acts of the receivers in this case are
inimical to their rights as owners of the property. They also failed to show that the
non-issuance of the writ of injunction will cause them irreparable injury. The court-
appointed receivers merely performed their duties as administrators of the disputed
lots. It must be stressed that the trial court specifically appointed these receivers to
preserve the properties and its proceeds to avoid any prejudice to the parties until the
main case is resolved, Hence, there is no urgent need to issue the injunction.

ACCORDINGLY, the motion for reconsideration is DENIED for lack of merit.

SO ORDERED.

xxxx

WHEREFORE, premises considered, this Court RESOLVES, as it is hereby

RESOLVED, that:

1. The defendants’ "Urgent Precautionary Motion to Stay Assumption of Receivers"

be DENIED for lack of merit. Accordingly, it being patently a second motion for
reconsideration, a prohibited pleading, the same is hereby ordered EXPUNGED from
the records;

2. The "Motion to Fix the Bond, Acceptance and Approval of the Oath of Office, and
Bond of the Receiver" of defendant Dominalda Espina Caboverde, be GRANTED with
the receivers’ bond set and fixed at ONE HUNDRED THOUSAND PESOS
(Ph₱100,000.00) each.12

It should be stated at this juncture that after filing their Urgent Precautionary Motion
to Stay Assumption of Receivers but before the RTC could rule on it, petitioners filed
a petition for certiorari with the CA dated September 29, 2010 seeking to declare null
and void the February 8, 2010 Resolution of the RTC granting the Application for
Receivership and its July 19, 2010 Resolution denying the motion for reconsideration
filed by petitioners and appointing the receivers nominated by respondents. The
petition was anchored on two grounds, namely: (1) non-compliance with the
substantial requirements under Section 2, Rule 59 of the 1997 Rules of Civil

Procedure because the trial court appointed a receiver without requiring the applicant
to file a bond; and (2) lack of factual or legal basis to place the properties under
receivership because the applicant presented support and medication as grounds in
her application which are not valid grounds for receivership under the rules.

On June 25, 2012, the CA rendered the assailed Decision denying the petition on the
strength of the following premises and ratiocination:
Petitioners harp on the fact that the court a quo failed to require Dominalda to post a
bond prior to the issuance of the order appointing a receiver, in violation of Section 2,
Rule 59 of the Rules of court which provides that:

SEC. 2. Bond on appointment of receiver.-- Before issuing the order appointing a

receiver the court shall require the applicant to file a bond executed to the party
against whom the application is presented, in an amount to be fixed by the court, to
the effect that the applicant will pay such party all damages he may sustain by reason
of the appointment of such receiver in case the applicant shall have procured such
appointment without sufficient cause; and the court may, in its discretion, at any time
after the appointment, require an additional bond as further security for such
damages.

The Manifestation dated September 30, 2009 filed by petitioners wherein "they
formally manifested their concurrence" to the settlement on the application for
receivership estops them from questioning the sufficiency of the cause for the
appointment of the receiver since they themselves agreed to have the properties
placed under receivership albeit on the condition that the same be placed under the
administration of Mila. Thus, the filing of the bond by Dominalda for this purpose
becomes unnecessary.

It must be emphasized that the bond filed by the applicant for receivership answers
only for all damages that the adverse party may sustain by reason of the appointment
of such receiver in case the applicant shall have procured such appointment without
sufficient cause; it does not answer for damages suffered by reason of the failure of
the receiver to discharge his duties faithfully or to obey the orders of the court,
inasmuch as such damages are covered by the bond of the receiver.

As to the second ground, petitioners insist that there is no justification for placing the
properties under receivership since there was neither allegation nor proof that the
said properties, not the fruits thereof, were in danger of being lost or materially injured.
They believe that the public respondent went out of line when he granted the
application for receivership for the purpose of procuring money for the medications
and basic needs of Dominalda despite the income she’s supposed to receive under
the Partial Settlement Agreement.

The court a quo has the discretion to decide whether or not the appointment of a
receiver is necessary. In this case, the public respondent took into consideration that
the applicant is already an octogenarian who may not live up to the day when this
conflict will be finally settled. Thus, We find that he did not act with grave abuse of
discretion amounting to lack or excess of jurisdiction when he granted the application
for receivership based on Section 1(d) of Rule 59 of the Rules of Court.

A final note, a petition for certiorari may be availed of only when there is no appeal,
nor any plain, speedy and adequate remedy in the ordinary course of law. In this case,
petitioners may still avail of the remedy provided in Section 3, Rule 59 of the said Rule
where they can seek for the discharge of the receiver.

FOR REASONS STATED, the petition for certiorari is DENIED.

SO ORDERED.13

Petitioners’ Motion for Reconsideration was also denied by the CA on September 21,
2012.14
Hence, the instant petition, petitioners effectively praying that the approval of
respondent Dominalda’s application for receivership and necessarily the concomitant
appointment of receivers be revoked.

The Issues

Petitioners raise the following issues in their petition:

(1) Whether or not the CA committed grave abuse of discretion in sustaining the
appointment of a receiver despite clear showing that the reasons advanced by the
applicant are not any of those enumerated by the rules; and

(2) Whether or not the CA committed grave abuse of discretion in upholding the
Resolution of the RTC and ruling that the receivership bond is not required prior to
appointment despite clear dictates of the rules.

The Court’s Ruling

The petition is impressed with merit.

We have repeatedly held that receivership is a harsh remedy to be granted with

utmost circumspection and only in extreme situations. The doctrinal pronouncement
in Velasco & Co. v. Gochico & Co is instructive:

The power to appoint a receiver is a delicate one and should be exercised with
extreme caution and only under circumstances requiring summary relief or where the
court is satisfied that there is imminent danger of loss, lest the injury thereby caused
be far greater than the injury sought to be averted. The court should consider the
consequences to all of the parties and the power should not be exercised when it is
likely to produce irreparable injustice or injury to private rights or the facts demonstrate
that the appointment will injure the interests of others whose rights are entitled to as
much consideration from the court as those of the complainant.15

To recall, the RTC approved the application for receivership on the stated rationale
that receivership was the most convenient and feasible means to preserve and
administer the disputed properties. As a corollary, the RTC, agreeing with the
applicant Dominalda, held that placing the disputed properties under receivership
would ensure that she would receive her share in the income which she supposedly
needed in order to pay for her vitamins, medicines, her regular check-ups and daily
sustenance. Considering that, as the CA put it, the applicant was already an
octogenarian who may not live up to the day when the conflict will be finally settled,
the RTC did not act with grave abuse of discretion amounting to lack or excess of
jurisdiction when it granted the application for receivership since it was justified under
Sec. 1(d), Rule 59 of the Rules of Court, which states:

Section 1. Appointment of a receiver. – Upon a verified application, one or more

receivers of the property subject of the action or proceeding may be appointed by the
court where the action is pending, or by the Court of Appeals or by the Supreme
Court, or a member thereof, in the following cases:

xxxx

(d) Whenever in other cases it appears that the appointment of a receiver is the most
convenient and feasible means of preserving, administering, or disposing of the
property in litigation. (Emphasis supplied.)
Indeed, Sec. 1(d) above is couched in general terms and broad in scope,
encompassing instances not covered by the other grounds enumerated under the
said section.16 However, in granting applications for receivership on the basis of this
section, courts must remain mindful of the basic principle that receivership may be
granted only when the circumstances so demand, either because the property sought
to be placed in the hands of a receiver is in danger of being lost or because they run
the risk of being impaired,17 and that being a drastic and harsh remedy, receivership
must be granted only when there is a clear showing of necessity for it in order to save
the plaintiff from grave and immediate loss or damage.18

Before appointing a receiver, courts should consider: (1) whether or not the injury
resulting from such appointment would probably be greater than the injury ensuing if
the status quo is left undisturbed; and (2) whether or not the appointment will imperil
the interest of others whose rights deserve as much a consideration from the court as
those of the person requesting for receivership.19

Moreover, this Court has consistently ruled that where the effect of the appointment
of a receiver is to take real estate out of the possession of the defendant before the
final adjudication of the rights of the parties, the appointment should be made only in
extreme cases.20

After carefully considering the foregoing principles and the facts and circumstances
of this case, We find that the grant of Dominalda’s Application for Receivership has
no leg to stand on for reasons discussed below.

First, Dominalda’s alleged need for income to defray her medical expenses and
support is not a valid justification for the appointment of a receiver. The approval of
an application for receivership merely on this ground is not only unwarranted but also
an arbitrary exercise of discretion because financial need and like reasons are not
found in Sec. 1 of Rule 59 which prescribes specific grounds or reasons for granting
receivership. The RTC’s insistence that the approval of the receivership is justified
under Sec. 1(d) of Rule 59, which seems to be a catch-all provision, is far from
convincing. To be clear, even in cases falling under such provision, it is essential that
there is a clear showing that there is imminent danger that the properties sought to
be placed under receivership will be lost, wasted or injured.

Second, there is no clear showing that the disputed properties are in danger of being
lost or materially impaired and that placing them under receivership is most
convenient and feasible means to preserve, administer or dispose of them.

Based on the allegations in her application, it appears that Dominalda sought

receivership mainly because she considers this the best remedy to ensure that she
would receive her share in the income of the disputed properties. Much emphasis has
been placed on the fact that she needed this income for her medical expenses and
daily sustenance. But it can be gleaned from her application that, aside from her bare
assertion that petitioner Mila solely appropriated the fruits and rentals earned from
the disputed properties in connivance with some of her siblings, Dominalda has not
presented or alleged anything else to prove that the disputed properties were in
danger of being wasted or materially injured and that the appointment of a receiver
was the most convenient and feasible means to preserve their integrity.

Further, there is nothing in the RTC’s February 8 and July 19, 2010 Resolutions that
says why the disputed properties might be in danger of being lost, removed or
materially injured while in the hands of the defendants a quo. Neither did the RTC
explain the reasons which compelled it to have them placed under receivership. The
RTC simply declared that placing the disputed properties under receivership was
urgent and merely anchored its approval on the fact that Dominalda was an elderly in
need of funds for her medication and sustenance. The RTC plainly concluded that
since the purpose of the receivership is to procure money from the proceeds of these
properties to spend for medicines and other needs of the Dominalda, who is old and
sickly, this circumstance falls within the purview of Sec. 1(d), that is, "Whenever in
other cases it appears that the appointment of a receiver is the most convenient and
feasible means of preserving, administering, or disposing of the property in litigation."

Verily, the RTC’s purported determination that the appointment of a receiver is the
most convenient and feasible means of preserving, administering or disposing of the
properties is nothing but a hollow conclusion drawn from inexistent factual
considerations.

Third, placing the disputed properties under receivership is not necessary to save
Dominalda from grave and immediate loss or irremediable damage. Contrary to her
assertions, Dominalda is assured of receiving income under the PSA approved by the
RTC providing that she was entitled to receive a share of one-half (1/2) of the net
income derived from the uncontroverted properties. Pursuant to the PSA, Josephine,
the daughter of Dominalda, was appointed by the court as administrator of the eight
(8) uncontested lots with special authority to provide for the medicine of her mother.
Thus, it was patently erroneous for the RTC to grant the Application for Receivership
in order to ensure Dominalda of income to support herself because precisely, the PSA
already provided for that. It cannot be over-emphasized that the parties in Civil Case
No. S-760 were willing to make arrangements to ensure that Dominalda was provided
with sufficient income. In fact, the RTC, in its February 8, 2010 Resolution granting
the Application for Receivership, noted the agreement of the parties that "Dominalda
Espina Caboverde shall be given 2/10 shares of the net monthly income and products
of said properties."21

Finally, it must be noted that the defendants in Civil Case No. S-760 are the registered
owners of the disputed properties that were in their possession. In cases such as this,
it is settled jurisprudence that the appointment should be made only in extreme cases
and on a clear showing of necessity in order to save the plaintiff from grave and
irremediable loss or damage.22

This Court has held that a receiver should not be appointed to deprive a party who is
in possession of the property in litigation, just as a writ of preliminary injunction should
not be issued to transfer property in litigation from the possession of one party to
another where the legal title is in dispute and the party having possession asserts
ownership in himself, except in a very clear case of evident usurpation. 23

Furthermore, this Court has declared that the appointment of a receiver is not proper
when the rights of the parties, one of whom is in possession of the property, depend
on the determination of their respective claims to the title of such property24 unless
such property is in danger of being materially injured or lost, as by the prospective
foreclosure of a mortgage on it or its portions are being occupied by third persons
claiming adverse title.25

It must be underscored that in this case, Dominalda’s claim to the disputed properties
and her share in the properties’ income and produce is at best speculative precisely
because the ownership of the disputed properties is yet to be determined in Civil Case
No. S-760. Also, except for Dominalda’s claim that she has an interest in the disputed
properties, Dominalda has no relation to their produce or income.1âwphi1
By placing the disputed properties and their income under receivership, it is as if the
applicant has obtained indirectly what she could not obtain directly, which is to deprive
the other parties of the possession of the property until the controversy between them
in the main case is finally settled.26 This Court cannot countenance this arrangement.

To reiterate, the RTC’s approval of the application for receivership and the deprivation
of petitioners of possession over the disputed properties would be justified only if
compelling reasons exist. Unfortunately, no such reasons were alleged, much less
proved in this case.

In any event, Dominalda’s rights may be amply protected during the pendency of Civil
Case No. S-760 by causing her adverse claim to be annotated on the certificates of
title covering the disputed properties.27

As regards the issue of whether or not the CA was correct in ruling that a bond was
not required prior to the appointment of the receivers in this case, We rule in the
negative.

Respondents Eve and Fe claim that there are sufficient grounds for the appointment
of receivers in this case and that in fact, petitioners agreed with them on the existence
of these grounds when they acquiesced to Dominalda’s Application for Receivership.
Thus, respondents insist that where there is sufficient cause to appoint a receiver,
there is no need for an applicant’s bond because under Sec. 2 of Rule 59, the very
purpose of the bond is to answer for all damages that may be sustained by a party by
reason of the appointment of a receiver in case the applicant shall have procured
such appointment without sufficient cause. Thus, they further argue that what is
needed is the receiver’s bond which was already fixed and approved by the
RTC.28 Also, the CA found that there was no need for Dominalda to file a bond
considering that petitioners filed a Manifestation where they formally consented to the
receivership. Hence, it was as if petitioners agreed that there was sufficient cause to
place the disputed properties under receivership; thus, the CA declared that
petitioners were estopped from challenging the sufficiency of such cause.

The foregoing arguments are misplaced. Sec. 2 of Rule 59 is very clear in that before
issuing the order appointing a receiver the court shall require the applicant to file a
bond executed to the party against whom the application is presented. The use of the
word "shall" denotes its mandatory nature; thus, the consent of the other party, or as
in this case, the consent of petitioners, is of no moment. Hence, the filing of an
applicant’s bond is required at all times. On the other hand, the requirement of a
receiver’s bond rests upon the discretion of the court. Sec. 2 of Rule 59 clearly states
that the court may, in its discretion, at any time after the appointment, require an
additional bond as further security for such damages.

WHEREFORE, upon the foregoing considerations, this petition is GRANTED. The

assailed CA June 25, 2012 Decision and September 21, 2012 Resolution in CA-G.R.
SP No. 03834 are hereby REVERSED and SET ASIDE. The Resolutions dated
February 8, 2010 and July 19, 2010 of the RTC, Branch 11 in Sindangan, Zamboanga
del Norte, in Civil Case No. S-760, approving respondent Dominalda Espina-
Caboverde’s application for receivership and appointing the receivers over the
disputed properties are likewise SET ASIDE.

SO ORDERED.

19. G.R. No. 194589, September 21, 2015

BALAYAN BAY RURAL BANK, INC., REPRESENTED BY ITS STATUTORY
LIQUIDATOR, THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION, Petitioner, v. NATIONAL LIVELIHOOD DEVELOPMENT
CORPORATION, Respondent.

DECISION

PEREZ, J.:

This is a Petition for Review on Certiorari1 filed by petitioner Balayan Bay Rural Bank
(Batangas), Inc. (petitioner bank), seeking to reverse and set aside the 11 June 2010
Order2 of the Regional Trial Court (RTC) of Makati City, Branch 147. In its assailed
Order, the RTC granted the Motion for Substitution of parties filed by respondent
National Livelihood Development Corporation (NLDC) and ordered that the Philippine
Deposit Insurance Corporation (PDIC) be substituted or joined as co-defendant in
Civil Case No. 09-917. The dispositive portion of the assailed RTC Order
reads:chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the Motion for Substitution of Part is hereby

GRANTED. Accordingly, PDIC is hereby ordered substituted or joined as co-
defendant in this case.3ChanRoblesVirtualawlibrary
ChanRoblesVirtualawlibrary
The Facts

Petitioner bank is a banking institution duly authorized by the Central Bank to engage
in banking business before it was placed under receivership by the Bangko Sentral
ng Pilipinas on 26 November 2009.

NLDC, on the other hand, is a government institution created to promote and generate
the development of livelihood and community-based enterprises by virtue of
Executive Order No. 715 (1981).

On 12 October 2009, NLDC filed a complaint for collection of sum of money against
petitioner bank for the latter's unpaid obligation in the amount of P1,603,179.86 before
the RTC of Makati City. The case was docketed as Civil Case No. 09-917 and was
raffled to Branch 147 of the trial court.4

During the pendency of the case before the RTC, the Bangko Sentral ng Pilipinas,
thru the Monetary Board, issued MIN-70-26 November 2009,5 placing the petitioner
bank under receivership and appointed the PDIC as receiver of the bank pursuant to
Section 30 of Republic Act (R.A.) No. 7653.6

After the petitioner bank was placed under receivership, NLDC filed a Motion for
Substitution of Party and Set the Case for Pre-Trial.7 Invoking Section 19, Rule 3 of
the Revised Rules of Court, the NLDC claimed that by virtue of transfer of interest of
the petitioner bank to the PDIC, the latter may be substituted as party or joined with
the original party.

The motion was duly opposed by the petitioner bank contending that the PDIC is not
the real party in interest in the instant case because it does not stand to be benefited
or injured by the judgment in the suit. It argued that the PDIC is merely the Statutory
Receiver/Liquidator of all banks placed by the Monetary Board under receivership
and is merely a representative of the petitioner bank which remains as the real party
in interest. The substitution of the PDIC as defendant in this case is therefore not
proper.8

On 11 June 2010, the RTC issued an Order granting the Motion for Substitution filed
by NLDC and directed that the PDIC be substituted or joined as co-defendant in the
case. In sustaining the NLDC, the court a quo ruled that the prosecution or defense
of the action must be done thru the liquidator, lest, no suit for or against the insolvent
entity would prosper.

Arguing that the substitution is not proper in the instant case since the PDIC is not the
real party in interest but was merely tasked to conserve the assets of the bank for the
benefit of its creditors, petitioner bank elevated the matter before the Court on
question of law via this instant Petition for Review on Certiorari.9

In the interregnum, the RTC issued a Decision10 in Civil Case No. 09-917 dated 18
June 2010 in favor of the NLDC thereby ordering the petitioner bank to pay the former
the amount of P1,603,179.86 representing its unpaid loan obligation. The RTC
disposed in this wise:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[NLDC] and against [petitioner bank], ordering the [petitioner bank] to pay [NLDC] the
amount of P1,603,179.86 inclusive of interest and surcharges as actual damages and
P30,000.00 as attorney's fees.11ChanRoblesVirtualawlibrary
While the petitioner bank made no objection to the afore-quoted ruling, it maintained
that the lower court committed an error of law in issuing the 11 June 2010 Order.12 For
the resolution of the Court is the sole issue of:chanRoblesvirtualLawlibrary
Issue

WHETHER OR NOT THE 11 JUNE 2010 RTC ORDER WHICH DIRECTED THE
SUBSTITUTION OF THE PDIC AS DEFENDANT OR ITS INCLUSION THEREIN AS
CO-DEFENDANT IS CONTRARY TO LAW.ChanRoblesVirtualawlibrary
ChanRoblesVirtualawlibrary
The Court's Ruling

We deny the petition.

The instant case involves a disputed claim of sum of money against a closed financial
institution. After the Monetary Board has declared that a bank is insolvent and has
ordered it to cease operations, the Board becomes the trustee of its assets for the
equal benefit of all the creditors, including depositors.13The assets of the insolvent
banking institution are held in trust for the equal benefit of all creditors, and
after its insolvency, one cannot obtain an advantage or a preference over another by
an attachment, execution or otherwise.14 Towards this end, the PDIC, as the statutory
receiver/liquidator of the bank, is mandated to immediately gather and take charge of
all the assets and liabilities of the institution and administer the same for the benefit
of its creditors.15

As the fiduciary of the properties of a closed bank, the PDIC may prosecute or defend
the case by or against the said bank as a representative party while the bank will
remain as the real party in interest pursuant to Section 3, Rule 3 of the Revised Rules
of Court which provides:chanRoblesvirtualLawlibrary
SEC. 3. Representatives as parties.- Where the action is allowed to be prosecuted or
defended by a representative or someone acting in a fiduciary capacity, the
beneficiary shall be included in the title of the case and shall be deemed to be the
real party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed principal may
sue or be sued without joining the principal except when the contract involves things
belonging to the principal.ChanRoblesVirtualawlibrary
The inclusion of the PDIC as a representative party in the case is therefore grounded
on its statutory role as the fiduciary of the closed bank which, under Section 3016 of
R.A. 7653 (New Central Bank Act), is authorized to conserve the latter's property for
the benefit of its creditors.

While we agree with the conclusion reached by the RTC that the PDIC should be
included in Civil Case No. 09-917, its reliance on Section 19, Rule 3 of the Revise
Rules of Court on transfer of interest pendente lite as justification for its directive to
include the PDIC in the case is erroneous.

For one, the properties of an insolvent bank are not transferred by operation of law to
the statutory receiver/liquidator but rather these assets are just held in trust to be
distributed to its creditors after the liquidation proceedings in accordance with the
rules on concurrence and preference of credits.17 The debtors properties are then
deemed to have been conveyed to the Liquidator in trust for the benefit of creditors,
stockholders and other persons in interest.18 This notwithstanding, any lien or
preference to any property shall be recognized by the Liquidator in favor of the
security or lienholder, to the extent allowed by law, in the implementation of the
liquidation plan.19

In addition, the insolvent bank's legal personality is not dissolved by virtue of being
placed under receivership by the Monetary Board. It must be stressed here that a
bank retains its juridical personality even if placed under conservatorship; it is neither
replaced nor substituted by the conservator who shall only take charge of the assets,
liabilities and the management of the institution.20

It being the fact that the PDIC should not be considered as a substitute or as a co-
defendant of the petitioner bank but rather as a representative party or someone
acting in fiduciary capacity, the insolvent institution shall remain in the case and shall
be deemed as the real party in interest.21 Nowhere in Section 3, Rule 3 of the Revised
Rules of Court is it stated or, at the very least implied, that the representative is
likewise deemed as the real party in interest.22 The said rule simply states that, in
actions which are allowed to be prosecuted or defended by a representative, the
beneficiary shall be deemed the real party in interest and, hence, should be included
in the title of the case.

In Manalo v. Court of Appeals,23 the Court validated the right of a bank which was
placed under receivership to continue litigating the petition for the issuance of writ of
possession and dismissed the position assumed by petitioner therein that a closed
bank cannot maintain a suit against its debtor, thus:chanRoblesvirtualLawlibrary
Petitioner next casts doubt on the capacity of the respondent to continue litigating the
petition for the issuance of the writ. He asserts that, being under liquidation,
respondent bank is already a "dead" corporation that cannot maintain the suit in the
RTC. Hence, no writ may be issued in its favor.

The argument is devoid of merit. A bank which had been ordered closed by the
monetary board retains its juridical personality which can sue and be sued
through its liquidator. The only limitation being that the prosecution or defense
of the action must be done through the liquidator. Otherwise, no suit for or against
an insolvent entity would prosper. In such situation, banks in liquidation would lose
what justly belongs to them through a mere technicality.24 (Emphasis
supplied)ChanRoblesVirtualawlibrary
In fine, the legal personality of the petitioner bank is not ipso facto dissolved by
insolvency; it is not divested of its capacity to sue and be sued after it was ordered by
the Monetary Board to cease operation. The law mandated, however, that the action
should be brought through its statutory liquidator/receiver which in this case is the
PDIC. The authority of the PDIC to represent the insolvent bank in legal actions
emanates from the fiduciary relation created by statute which reposed upon the
receiver the task of preserving and conserving the properties of the insolvent for the
benefit of its creditors.

WHEREFORE, premises considered, the instant petition is hereby DENIED.

SO ORDERED.

D. REPLEVIN Rule 60

20. G.R. No. 160191 June 8, 2006

TWIN ACE HOLDINGS CORPORATION, Petitioner,

vs.
RUFINA AND COMPANY, Respondent.

DECISION

CHICO-NAZARIO, J.:

From the records, it appears that on 3 December 1991, Twin Ace Holdings
Corporation (Twin Ace) filed a Complaint1 for recovery of possession of personal
property, permanent injunction and damages with prayer for the issuance of a writ of
replevin, temporary restraining order and a writ of preliminary injunction against
Rufina and Company (Rufina).

As alleged in the complaint, Twin Ace is a private domestic corporation engaged in

the manufacture of rhum, wines and liquor under the name and style "Tanduay
Distillers." It has registered its mark of ownership of its bottles with the Bureau of
Patent, Trademarks and Technology Transfer under Republic Act No. 623. In the
conduct of its business, it sells its products to the public excluding the bottles. It makes
substantial investments in brand new bottles which it buys from glass factories and
which they use for about five times in order to recover the cost of acquisition. Twin
Ace thus retrieves its used empty bottles, washes and uses them over and over again
as containers for its products.

On the other hand, Rufina is engaged in the production, extraction, fermentation and
manufacture of patis and other food seasonings and is engaged in the buying and
selling of all kinds of foods, merchandise and products for domestic use or for export
to other countries. In producing patis and other food seasonings, Rufina uses as
containers bottles owned by Twin Ace without any authority or permission from the
latter. In the process, Rufina is unduly benefited from the use of the bottles.

Upon the posting of Twin Ace of the required bond, the Regional Trial Court (RTC) of
Manila, Branch 26, issued an Order dated 5 February 1992 granting the application
for the issuance of a writ of replevin.2 Upon the implementation of the said writ, Deputy
Sheriff Amado P. Sevilla was able to seize a total of 26,241 empty bottles marked
"TANDUAY DISTILLERY, INC.,"3 at the address of Rufina.
In its Answer with counter-application for a Writ of Preliminary Injunction, Rufina
claimed that the marked bottles it used as containers for its products were purchased
from junk dealers; hence, it became the owner thereof.

After hearing, the trial court rendered its decision dated 20 May 1995 the dispositive
portion of which states:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of

the defendant as follows:

a) dismissing the complaint for lack of merit;

b) dissolving the order of replevin;

c) ordering the plaintiff to return 26,241 bottles to the defendant in the place where
the bottles were seized at the expense of the plaintiff within 48 hours from receipt
hereof;

d) ordering the plaintiff to pay the defendant the sum of P100,000.00 as actual
damages sustained by the latter to be taken from the replevin bond;

e) ordering the plaintiff to pay the defendant the sum of P1,000,000.00 as damages
for besmirched reputation;

f) ordering the plaintiff to pay the sum of P100,00.00 as nominal damages;

g) ordering the plaintiff to pay the defendant the sum of P50,000.00 as attorney’s fee;
and

h) ordering the plaintiff to pay the cost of the suit.4

Twin Ace appealed to the Court of Appeals. On 27 September 2002, the appellate
court rendered its decision5modifying the decision of the trial court as follows:

WHEREFORE, in view of all the foregoing, the appealed decision dated May 20, 1995
of Branch 26, Regional Trial Court, Manila, in Civil Case No. 92-59862 is MODIFIED,
in that the award of damages, except nominal damages, and attorney’s fees is
DELETED for lack of legal and factual basis. The award of nominal damages is
reduced to P50,000.00. In all other respects, the assailed decision is AFFIRMED.

Costs against plaintiff-appellant.6

A motion for reconsideration dated 19 October 20027 filed by Twin Ace was denied in
a resolution of the Court of Appeals dated 29 September 2003.8 Hence, this Petition
for Review.

For resolution are the following issues:

I.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

RESPONDENT RUFINA IS NOT COVERED WITHIN THE EXEMPTION PROVIDED
BY SECTION 6 OF R.A. 623, AS AMENDED BY R.A. 5700.

II.
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING NOMINAL
DAMAGES AGAINST PETITIONER TWIN ACE CONSIDERING THAT IT WAS THE
ONE WHOSE RIGHTS HAVE BEEN VIOLATED OR INVADED BY RESPONDENT
RUFINA.

III.

THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT

PETITIONER AS OWNER OF THE SUBJECT BOTTLES IS ENTITLED TO
COMPENSATION FOR ITS UNAUTHORIZED USE BY RESPONDENT RUFINA.9

Pertinent provision of Republic Act No. 623,10 as amended by Republic Act No.
5700,11 is quoted hereunder for clarity:

Sec. 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler, or seller, who has successfully registered the marks of
ownership in accordance with the provisions of the next preceding section, to fill such
bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other
similar containers so marked or stamped, for the purpose of sale, or to sell, dispose
of, buy or traffic in, or wantonly destroy the same, whether filled or not to use the
same for drinking vessels or glasses or drain pipes, foundation pipes, for any other
purpose than that registered by the manufacturer, bottler or seller. Any violation of
this section shall be punished by a fine of not more than one thousand pesos or
imprisonment of not more than one year or both.

Sec. 3. The use by any person other than the registered manufacturer, bottler or
seller, without written permission of the latter of any such bottle, cask, barrel, keg,
box, steel cylinders, tanks, flasks, accumulators, or other similar containers, or the
possession thereof without written permission of the manufacturer, by any junk dealer
or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks, accumulators,
or other similar containers, the same being duly marked or stamped and registered
as herein provided, shall give rise to a prima facie presumption that such use or
possession is unlawful.12

Sec. 4. The criminal action provided in this Act shall in no way affect any civil action
to which the registered manufacturer, bottler, or seller, may be entitled by law or
contract.

Sec. 5. No action shall be brought under this Act against any person to whom the
registered manufacturer, bottler, or seller, has transferred by way of sale, any of the
containers herein referred to, but the sale of the beverage contained in the said
containers shall not include the sale of the containers unless specifically so provided.

Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of
bottles as containers for "sisi," "bagoong," "patis," and similar native products.13

In sum, Twin Ace asserts that the provision under the law affords protection only to
small scale producers/manufacturers who do not have the capacity to buy new bottles
for use in their products and cannot extend to Rufina which had unequivocably
admitted in its Answer14 and affirmed in the decision of the trial court that it is
engaged, on a large scale basis, in the production and manufacture of food
seasonings.

For its part, Rufina counters that the law did not really distinguish between large scale
manufacturers and small time producers.
The petition is not meritorious.

The earlier case of Twin Ace Holdings Corporation v. Court of Appeals,15 applies to
the present petition. In said case, Twin Ace filed a Complaint for Replevin against
Lorenzana Food Corporation to recover three hundred eighty thousand bottles
allegedly owned by Twin Ace but detained and used by Lorenzana Food Corporation
as containers for its native products without its express permission, in violation of the
law. In that case, this Court acknowledged that the exemption under the law is
unqualified as the law did not make a distinction that it only applies to small scale
industries but not to large scale manufacturers. Thus, even if the court in said case
held that the exemption is primarily meant to give protection to small scale industries,
it did not qualify that the protection therein was intended and limited only to such. The
Court held:

Petitioner itself alleges that respondent LORENZANA uses the subject 350 ml., 375
ml. and 750 ml. bottles as containers for processed foods and other related products
such as patis, toyo, bagoong, vinegar and other food seasonings. Hence, Sec. 6
squarely applies in private respondent’s favor. Obviously, the contention of TWIN
ACE that the exemption refers only to criminal liability but not to civil liability is without
merit. It is inconceivable that an act specifically allowed by law, in other words legal,
can be the subject of injunctive relief and damages. Besides, the interpretation offered
by petitioner defeats the very purpose for which the exemption was provided.

Republic Act No. 623, "An Act to Regulate the Use of Duly Stamped or Marked
Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers," as amended by
RA No. 5700, was meant to protect the intellectual property rights of the registrants
of the containers and prevent unfair trade practices and fraud on the public. However,
the exemption granted in Sec. 6 thereof was deemed extremely necessary to provide
assistance and incentive to the backyard, cottage and small-scale manufacturers of
indigenous native products such as patis, sisi and toyo who do not have the capital
to buy brand new bottles as containers nor afford to pass the added cost to the
majority of poor Filipinos who use the products as their daily condiments or viands. If
the contention of petitioner is accepted, i.e., to construe the exemption as to apply to
criminal liability only but not to civil liability, the very purpose for which the exemption
was granted will be defeated. None of the small-scale manufacturers of the
indigenous native products protected would possibly wish to use the registered bottles
if they are vulnerable to civil suits. The effect is a virtual elimination of the clear and
unqualified exemption embodied in Sec. 6. It is worthy to note that House Bill No.
20585 was completely rejected because it sought to expressly and directly eliminate
that which petitioner indirectly proposes to do with this petition. 16 (Emphasis
supplied.)

It is worth noting that Lorenzana Food Corporation which prevailed in the case filed
by Twin Ace against it is certainly not a small scale industry. Just like Rufina,
Lorenzana Food Corporation also manufactures and exports processed foods and
other related products, e.g., patis, toyo, bagoong, vinegar and other food seasonings.

It is a basic rule in statutory construction that when the law is clear and free from any
doubt or ambiguity, there is no room for construction or interpretation. As has been
our consistent ruling, where the law speaks in clear and categorical language, there
is no occasion for interpretation; there is only room for application.17

Notably, attempts to amend the protection afforded by Section 6 of Republic Act No.
623, by giving protection only to small scale manufacturers or those with a
capitalization of five hundred thousand pesos or less (P500,000.00), through then
House Bill No. 20585,18 and subsequently through House Bill No. 30400,19 proved
unsuccessful as the amendment proposed in both Bills was never passed.

In view of these considerations, we find and so hold that the exemption contained in
Section 6 of Rep. Act No. 623 applies to all manufacturers of sisi, bagoong, patis and
similar native products without distinction or qualification as to whether they are small,
medium or large scale.

On the issue of nominal damages, Article 2222 of the Civil Code20 states that the court
may award nominal damages in every obligation arising from any source enumerated
in Article 1157,21 or in every other case where any property right has been
invaded.22 Nominal damages are given in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not
for the purpose of indemnifying the plaintiff for any loss suffered by him. 23 In another
case,24 this Court held that when plaintiff suffers some species of injury not enough
to warrant an award of actual damages, the court may award nominal damages.
Considering the foregoing, we find that the award of nominal damages to Rufina in
the amount of fifty thousand pesos (P50,000.00) is reasonable, warranted and
justified.

As to the third issue, Rule 60, Section 2(a), of the Revised Rules of Court mandates
that a party praying for the recovery of possession of personal property must show by
his own affidavit or that of some other person who personally knows the facts that he
is the owner of the property claimed, particularly describing it, or is entitled to the
possession thereof.25 It must be borne in mind that replevin is a possessory action
the gist of which focuses on the right of possession that, in turn, is dependent on a
legal basis that, not infrequently, looks to the ownership of the object sought to be
replevied.26 Wrongful detention by the defendant of the properties sought in an action
for replevin must be satisfactorily established. If only a mechanistic averment thereof
is offered, the writ should not be issued.27 In this case, Twin Ace has not shown that
it is entitled to the possession of the bottles in question and consequently there is thus
no basis for the demand by it of due compensation. As stated by the court in the
earlier case of Twin Ace Holdings Corporation v. Court of Appeals28 :

Petitioner cannot seek refuge in Sec. 5 of RA No. 623 to support its claim of continuing
ownership over the subject bottles. In United States v. Manuel [7 Phil. 221 (1906)] we
held that since the purchaser at his discretion could either retain or return the bottles,
the transaction must be regarded as a sale of the bottles when the purchaser actually
exercised that discretion and decided not to return them to the vendor. We also take
judicial notice of the standard practice today that the cost of the container is included
in the selling price of the product such that the buyer of liquor or any such product
from any store is not required to return the bottle nor is the liquor placed in a plastic
container that possession of the bottle is retained by the store.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit
and the decision dated 27 September 2002 and resolution dated 29 September 2003,
in CA-G.R. CV No. 52852, both of the Court of Appeals are Affirmed.

SO ORDERED.

21. G.R. No. 169596 March 28, 2007

SUPERLINES TRANSPORTATION COMPANY, INC., Petitioner,

vs.
PHILIPPINE NATIONAL CONSTRUCTION COMPANY and PEDRO
BALUBAL, Respondents

DECISION

CARPIO MORALES, J.:

Assailed via petition for review is the Court of Appeals’ Decision1 dated September 6,
2005 dismissing for lack of merit the appeal of petitioner Superlines Transportation
Company, Inc. (petitioner), docketed as CA-G.R. CV No. 61144.

Petitioner is a corporation engaged in the business of providing public transportation.

On December 13, 1990, one of its buses, while traveling north and approaching the
Alabang northbound exit lane, swerved and crashed into the radio room of respondent
Philippine National Construction Company (PNCC).

The incident was initially investigated by respondent PNCC’s toll way patrol, Sofronio
Salvanera, and respondent Pedro Balubal (Balubal), then head of traffic control and
security department of the South Luzon tollway.2 The bus3was thereafter turned over
to the Alabang Traffic Bureau for it to conduct its own investigation of the incident.
Because of lack of adequate space, the bus was, on request of traffic investigator
Pat. Cesar Lopera (Lopera), towed by the PNCC patrol to its compound where it was
stored.4

Subsequently, petitioner made several requests for PNCC to release the bus, but
respondent Balubal denied the same, despite petitioner’s undertaking to repair the
damaged radio room. Respondent Balubal instead demanded the sum of ₱40,000.00,
or a collateral with the same value, representing respondent PNCC’s estimate of the
cost of reconstruction of the damaged radio room. By petitioner’s estimate, however,
the damage amounted to ₱10,000.00 only.5

Petitioner thus filed a complaint for recovery of personal property (replevin) with
damages6 against respondents PNCC and Balubal with the Regional Trial Court of
Gumaca, Quezon, praying as follows:

xxxx

2. after trial on the issues, judgment be rendered –

a) adjudging that plaintiff has the right to the possession of subject personal property
and awarding the material possession of said property to plaintiff as the sole and
absolute owner thereof;

b) ordering defendants jointly and severally to pay the plaintiff the following:

(1) the sum of P500,000.00 representing unrealized income as of the date of the filing
of the instant complaint and, thereafter, the sum of P7,500.00 daily until subject
passenger bus shall have been delivered to and in actual material possession of
plaintiff;

(2) the sum of P100,000.00 as and for attorney’s fees;

(3) the sum of P20,000.00 as litis expenses; and

(4) the cost of suit.7

In view of its inability to put up the bond for the issuance of a writ of replevin, petitioner
opted to forego the same and just wait for the court’s final judgment.

In respondents’ Answer8 to the complaint, they claimed that they merely towed the
bus to the PNCC compound for safekeeping pursuant to an order from the police
authorities; that respondent Balubal did not release the bus to petitioner in the
absence of an order from the police authorities; that petitioner, in claiming the bus,
failed to present the certificate of registration and official receipt of payment to
establish ownership thereof; and that the bus subject of the complaint was not the
same bus involved in the December 13, 1990 accident.

By way of Counterclaim, respondents prayed for the award of ₱40,326.54 in actual

damages, ₱50,000.00 in exemplary damages, and ₱130,000.00 in attorney’s fees
and litigation expenses.

By Decision of December 9, 1997, the trial court dismissed petitioner’s complaint. On

respondents’ Counterclaim, it ordered petitioner to pay respondent PNCC the amount
of ₱40,320.00 representing actual damages to the radio room.

Petitioner appealed to the Court of Appeals9 which held that the storage of the bus
for safekeeping purposes partakes of the nature of a deposit, hence, custody or
authority over it remained with Lopera who ordered its safekeeping; and that Lopera
acted as respondent PNCC’s agent, hence, absent any instruction from him,
respondent PNCC may not release the bus.

The appellate court thus concluded that the case should have been brought against
the police authorities instead of respondents.

Hence, the present petition for review.

The petition is impressed with merit.

Before proceeding to the substantive issues raised in the petition, the Court resolves
to dispose first the procedural issues raised by respondents in their Comment.10

Respondents contend that the petition raises only questions of fact and suffers from
a procedural defect in that it failed to include "such material portions of the record as
would support the petition" as required under Section 4, Rule 4511 of the Rules of
Court, hence, it should be dismissed outright.

Contrary to respondents’ contention, the petition raises questions of law foremost of

which is whether the owner of a personal property may initiate an action for replevin
against a depositary and recover damages for illegal distraint.

In any event, while it is settled that this Court is not a trier of facts and does not, as a
rule, undertake a re-examination of the evidence presented by the parties, a number
of exceptions have nevertheless been recognized by the Court. These exceptions are
enumerated in Insular Life Assurance Company, Ltd. v. Court of Appeals:12

It is a settled rule that in the exercise of the Supreme Court’s power of review, the
Court is not a trier of facts and does not normally undertake the re-examination of the
evidence presented by the contending parties during the trial of the case considering
that the findings of facts of the CA are conclusive and binding on the Court. However,
the Court had recognized several exceptions to this rule, to wit: (1) when the findings
are grounded entirely on speculation, surmises or conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of facts are conflicting; (6) when in making its findings the Court of
Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary
to the trial court; (8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as well
as in the petitioner’s main and reply briefs are not disputed by the respondent; (10)
when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion. x x x (Italics in original;
underscoring supplied; citations omitted)

As will be discussed below, number 11 of the foregoing enumeration applies in the

present case.

Respecting the second procedural issue, as a rule, the failure of a petitioner to comply
with any of the requirements under Section 4, Rule 45 of the Rules of Court regarding
the contents of and the documents which should accompany the petition constitutes
sufficient ground for its dismissal.13

In the exercise of its equity jurisdiction, however, procedural lapses may be

disregarded so that a case may be resolved on its merits. As held in Durban
Apartments Corporation v. Catacutan:14

It is well to remember that this Court, in not a few cases, has consistently held that
cases shall be determined on the merits, after full opportunity to all parties for
ventilation of their causes and defense, rather than on technicality or some procedural
imperfections. In so doing, the ends of justice would be better served. The dismissal
of cases purely on technical grounds is frowned upon and the rules of procedure
ought not be applied in a very rigid, technical sense, for they are adopted to help
secure, not override, substantial justice, and thereby defeat their very ends. Indeed,
rules of procedure are mere tools designed to expedite the resolution of cases and
other matters pending in court. A strict and rigid application of the rules that would
result in technicalities that tend to frustrate rather than promote justice must be
avoided.

x x x x (Emphasis supplied; citations omitted)

The facts and circumstances attendant to the case dictate that, in the interest of
substantial justice, this Court resolves it on the merits.

On to the substantive issues. Tillson v. Court of Appeals15 discusses the term replevin
as follows:

The term replevin is popularly understood as "the return to or recovery by a person of

goods or chattels claimed to be wrongfully taken or detained upon the person’s giving
security to try the matter in court and return the goods if defeated in the action;" "the
writ by or the common-law action in which goods and chattels are replevied," i.e.,
taken or gotten back by a writ for replevin;" and to replevy, means to recover
possession by an action of replevin; to take possession of goods or chattels under a
replevin order. Bouvier’s Law Dictionary defines replevin as "a form of action which
lies to regain the possession of personal chattels which have been taken from the
plaintiff unlawfully x x x, (or as) the writ by virtue of which the sheriff proceeds at once
to take possession of the property therein described and transfer it to the plaintiff upon
his giving pledges which are satisfactory to the sheriff to prove his title, or return the
chattels taken if he fail so to do; the same authority states that the term, "to replevy"
means " to re-deliver goods which have been distrained to the original possessor of
them, on his giving pledges in an action of replevin." The term therefore may refer
either to the action itself, for the recovery of personality, or the provisional remedy
traditionally associated with it, by which possession of the property may be obtain[ed]
by the plaintiff and retained during the pendency of the action. (Emphasis and
underscoring supplied; citations omitted)

In a complaint for replevin, the claimant must convincingly show that he is either the
owner or clearly entitled to the possession of the object sought to be recovered,16 and
that the defendant, who is in actual or legal possession thereof, wrongfully detains
the same.17

Petitioner’s ownership of the bus being admitted by respondents,18 consideration of

whether respondents have been wrongfully detaining it is in order.

Following the conduct of an investigation of the accident, the bus was towed by
respondents on the request of Lopera.19 It was thus not distrained or taken for a tax
assessment or a fine pursuant to law, or seized under a writ of execution or
preliminary attachment, or otherwise placed under custodia legis.

In upholding the dismissal of petitioner’s complaint, the Court of Appeals held that
while "there is no law authorizing the impounding of a vehicle involved in an accident
by the police authorities, x x x neither is there a law making the impounding of vehicles
involved in accidents illegal." It added that "the Supreme Court is of the view that there
is yet no clear-cut policy or rule on the matter."20 The appellate court is mistaken.

The Constitution grants the right against unreasonable seizures. Thus, Section 2,
Article III provides:

The right of the people to be secure in their persons, houses, papers, and
effects against unreasonable searches and seizures of whatever nature and for any
purpose shall be inviolable, and no search warrant or warrant of arrest shall issue
except upon probable cause to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may
produce, and particularly describing the place to be searched and the persons or
things to be seized. (Underscoring supplied)

The seizure and impounding of petitioner’s bus, on Lopera’s request, were

unquestionably violative of "the right to be let alone" by the authorities as guaranteed
by the Constitution.21

The Court of Appeals’ reliance on Victory Liner, Inc. v. Bellosillo 22 to justify the
impounding of vehicles involved in accidents by police authorities is misplaced. The
Victory Liner case was an administrative case against a trial court judge. This Court
explicitly declined to rule on the legality of such an order:

In the same vein, this administrative case is not the right forum to determine the issue
of the legality of respondent’s order requiring VLI to post a cash bond for the release
of its impounded vehicle. VLI should have raised that issue in the proper courts and
not directly to us, and much less by way of an administrative case. x x x

xxxx
To allow VLI to raise that issue before us and obtain a ruling thereon directly from us
through an administrative case would be to countenance a disregard of the
established rules of procedure and of the hierarchy of courts. VLI would thus be able
to evade compliance with the requirements inherent in the filing of a property petition,
including the payment of docket fees. Hence, we shall shun from passing upon that
issue in this case.23 (Underscoring supplied)

This Court’s statement in Victory Liner on the lack of a "clear-cut policy" refers to the
practice, rightly or wrongly, of trial court judges of issuing orders for the impounding
of vehicles involved in accidents. It has no application to the instant case which
involves the seizure and distraint implemented by respondents upon a verbal order
by Lopera without the benefit or color of legality afforded by a court process, writ or
order.

That a year after the incident the driver of the bus was criminally charged for reckless
imprudence resulting to damage to property in which the bus could possibly be held
as evidence does not affect the outcome of this case.24As explained in Bagalihog v.
Fernandez:25

It is true that property held as evidence in a criminal case cannot be replevied. But
the rule applies only where the property is lawfully held, that is, seized in accordance
with the rule against warrantless searches and seizures or its accepted exceptions.
Property subject of litigation is not by that fact alone in custodia legis. As the Court
said in Tamisin v. Odejar, 26 "A thing is in custodia legis when it is shown that it has
been and is subjected to the official custody of a judicial executive officer in pursuance
of his execution of a legal writ." Only when property is lawfully taken by virtue of legal
process is it considered in the custody of the law, and not otherwise. (Emphasis and
underscoring supplied; italics in the original; citations omitted)

Petitioner’s prayer for recovery of possession of the bus is, in light of the foregoing
discussion, thus in order.

As for petitioner’s claim for damages, the Court finds that it cannot pass upon the
same without impleading Lopera and any other police officer responsible for ordering
the seizure and distraint of the bus. The police authorities, through Lopera, having
turned over the bus to respondents for safekeeping, a contract of deposit27 was
perfected between them and respondents.

Petitioner’s failure to implead indispensable parties is not, of course, fatal to its cause
of action, misjoinder or non-joinder of parties not being a ground for its
dismissal.28 Domingo v. Scheer29 elucidates:

However, the non-joinder of indispensable parties is not a ground for the dismissal of
an action. Parties may be added by order of the court on motion of the party or on its
own initiative at any stage of the action and/or such times as are just. If the
petitioner/plaintiff refuses to implead an indispensable party despite the order of the
court, the latter may dismiss the complaint/petition for the petitioner/plaintiff’s failure
to comply therefor. The remedy is to implead the non-party claimed to be
indispensable. (Emphasis and underscoring supplied; citations omitted)

For petitioner to pursue its claim for damages then, it or the trial court motu proprio
may implead as defendants the indispensable parties ─ Lopera and any other
responsible police officers.
WHEREFORE, the assailed Court of Appeals Decision is REVERSED and SET
ASIDE.

The prayer of petitioner, Superlines Transportation Company, Inc., for recovery of

possession of personal property is GRANTED.

The records of the case are REMANDED to the court of origin, the Regional Trial
Court, Branch 62, Gumaca, Quezon, which is DIRECTED to REINSTATE petitioner’s
complaint to its docket if petitioner is still interested to pursue its claim for damages
and to act in accordance with the foregoing pronouncement of the Court.

SO ORDERED.

22. A.M. No. RTJ-06-2017 June 19, 2008

LT. GEN. ALFONSO P. DAGUDAG (Ret.), complainant,

vs.
JUDGE MAXIMO G.W. PADERANGA, Regional Trial Court, Branch 38, Cagayan de
Oro City, respondent.

DECISION

PER CURIAM, J.:

This is a complaint for gross ignorance of the law and conduct unbecoming a judge
filed by retired Lt. Gen. Alfonso P. Dagudag (Gen. Dagudag), Head of Task Force
Sagip Kalikasan, against Judge Maximo G. W. Paderanga (Judge Paderanga),
Presiding Judge of the Regional Trial Court, Branch 38, Cagayan de Oro City.

On or about 30 January 2005, the Region VII Philippine National Police Regional
Maritime Group (PNPRMG) received information that MV General Ricarte of NMC
Container Lines, Inc. was shipping container vans containing illegal forest products
from Cagayan de Oro to Cebu. The shipments were falsely declared as cassava meal
and corn grains to avoid inspection by the Department of Environment and Natural
Resources (DENR).1

On 30 and 31 January 2005, a team composed of representatives from the PNPRMG,

DENR, and the Philippine Coast Guard inspected the container vans at a port in
Mandaue City, Cebu. The team discovered the undocumented forest products and
the names of the shippers and consignees:

Container Van No. Shipper Consignee

NCLU – 2000492-22GIPolaris Chua Polaris Chua
IEAU – 2521845-2210Polaris Chua Polaris Chua
NOLU – 2000682-22GIRowena BalangotRowena Balangot
INBU – 3125757-BB2210
Rowena BalangotRowena Balangot
NCLU – 20001591-22GI
Jovan Gomez Jovan Gomez
GSTU – 339074-US2210
Jovan Gomez Jovan Gomez
CRXU – 2167567 Raffy Enriquez Raffy Enriquez
NCLU – 2001570-22GIRaffy Enriquez Raffy Enriquez

The crew of MV General Ricarte failed to produce the certificate of origin forms and
other pertinent transport documents covering the forest products, as required by
DENR Administrative Order No. 07-94. Gen. Dagudag alleged that, since nobody
claimed the forest products within a reasonable period of time, the DENR considered
them as abandoned and, on 31 January 2005, the Provincial Environment and Natural
Resources Office (PENRO) Officer-in-Charge (OIC), Richard N. Abella, issued a
seizure receipt to NMC Container Lines, Inc.2

On 1 February 2005, Community Environment and Natural Resources Office

(CENRO) OIC Loreto A. Rivac (Rivac) sent a notice to NMC Container Lines, Inc.
asking for explanation why the government should not confiscate the forest
products.3 In an affidavit4 dated 9 February 2005, NMC Container Lines, Inc.’s Branch
Manager Alex Conrad M. Seno stated that he did not see any reason why the
government should not confiscate the forest products and that NMC Container Lines,
Inc. had no knowledge of the actual content of the container vans.

On 2, 9, and 15 February 2005, DENR Forest Protection Officer Lucio S. Canete, Jr.
posted notices on the CENRO and PENRO bulletin boards and at the NMC Container
Lines, Inc. building informing the unknown owner about the administrative
adjudication scheduled on 18 February 2005 at the Cebu City CENRO. Nobody
appeared during the adjudication.5 In a resolution6 dated 10 March 2005, Rivac,
acting as adjudication officer, recommended to DENR Regional Executive Director
Clarence L. Baguilat that the forest products be confiscated in favor of the
government.

In a complaint7 dated 16 March 2005 and filed before Judge Paderanga, a certain
Roger C. Edma (Edma) prayed that a writ of replevin be issued ordering the
defendants DENR, CENRO, Gen. Dagudag, and others to deliver the forest products
to him and that judgment be rendered ordering the defendants to pay him moral
damages, attorney’s fees, and litigation expenses. On 29 March 2005, Judge
Paderanga issued a writ of replevin8 ordering Sheriff Reynaldo L. Salceda to take
possession of the forest products.

In a motion to quash the writ of replevin,9 the defendants DENR, CENRO, and Gen.
Dagudag prayed that the writ of replevin be set aside: (1) Edma’s bond was
insufficient; (2) the forest products were falsely declared as cassava meal and corn
grains; (3) Edma was not a party-in-interest; (4) the forest products were not covered
by any legal document; (5) nobody claimed the forest products within a reasonable
period of time; (6) the forest products were already considered abandoned; (7) the
forest products were lawfully seized under the Revised Forestry Code of the
Philippines; (8) replevin was not proper; (9) courts could not take cognizance of cases
pending before the DENR; (10) Edma failed to exhaust administrative remedies; and
(11) the DENR was the agency responsible for the enforcement of forestry laws. In a
motion to dismiss ad cautelam10 dated 12 April 2005, the defendants prayed that the
complaint for replevin and damages be dismissed: (1) the real defendant is the
Republic of the Philippines; (2) Edma failed to exhaust administrative remedies; (3)
the State cannot be sued without its consent; and (4) Edma failed to allege that he is
the owner or is entitled to the possession of the forest products.

In an order11 dated 14 April 2005, Judge Paderanga denied the motion to quash the
writ of replevin for lack of merit.

Gen. Dagudag filed with the Office of the Court Administrator (OCA) an affidavit-
complaint12 dated 8 July 2005 charging Judge Paderanga with gross ignorance of the
law and conduct unbecoming a judge. Gen. Dagudag stated that:
During the x x x hearing, [Judge Paderanga] showed manifest partiality in favor of x
x x Edma. DENR’s counsel was lambasted, cajoled and intimidated by [Judge
Paderanga] using words such as "SHUT UP" and "THAT’S BALONEY."

xxxx

Edma in the replevin case cannot seek to recover the wood shipment from the DENR
since he had not sought administrative remedies available to him. The prudent thing
for [Judge Paderanga] to have done was to dismiss the replevin suit outright.

xxxx

[Judge Paderanga’s] act[s] of taking cognizance of the x x x replevin suit, issuing the
writ of replevin and the subsequent denial of the motion to quash clearly demonstrates
[sic] ignorance of the law.

In its 1st Indorsement13 dated 1 August 2005, the OCA directed Judge Paderanga to
comment on the affidavit-complaint. In his comment14 dated 6 September 2005,
Judge Paderanga stated that he exercised judicial discretion in issuing the writ of
replevin and that he could not delve into the issues raised by Gen. Dagudag because
they were related to a case pending before him.

In its Report15 dated 10 July 2006, the OCA found that Judge Paderanga (1) violated
the doctrine of exhaustion of administrative remedies; (2) violated the doctrine of
primary jurisdiction; and (3) used inappropriate language in court. The OCA
recommended that the case be re-docketed as a regular administrative matter; that
Judge Paderanga be held liable for gross ignorance of the law and for violation of
Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine
Judiciary;16 and that he be fined P30,000.

In its Resolution17 dated 16 August 2006, the Court re-docketed the case as a regular
administrative matter and required the parties to manifest whether they were willing
to submit the case for decision based on the pleadings already filed. Judge
Paderanga manifested his willingness to submit the case for decision based on the
pleadings already filed.18 Since Gen. Dagudag did not file any manifestation, the
Court considered him to have waived his compliance with the 16 August 2006
Resolution.19

The Court finds Judge Paderanga liable for gross ignorance of the law and for conduct
unbecoming a judge.

The DENR is the agency responsible for the enforcement of forestry laws. Section 4
of Executive Order No. 192 states that the DENR shall be the primary agency
responsible for the conservation, management, development, and proper use of the
country’s natural resources.

Section 68 of Presidential Decree No. 705, as amended by Executive Order No. 277,
states that possessing forest products without the required legal documents is
punishable. Section 68-A states that the DENR Secretary or his duly authorized
representatives may order the confiscation of any forest product illegally cut,
gathered, removed, possessed, or abandoned.

In the instant case, the forest products were possessed by NMC Container Lines, Inc.
without the required legal documents and were abandoned by the unknown owner.
Consequently, the DENR seized the forest products.
Judge Paderanga should have dismissed the replevin suit outright for three reasons.
First, under the doctrine of exhaustion of administrative remedies, courts cannot take
cognizance of cases pending before administrative agencies. In Factoran, Jr. v. Court
of Appeals,20 the Court held that:

The doctrine of exhaustion of administrative remedies is basic. Courts, for

reasons of law, comity and convenience, should not entertain suits unless the
available administrative remedies have first been resorted to and the proper
authorities have been given an appropriate opportunity to act and correct their
alleged errors, if any, committed in the administrative forum. (Emphasis ours)

In Dy v. Court of Appeals,21 the Court held that a party must exhaust all administrative
remedies before he can resort to the courts. In Paat v. Court of Appeals,22 the Court
held that:

This Court in a long line of cases has consistently held that before a party is allowed
to seek the intervention of the court, it is a pre-condition that he should have
availed of all the means of administrative processes afforded him. Hence, if a
remedy within the administrative machinery can still be resorted to by giving the
administrative officer concerned every opportunity to decide on a matter that comes
within his jurisdiction then such remedy should be exhausted first before court’s
judicial power can be sought. The premature invocation of court’s intervention
is fatal to one’s cause of action. Accordingly, absent any finding of waiver or
estoppel the case is susceptible of dismissal for lack of cause of action. (Emphasis
ours)

In the instant case, Edma did not resort to, or avail of, any administrative remedy. He
went straight to court and filed a complaint for replevin and damages. Section 8 of
Presidential Decree No. 705, as amended, states that (1) all actions and decisions of
the Bureau of Forest Development Director are subject to review by the DENR
Secretary; (2) the decisions of the DENR Secretary are appealable to the President;
and (3) courts cannot review the decisions of the DENR Secretary except through a
special civil action for certiorari or prohibition. In Dy,23 the Court held that all actions
seeking to recover forest products in the custody of the DENR shall be directed to
that agency — not the courts. In Paat,24 the Court held that:

Dismissal of the replevin suit for lack of cause of action in view of the private
respondents’ failure to exhaust administrative remedies should have been the
proper course of action by the lower court instead of assuming jurisdiction over
the case and consequently issuing the writ [of replevin]. Exhaustion of the
remedies in the administrative forum, being a condition precedent prior to one’s
recourse to the courts and more importantly, being an element of private respondents’
right of action, is too significant to be waylaid by the lower court.

xxxx

Moreover, the suit for replevin is never intended as a procedural tool to question
the orders of confiscation and forfeiture issued by the DENR in pursuance to the
authority given under P.D. 705, as amended. Section 8 of the said law is explicit
that actions taken by the

Director of the Bureau of Forest Development concerning the enforcement of the

provisions of the said law are subject to review by the Secretary of DENR and that
courts may not review the decisions of the Secretary except through a special
civil action for certiorari or prohibition. (Emphasis ours)
Second, under the doctrine of primary jurisdiction, courts cannot take cognizance of
cases pending before administrative agencies of special competence. The DENR is
the agency responsible for the enforcement of forestry laws. The complaint for
replevin itself stated that members of DENR’s Task Force Sagip Kalikasan took over
the forest products and brought them to the DENR Community Environment and
Natural Resources Office. This should have alerted Judge Paderanga that the DENR
had custody of the forest products, that administrative proceedings may have been
commenced, and that the replevin suit had to be dismissed outright. In Tabao v.
Judge Lilagan25 — a case with a similar set of facts as the instant case — the Court
held that:

The complaint for replevin itself states that the shipment x x x [was] seized by the NBI
for verification of supporting documents. It also states that the NBI turned over the
seized items to the DENR "for official disposition and appropriate action." x x x To our
mind, these allegations [should] have been sufficient to alert respondent judge
that the DENR has custody of the seized items and that administrative
proceedings may have already been commenced concerning the shipment.
Under the doctrine of primary jurisdiction, courts cannot take cognizance of
cases pending before administrative agencies of special competence. x x x The
prudent thing for respondent judge to have done was to dismiss the replevin
suit outright. (Emphasis ours)

In Paat,26 the Court held that:

[T]he enforcement of forestry laws, rules and regulations and the protection,
development and management of forest lands fall within the primary and special
responsibilities of the Department of Environment and

Natural Resources. By the very nature of its function, the DENR should be given a
free hand unperturbed by judicial intrusion to determine a controversy which
is well within its jurisdiction. The assumption by the trial court, therefore, of the
replevin suit filed by private respondents constitutes an unjustified
encroachment into the domain of the administrative agency’s prerogative. The
doctrine of primary jurisdiction does not warrant a court to arrogate unto itself
the authority to resolve a controversy the jurisdiction over which is initially
lodged with an administrative body of special competence. (Emphasis ours)

Third, the forest products are already in custodia legis and thus cannot be the subject
of replevin. There was a violation of the Revised Forestry Code and the DENR seized
the forest products in accordance with law. In Calub v. Court of Appeals,27 the Court
held that properties lawfully seized by the DENR cannot be the subject of replevin:

Since there was a violation of the Revised Forestry Code and the seizure was
in accordance with law, in our view the [properties seized] were validly deemed
in custodia legis. [They] could not be subject to an action for replevin. For it is
property lawfully taken by virtue of legal process and considered in the custody of the
law, and not otherwise. (Emphasis ours)

Judge Paderanga’s acts of taking cognizance of the replevin suit and of issuing the
writ of replevin constitute gross ignorance of the law. In Tabao,28 the Court held that:

Under the doctrine of primary jurisdiction, courts cannot take cognizance of cases
pending before administrative of special competence. x x x [T]he plaintiff in the
replevin suit who [sought] to recover the shipment from the DENR had not
exhausted the administrative remedies available to him. The prudent thing for
respondent judge to have done was to dismiss the replevin suit outright.

Under Section 78-A of the Revised Forestry Code, the DENR secretary or his
authorized representatives may order the confiscation of forest products illegally cut,
gathered, removed, or possessed or abandoned.

xxxx

Respondent judge’s act of taking cognizance of the x x x replevin suit clearly

demonstrates ignorance of the law. x x x [J]udges are expected to keep abreast of
all laws and prevailing jurisprudence. Judges are duty bound to have more than just
a cursory acquaintance with laws and jurisprudence. Failure to follow basic legal
commands constitutes gross ignorance of the law from which no one may be
excused, not even a judge. (Emphasis ours)

Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary states that
competence is a prerequisite to the due performance of judicial office. Section 3 of
Canon 6 states that judges shall take reasonable steps to maintain and enhance their
knowledge necessary for the proper performance of judicial duties. Judges should
keep themselves abreast with legal developments and show acquaintance with
laws.29

The rule that courts cannot prematurely take cognizance of cases pending before
administrative agencies is basic. There was no reason for Judge Paderanga to make
an exception to this rule. The forest products were in the custody of the DENR and
Edma had not availed of any administrative remedy. Judge Paderanga should have
dismissed the replevin suit outright. In Español v. Toledo-Mupas,30 the Court held
that:

Being among the judicial front-liners who have direct contact with the litigants, a
wanton display of utter lack of familiarity with the rules by the judge inevitably erodes
the confidence of the public in the competence of our courts to render justice. It
subjects the judiciary to embarrassment. Worse, it could raise the specter of
corruption.

When the gross inefficiency springs from a failure to consider so basic and elemental
a rule, a law, or a principle in the discharge of his or her duties, a judge is either too
incompetent and undeserving of the exalted position and title he or she holds, or the
oversight or omission was deliberately done in bad faith and in grave abuse of judicial
authority.

The OCA found Judge Paderanga liable for using inappropriate language in court:
"We x x x find respondent’s intemperate use of "Shut up!" and "Baloney!" well nigh
inappropriate in court proceedings. The utterances are uncalled for."31

Indeed, the 14 and 22 April 2005 transcripts of stenographic notes show that Judge
Paderanga was impatient, discourteous, and undignified in court:

Atty. Luego: Your Honor, we want to have this motion because that is...

Judge Paderanga: I am asking you why did you not make any rejoinder[?]

xxxx

Atty. Luego: I apologize, Your Honor. We are ready to...

Judge Paderanga: Ready to what? Proceed.

Atty. Luego: Yes, Your Honor. We filed this motion to quash replevin, Your Honor, on
the grounds, first and foremost, it is our contention, Your Honor, with all due respect
of [sic] this Honorable Court, that the writ of replevin dated March 29, 2005 was
improper, Your Honor, for the reasons that the lumber, subject matter of this case,
were apprehended in accordance with...

Judge Paderanga: Where is your proof that it was apprehended? Where is your
proof? Is that apprehension proven by a seizure receipt? Where is your seizure
receipt?

Atty. Luego: Under the rules...

Judge Paderanga: Where is your seizure receipt? You read your rules. What does
[sic] the rules say? Where in your rules does it say that it does not need any seizure
receipt? You look at your rules. You point out the rules. You take out your rules and
then you point out. Do you have the rules?

xxxx

Atty. Luego: Your Honor, there was no seizure receipt, but during the apprehension,
Your Honor, there was no claimant.

Judge Paderanga: Answer me. Is there a seizure receipt?

Atty. Luego: But during the apprehension, Your Honor, no owner has [sic] appeared.

xxxx

Atty. Luego: According to [the] rules, Your Honor, if there is no...

Judge Paderanga: Whom are you seizing it from? To [sic] whom are you taking it
from?

Atty. Luego: From the shipping company, Your Honor.

xxxx

Atty. Luego: Your Honor please, the shipping company denied the ownership of that
lumber.

xxxx

Atty. Luego: But the shipping company, Your Honor,...

Judge Paderanga: Shut up. That’s baloney. You are seizing it from nobody. Then
how can you seize it from the shipping company. Are you not? You are a lawyer. Who
is in possession of the property? The shipping company. Why did you not issue [a]
seizure receipt to the shipping company?

Atty. Luego: But the... May I continue, Your Honor?

xxxx
Judge Paderanga: Stop talking about the shipping company. Still you did not issue a
seizure receipt here. Well, I’m telling you you should have issued [a] seizure receipt
to the shipping company.

xxxx

Judge Paderanga: You are a lawyer. You should know how to write pleadings.
You write the pleadings the way it should be, not the way you think it should be.

Atty. Luego: I’m sorry, Your Honor.

Judge Paderanga: You are an officer of the court. You should be careful with your
language. You say that I am wrong. It’s you who are [sic] wrong because you do
not read the law.

xxxx

Judge Paderanga: Then you read the law. How dare you say that the Court is
wrong.

xxxx

Judge Paderanga: Are you not representing [the DENR]?

Atty. Luego: Yes, in this case, Your Honor.

Judge Paderanga: Then you are representing them. They are your clients. What kind
of a lawyer are you?32

xxxx

Atty. Tiamson: Specifically it was stated in the [Factoran] versus Court of Appeals
[case] that the Court should not interfere, Your Honor.

Judge Paderanga: No.

xxxx

Judge Paderanga: The problem with you people is you do not use your heads.

Atty. Tiamson: We use our heads, your Honor.

xxxx

Atty. Tiamson: Your Honor, we would like to put on record that we use our heads,
your Honor.33 (Emphasis ours)

Section 6, Canon 6 of the New Code of Judicial Conduct for the Philippine Judiciary
states that judges shall be patient, dignified, and courteous in relation to lawyers. Rule
3.04, Canon 3 of the Code of Judicial Conduct states that judges should be patient
and courteous to lawyers, especially the inexperienced. They should avoid the
attitude that the litigants are made for the courts, instead of the courts for the litigants.

Judicial decorum requires judges to be temperate in their language at all times. They
must refrain from inflammatory, excessively rhetoric, or vile language.34 They should
(1) be dignified in demeanor and refined in speech; (2) exhibit that temperament of
utmost sobriety and self-restraint; and (3) be considerate, courteous, and civil to all
persons who come to their court.35 In Juan de la Cruz v. Carretas,36 the Court held
that:

A judge who is inconsiderate, discourteous or uncivil to lawyers x x x who appear in

his sala commits an impropriety and fails in his duty to reaffirm the people’s faith in
the judiciary. He also violates Section 6, Canon 6 of the New Code of Judicial Conduct
for the Philippine Judiciary.

xxxx

It is reprehensible for a judge to humiliate a lawyer x x x. The act betrays lack of

patience, prudence and restraint. Thus, a judge must at all times be temperate in his
language. He must choose his words x x x with utmost care and sufficient control.
The wise and just man is esteemed for his discernment. Pleasing speech increases
his persuasiveness.

Equanimity and judiciousness should be the constant marks of a dispenser of justice.

A judge should always keep his passion guarded. He can never allow it to run loose
and overcome his reason. He descends to the level of a sharp-tongued, ill-mannered
petty tyrant when he utters harsh words x x x. As a result, he degrades the judicial
office and erodes public confidence in the judiciary.

Judge Paderanga’s refusal to consider the motion to quash the writ of replevin,
repeated interruption of the lawyers, and utterance of "shut up," "that’s baloney," "how
dare you say that the court is wrong," "what kind of a lawyer are you?," and "the
problem with you people is you do not use your heads" are undignified and very
unbecoming a judge. In Office of the Court Administrator v. Paderanga,37 the Court
already reprimanded Judge Paderanga for repeatedly saying "shut up," being
arrogant, and declaring that he had "absolute power" in court. He has not changed.

Section 8, Rule 140 of the Rules of Court classifies gross ignorance of the law as a
serious offense. It is punishable by (1) dismissal from the service, forfeiture of
benefits, and disqualification from reinstatement to any public office; (2) suspension
from office without salary and other benefits for more than three months but not
exceeding six months; or (3) a fine of more than P20,000 but not
exceeding P40,000.38 Section 10 of Rule 140 classifies conduct unbecoming a judge
as a light offense. It is punishable by (1) a fine of not less than P1,000 but not
exceeding P10,000; (2) censure; (3) reprimand; or (4) admonition with warning.39

The Court notes that this is Judge Paderanga’s third offense. In Office of the Court
Administrator v. Paderanga,40the Court held him liable for grave abuse of authority
and simple misconduct for unceremoniously citing a lawyer in contempt while
declaring himself as having "absolute power" and for repeatedly telling a lawyer to
"shut up." In Beltran, Jr. v. Paderanga,41 the Court held him liable for undue delay in
rendering an order for the delay of nine months in resolving an amended formal offer
of exhibits. In both cases, the Court sternly warned Judge Paderanga that the
commission of another offense shall be dealt with more severely. The instant case
and the two cases decided against him demonstrate Judge Paderanga’s arrogance,
incorrigibility, and unfitness to become a judge.

Judge Paderanga has two other administrative cases pending against him —
one42 for gross ignorance of the law, knowingly rendering an unjust judgment, and
grave abuse of authority, and the other43 for gross misconduct, grave abuse of
authority, and gross ignorance of the law.
The Court will not hesitate to impose the ultimate penalty on those who have fallen
short of their accountabilities. It will not tolerate any conduct that violates the norms
of public accountability and diminishes the faith of the people in the judicial system.44

WHEREFORE, the Court finds Judge Maximo G.W. Paderanga, Regional Trial Court,
Branch 38, Cagayan de Oro City, GUILTY of GROSS IGNORANCE OF THE
LAW and UNBECOMING CONDUCT. Accordingly, the Court DISMISSES him from
the service, with forfeiture of all retirement benefits, except accrued leave credits, and
with prejudice to reinstatement or appointment to any public office, including
government-owned or controlled corporations.

SO ORDERED.

23. April 24, 2017

G.R. No. 205998

WILLIAM ANGIDAN SIY, Petitioner

vs.
ALVIN TOMLIN, Respondent

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the October 9, 2012 Decision2 and
February 19, 2013 Resolution3 of the Court of Appeals (CA) which respectively
granted the respondent's Petition for Certiorari and denied petitioner1s Motion for
Reconsideration4 in CA-G.R. SP No. 124967.

Factual Antecedents

In July, 2011, petitioner William Anghian Siy filed before the Regional Trial Court of
Quezon City (RTC) a Complaint for Recovery of Possession with Prayer for
Replevin5 against Frankie Domanog Ong (Ong), Chris Centeno (Centeno), John Co
Chua (Chua), and herein respondent Alvin Tomlin. The case was docketed as Civil
Case No. Q-11-69644 and assigned to RTC Branch 224.

In his Complaint, petitioner alleged that he is the owner of a 2007 model Range Rover
with Plate Number ZMG 272 which he purchased from alberto Lopez III (Lopez) on
July 22, 2009; that in 2010, he entrusted the said vehicle to Ong, a businessman who
owned a second-hand car sales showroom ("Motortrend" in Katipunan, Quezon City),
after the latter claimed that he had a prospective buyer therefor; that Ong failed to
remit the proceeds of the purported sale nor return the vehicle; that petitioner later
found out that the vehicle had been transferred to Chua; that in December, 2010,
petitioner filed a complaint before the Quezon City Police District's Anti-Carnapping
Section; that Ong, upon learning of the complaint, met with petitioner to arrange the
return of the vehicle; that Ong still failed to surrender the vehicle; that petitioner
learned that the vehicle was being transferred to respondent; and that the vehicle was
later impounded and taken into custody by the PNP-Highway Patrol Group (HPG) at
Camp Crame, Quezon City after respondent attempted to process a PNP clearance
of the vehicle with a view to transferring ownership thereof. Petitioner thus prayed that
a writ of replevin be issued for the return of the vehicle to him, and that the defendants
be ordered to pay him ₱100,000.00 atton1ey's fees and the costs of suit.
After hearing the application, the trial court issued a July 29, 2011 Order 6 decreeing
as follows:

WHEREFORE, in view of the foregoing, and with the ADMISSION of the plaintiff's
Documentary Exhibits in support of this Application, issue a Writ of Replevin in favor
of the plaintiff subject to the posting of the bond in the amount of EIGHT MILLION
PESOS (Php8,000,000.00) to be executed in favor of the defendants for the return of
the said property if such return be adjudged, and for the payment to the adverse
parties of such sum as they may recover from the applicant in this action.

SO ORDERED.7

Petitioner posted the required ₱8 million bond8 which was approved by the trial
court.9 A Writ of Replevin10 was then issued.

The subject vehicle was seized by the court-appointed special sheriff who then filed
the corresponding Sheriff's Return. 11

On August 17, 2011, respondent filed an Omnibus Motion12 seeking to quash the Writ
of Replevin, dismiss the Complaint, and turn over or return the vehicle to him.
Respondent claimed that he is the lawful and registered owner of the subject vehicle,
having bought the same and caused registration thereof in his name on March 7,
2011; that the Complaint in Civil Case No. Q-11-69644 should be dismissed for failure
to pay the correct amount of docket fees; that the Complaint is defective for failing to
allege the correct and material facts as to ownership, possession/detention by
defendant, warranty against distraint/levy/seizure, and actual value of the vehicle; and
that the implementation of the writ was attended by procedural irregularities.

Particularly, respondent argued that petitioner could not prove his ownership of the
vehicle as the only pieces of evidence he presented in this regard were a manager's
check and cash voucher as proof of payment, and the affidavit of Lopez attesting to
the sale between him and petitioner which are insufficient; that in fact, he is the
registered owner of the vehicle, as shown by the Official Receipt and Certificate of
Registration13 dated March 7, 2011 issued in his name by the Land Transportation
Office (LTO); that it has not been shown that he wrongfully detained the vehicle, as
petitioner was never in possession thereof, since the same was already detained and
seized by the HPG at the time; that petitioner failed to allege, as required under
Section 2 of Rule 60 of the 1997 Rules of Civil Procedure 14 (1997 Rules), that the
vehicle has not been distrained or taken for a tax assessment or a fine pursuant to
law, or seized under a writ of execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such seizure or custody;
and that petitioner failed to allege the actual market value (₱4 million) of the vehicle,
and instead, he intentionally understated its value at only ₱2 million in order to avoid
paying the correct docket fees.

As for the alleged procedural defects, respondent claimed that the sheriff
implemented the writ against the HPG, which is not a party to the case; that the
Complaint must be dismissed for failure to pay the correct docket foes based on the
actual value of the vehicle; and that the trial court acted with undue haste in granting
the writ of replevin.

Finally, respondent argued that he is the true owner of the subject vehicle as he was
able to register the transfer in his favor and obtain a certificate of registration in his
name; and that as between petitioner's documentary evidence and his official
registration documents, the latter should pre Petitioner filed his
Opposition/Comment15 to the omnibus motion.

Ruling of the Regional Trial Court

On November 21, 2011, the trial court issued an Order16 denying respondent's
Omnibus Motion for lack of merit. It held that respondent's remedy is not to move to
quash the writ of replevin, but to post a counterbond within the reglementary period
allowed under the 1997 Rules; that for failure to post said, counterbond, respondent's
prayer for the return of the vehicle to him is premature; that the issues of ownership
and insufficiency of the allegations in the complaint are best determined during trial;
and that an allegation of undervaluation of the vehicle cannot divest the court of
jurisdiction.

Respondent moved for reconsideration, but he was rebuffed just the same.

Ruling of the Court of Appeals

Respondent filed a Petition for Certiorari17 before the CA docketed as CAG. R. SP

No. 124967 claiming as he did in his Omnibus Motion that the trial court should have
dismissed Civil Case No. Q-11-69644 on account of failure to pay the correct docket
fees, defective complaint, procedural irregularities in the service of the writ of replevin,
the fact that he is the registered owner of the subject vehicle, and for the reason that
the trial court irregularly took cognizance of the case during the period for inventory
of its cases. Respondent sought injunctive relief as well.

On October 9, 2012, the CA rendered the assailed Decision granting the Petition. It
held that the trial court did not acquire jurisdiction over the instant case for failure of
petitioner to pay the correct docket fees, since petitioner misdeclared the value of the
subject vehicle at only ₱2 million in his Complaint, when the market value thereof was
around ₱4.5 million to ₱5 million; that this misdeclaration was undertaken with the
clear intention to defraud the government; and that petitioner failed to comply with the
requirements under Section 2, Rule 60 of the 1997 Rules, in that he gave a grossly
inadequate value for the subject vehicle in the Complaint and failed to allege therein
that the vehicle has not been distrained or taken for a tax assessment or a fine
pursuant to law, or seized under a writ of execution or preliminary attachment, or
otherwise placed under custodia legis.

The CA added that it was improper for the sheriff to serve a copy of the writ of replevin
upon the respondent on the day following the seizure of the subject vehicle, and not
prior to the taking thereof; that the trial court is deemed to have acted without or in
excess of its jurisdiction when it seized and detained the vehicle on the basis of an
improperly served writ; and that respondent was correct in moving to quash the writ,
as the proper remedy in case of an improperly served writ of replevin is to file a motion
to quash the same or a motion to vacate the order of seizure, and not to file a
counterbond as the trial court declared.

The CA thus decreed:

WHEREFORE, premises considered, the instant Petition for Certiorari is hereby

GRANTED with the following effects:

1) [T]he Order dated 21 November 2011 rendered by the Regional Trial Court of
Quezon City, Bnmch 224 is REVERSED and SET ASIDE;
2) [T]he Order dated 13 March 2012 similarly rendered by the Regional Trial Court of
Quezon City, Branch 224 is REVERSED and SET ASIDE;

3) Civil Case No. Q-11-69644 pending before the Regional Trial Court of Quezon City,
Branch 224 is hereby DISMISSED for want of jurisdiction;

4) The subject Range Rover with plate number ZMG 272 should be RETURNED to
the Philippine National Police-Highway Patrol Group for its proper disposition and
finally;

5) Prayer for the Issuance of Temporary Restraining Order and/or Preliminary

Injunction is DENIED for being moot and academic.

SO ORDERED.18

Petitioner moved to reconsider, but in its assailed February 19, 2013 Resolution, the
CA remained unconvinced. Hence, the present Petition.

In a November 10, 2014 Resolution, 19 this Court resolved to give due course to the
Petition.

Issues

Petitioner pleads the following assignment of errors:

I.

WHETHER XX X THE TRIAL COURT HAS ACQUIRED JURISDICTION OVER THE

SUBJECT MATTER OF THE COIV1PLAINT FOR RECOVERY OF POSSESSION
WITH PRAYER FOR REPLEVIN.

II.

WHETHER XXX THE PETITIONER FAILED TO ALLEGE ALL THE MATERIAL

FACTS IN THE COMPLAINT FOR REPLEVIN AND AFFIDAVIT OF MERIT UNDER
SECTIONS 2 & 4, RULE 60 OF THE REVISED RULES OF COURT.

III.

WHETHER X X X TIIE SHERIFF PROPERLY IMPLEMENTED THE WRIT OF

REPLEVIN BY SERVING THE SAME TO ANY PERSON WHO IS IN POSSESSION
OF THE PROPERTY SUBJECT THEREOF.20

Petitioner's Arguments

Praying that the assailed CA dispositions be reversed and set aside and that, instead,
Civil Case No. Q-11-69644 be reinstated, petitioner argues that the trial court
acquired jurisdiction over the replevin case considering the payment of docket fees
based on a valuation of the subject vehicle arrived at in good faith by petitioner, who
in estimating the vehicle's value took into consideration various factors such as
depreciation, actual condition, year model, and other circumstances; that the payment
of an inadequate docket fee is not a ground for dismissal of a case, and the trial court
may simply allow the plaintiff to complete the payment of the correct docket fees within
a reasonable time;21and that his eventual submission to the trial court's valuation of
₱4 million and his willingness to pay the bond and corresponding docket fee proves
his good faith and sincerity.
On the issue relating to his supposed defective complaint on account of insufficient
allegations made therein, petitioner contends that there is nothing in the 1997 Rules
which requires him to copy the requirements in Section 2 of Rule 60 and incorporate
them to the letter in his complaint, as the rule merely requires an applicant in replevin
to show the circumstances in his complaint or affidavit of merit, which he claims he
did.

Finally, petitioner insists that the writ of replevin was properly served upon
respondent. He did not address the issue relating to the sheriff's service of summons,
the Writ of replevin, and the responding order of the trial court on the day following
the seizure and detention of the subject vehicle, arguing rather sweepingly that it is
sufficient for the sheriff to have served respondent with a copy of the writ of replevin,
together with the complaint, affidavit, and bond. He conceded that respondent was in
constructive possession of the vehicle, as he was the registered owner thereof.

In his Reply, 22 petitioner retorts that the Petition is grounded on questions of law; that
even though respondent was able to register the vehicle in his name, he is
nonetheless a buyer and possessor in bad faith, and thus, the transfer of ownership
over the subject vehicle in his favor is illegal; that a criminal case for estafa relative to
the vehicle is pending against Ong, Chua, and Centeno; that Lopez's purported sale
to Chua was anomalous; and that respondent should have filed a counterbond.

Respondent's Arguments

In his Comment, 23 respondent essentially counters that the Petition should be

dismissed as it raises issues of fact; that a liberal application of the rule requiring the
payment of correct docket fees cannot apply to petitioner's case since he intentionally
defrauded the court in misdeclaring the value of the subject vehicle; that while they
need not be stated verbatim, the enumeration of required allegations under Section 2
of Rule 60 must still be specifically included in a complaint for replevin or in the
accompanying affidavit of merit; that petitioner failed to show that he is the owner of
the vehicle or that he is entitled to its possession, and that the vehicle is wrongfully
detained by him, and that it has not been distrained, seized or placed under custodia
legis; and that he is a buyer in good faith and for value.

Our Ruling

The Petition must be denied.

"In a complaint for replevin, the claimant must convincingly show that he is either the
owner or clearly entitled to the possession of the object sought to be recovered, and
that the defendant, who is in actual or legal possession thereof, wrongfully detains
the same."24 "Rule 60 x x x allows a plaintiff, in an action for the recovery of
possession of personal property, to apply for a writ of replevin if it can be shown that
he is 'the owner of the property claimed ... or is entitled to the possession thereof.’
The plaintiff need not be the owner so long as he is able to specify his right to the
possession of the property and his legal basis therefor." 25

In Filinvest Credit Corporation v. Court of Appeals,26 this Court likewise held that-

x x x It is not only the owner who can institute a replevin suit. A person "entitled to the
possession" of the property also can, as provided in the same paragraph cited by the
trial court, which reads:

Sec. 2. Affidavit and bond. - Upon applying for such order the plaintiff must show...
(a) That the plaintiff is the owner of the property claimed, particularly describing it, or
is entitled to the possession thereof; xxx

As correctly cited by respondent in his Comment:27

x x x [A] party praying for the recovery of possession of personal property must show
by his own affidavit or that of some other person who personally knows the facts that
he is the owner of the property claimed, particularly describing it, or is entitled to the
possession thereof It must be borne in mind that replevin is a possessory action the
gist of which focuses on the right of possession that, in turn, is dependent on a legal
basis that, not infrequently, looks to the ownership of the object sought to be
replevied. Wrongful detention by the defendant of the properties sought in an action
for replevin must be satisfactorily established. If only a mechanistic averment thereof
is offered, the writ should not be issued.28

Petitioner admits and claims in his pleadings that on July 22, 2009, he purchased the
subject vehicle from Lopez, who executed and signed in blank a deed of sale and
sun-endered all documents of title to him;29 that he did not register the sale in his
favor, such that the vehicle remained in the name ofLopez;30 that in September, 2010,
he delivered the subject vehicle, together with all its documents of title and the blank
deed of sale, to Ong, with the express intention of selling the vehicle through the latter
as broker/second hand car dealer; that Ong appears to have issued in his favor two
guarantee checks amounting to P4.95 million; and that these checks
bounced.31Thereafter, Ong was able to sell the vehicle using the deed of sale
executed and signed in blank by Lopez to Chua, who secured a certificate of
registration in his name.32 Chua then sold the vehicle, via a Deed of Sale of Motor
Vehicle dated December 7, 2010, to respondent, who caused registration of the
vehicle in his name on March 7, 2011.33 Apparently, Ong did not remit Chua's
payment to petitioner, prompting the latter to file formal complaints/charges
for 1) estafa and carna1ming on May 18, 2011 before the Office of the City Prosecutor
of Quezon City, and 2) camapping on June 15, 2011 before the PNP-HPG in Camp
Crame, Quezon City against Ong and Centeno.34 It appears as well that prior to the
filing of these fonnal complaints, or sometime in November, 2010, petitioner appeared
before the Quezon City Anti-Carnapping Unit based in Camp Karingal, Quezon City
and, claiming that the subject vehicle was cainapped, filed a "Failed to Return Vehicle"
report; that on February 23, 2011, petitioner, respondent, Ong, and Chua appeared
at Can1p Karingal to shed light on the claimed camapping; that the parties were
requested to voluntarily surrender the subject vehicle, but the request proved futile;
and that petitioner was instead advised to file appropriate charges and file a complaint
with the PNP-HPG in order to include the subject vehicle in the "hold order list".

This Court is not unaware of the practice by many vehicle buyers and second-hand
car traders of not transferring registration and ownership over vehicles purchased
from their original owners, and rather instructing the latter to execute and sign in blank
deeds of sale covering these vehicles, so that these buyers and dealers may freely
and readily trade or re-sell the vehicles in the second-hand car market without
difficulty. This way, multiple transfers, sales, or trades of the vehicle using these
undated deeds signed in blank become possible, until the latest purchaser decides to
actually transfer the certificate of registration in his name. For many car owners-
sellers, this is an easy concession; so long as they actually receive the sale price,
they will sign sale deeds in blank and surrender them to the buyers or dealers; and
for the latter, this is convenient since they can "flip'' or re-sell the vehicles to the public
many times over with ease, using these blank deeds of sale.
In many cases as well, busy vehicle owners selling their vehicles actually leave them,
together with all the documents of title, spare keys, and deeds of sale signed in blank,
with second-hand car traders they know and trust, in order for the latter to display
these vehicles for actual viewing and inspection by prospective buyers at their lots,
warehouses, garages, or showrooms, and to enable the traders to facilitate sales on-
the-spot, as-is-where-is, without having to inconvenience the owners with random
viewings and inspections of their vehicles. For this kind of arrangement, an agency
relationship is created between the vehicle owners, as principals, and the car traders,
as agents. The situation is akin to an owner of jewelry who sells the same through an
agent, who receives the jewelry in trust and offers it for sale to his/her regular clients;
if a sale is made, the agent takes payment under the obligation to remit the same to
the jewelry owner, minus the agreed commission or other compensation.

From petitioner's own account, he constituted and appointed Ong as his agent to sell
the vehicle, surrendering to the latter the vehicle, all documents of title pertaining
thereto, and a deed of sale signed in blank, with full understanding that Ong would
offer and sell the same to his clients or to the public. In return, Ong accepted the
agency by his receipt of the vehicle, the blank deed of sale, and documents of title,
and when he gave bond in the form of two guarantee checks worth ₱4.95 million. All
these gave Ong the authority to act for and in behalf of petitioner. Under the Civil
Code on agency, Art. 1869. Agency may be express, or implied from the acts of
the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.

Agency may be oral, unless the law requires a specific form.

Art. 1870. Acceptance by the agent may also be express or implied from his
acts which carry out the agency, or from his silence or inaction according to the
circumstances. (Emphasis and underscoring supplied)

"The basis of agency is representation and the same may be constituted expressly or
impliedly. In an implied agency, the principal can be bound by the acts of the implied
agent. "35 The same is true with an oral agency.

Acting for and in petitioner's behalf by virtue of the implied or oral agency, Ong was
thus able to sell the vehicle to Chua, but he failed to remit the proceeds thereof to
petitioner; his guarantee checks bounced as well. This entitled petitioner to sue for
estafa through abuse of confidence. This is exactly what petitioner did: on May 18,
2011, he filed a complaint for estafa and carnapping against Ong before the Quezon
City Prosecutor's Office.

Since Ong was able to sell the subject vehicle to Chua, petitioner thus ceased to be
the owner thereof. Nor is he entitled to the possession of the vehicle; together with
his ownership, petitioner lost his right of possession over the vehicle. His argument
that respondent is a buyer in bad faith, when the latter nonetheless proceeded with
the purchase and registration of the vehicle on March 7, 2011, despite having been
apprised of petitioner's earlier November, 2010 "Failed to Return Vehicle" report filed
with the PNP-HPG, is unavailing.1âwphi1 Petitioner had no right to file said report, as
he was no longer the owner of the vehicle at the time; indeed, his right of action is
only against Ong, for collection of the proceeds of the sale.

Considering that he was no longer the owner or rightful possessor of the subject
vehicle at the time he filed Civil Case No. Q-11-69644 in July, 2011, petitioner may
not seek a return of the same through replevin. Quite the contrary, respondent, who
obtained the vehicle from Chua and registered the transfer with the Land
Transportation Office, is the rightful owner thereof, and as such, he is entitled to its
possession. For this reason, the CA was correct in decreeing the dismissal of Civil
Case No. Q-11-69644, although it e1red in ordering the return of the vehicle to the
PNP-HPG, which had no further right to hold the vehicle in its custody. As the
registered and rightful owner of the subject vehicle, the trial court must return the
same to respondent.

Petitioner cannot be allowed to cut his losses by ostensibly securing the recovery of
the subject vehicle in lieu of its price, which Ong failed and continues to fail to remit.
On the other hand, Ong's declarations contained in his Affidavit,36 to the effect that
petitioner remains the owner of the vehicle, and that Chua came into illegal
possession and ownership of the same by unlawfully appropriating the same for
himself without paying for it, are unavailing. Faced with a possible criminal charge for
estafa initiated by petitioner for failing or refusing to remit the price for the subject
vehicle, Ong's declarations are considered self-serving, that is, calculated to free
himself from the criminal charge. The premise is that by helping petitioner to actually
recover his vehicle by insisting that the same was unlawfully taken from him, instead
of remitting its price to petitioner, Ong expects that he and petitioner may redeem
themselves from their bad judgment; for the petitioner, the mistake of bestowing his
full faith and confidence upon Ong, and blindly surrendering the vehicle, its
documents of title, and a deed of sale executed and signed in blank, to the latter; and
for Ong, his failure to remit the proceeds of the sale to petitioner; and petitioner might
then opt to desist from pursuing the estafa and other criminal charges against him.

Having disposed of the case in the foregoing manner, there is no need to discuss the
other issues raised by the parties.

WHEREFORE, the Petition is DENIED. The October 9, 2012 Decision and February
19, 2013 Resolution of the Court of Appeals in CA-G.R. SP No. 124967
are AFFIRMED WITH MODIFICATION, in that the subject Land Rover Range Rover,
with Plate Number ZMG 272 and particularly described in and made subject of these
proceedings, is ORDERED RETURNED to respondent Alvin Tomlin as its registered
owner.

SO ORDERED.

24. G.R. No. 210950, August 15, 2018

MILAGROS P. ENRIQUEZ, Petitioner, v. THE MERCANTILE INSURANCE CO.,

INC., Respondent.

DECISION

LEONEN, J.:

A surety bond remains effective until the action or proceeding is finally decided,
resolved, or terminated, regardless of whether the applicant fails to renew the bond.
The applicant will be liable to the surety for any payment the surety makes on the
bond, but only up to the amount of this bond.

This is a Petition for Review on Certiorari1 assailing the August 13, 2013
Decision2 and January 14, 2014 Resolution3 of the Court of Appeals in CA-G.R. CV
No. 95955, which affirmed the Regional Trial Court's finding that Milagros P. Enriquez
(Enriquez) was liable for the full amount of the replevin bond issued by The Mercantile
Insurance Company, Inc. (Mercantile Insurance).
Sometime in 2003, Enriquez filed a Complaint for Replevin4 against Wilfred Asuten
(Asuten) before the Regional Trial Court of Angeles City, Pampanga. This Complaint,
docketed as Civil Case No. 10846,5 was for the recovery of her Toyota Hi-Ace van
valued at P300,000.00.6 Asuten allegedly refused to return her van, claiming that it
was given by Enriquez's son as a consequence of a gambling deal. 7

Enriquez applied for a replevin bond from Mercantile Insurance. On February 24,
2003, Mercantile Insurance issued Bond No. 138 for P600,000.00,8 which had a
period of one (1) year or until February 24, 2004. Enriquez also executed an indemnity
agreement with Mercantile Insurance, where she agreed to indemnify the latter "for
all damages, payments, advances, losses, costs, taxes, penalties, charges, attorney's
fees and expenses of whatever kind and nature"9 that it would incur as surety of the
replevin bond.10

On May 24, 2004, the Regional Trial Court issued an Order11 dismissing the
Complaint without prejudice due to Enriquez's continued failure to present evidence.

The Regional Trial Court found that Enriquez surrendered the van to the Bank of the
Philippine Islands, San Fernando Branch but did not comply when ordered to return
it to the sheriff within 24 hours from receipt of the Regional Trial Court March 15, 2004
Order.12 She also did not comply with prior court orders to prove payment of her
premiums on the replevin bond or to post a new bond. Thus, the Regional Trial Court
declared Bond No. 138 forfeited. Mercantile Insurance was given 10 days to produce
the van or to show cause why judgment should not be rendered against it for the
amount of the bond.13

On July 12, 2004, the Regional Trial Court held a hearing on the final forfeiture of the
bond where it was found that Mercantile Insurance failed to produce the van, and that
Bond No. 138 had already expired.14In an Order15 issued on the same day, the
Regional Trial Court directed Mercantile Insurance to pay Asuten the amount of
P600,000.00.

Mercantile Insurance wrote to Enriquez requesting the remittance of P600,000.00 to

be paid on the replevin bond.16 Due to Enriquez's failure to remit the amount,
Mercantile Insurance paid Asuten P600,000.00 on September 3, 2004, in compliance
with the Regional Trial Court July 12, 2004 Order.17 It was also constrained to file a
collection suit against Enriquez with the Regional Trial Court of Manila. 18

In her defense, Enriquez claimed that her daughter-in-law, Asela, filed the Complaint
for Replevin in her name and that Asela forged her signature in the indemnity
agreement. She also argued that she could not be held liable since the replevin bond
had already expired.19

In its July 23, 2010 Decision,20 the Regional Trial Court ruled in favor of Mercantile
Insurance. It found that non-payment of the premiums did not cause the replevin bond
to expire. Thus, Enriquez was still liable for the reimbursement made by the surety on
the bond. The Regional Trial Court likewise pointed out that Enriquez made
"conflicting claims" of having applied for the bond and then later claiming that her
daughter-in-law was the one who applied for it.21 The dispositive portion of the
Regional Trial Court July 23, 2010 Decision read:

WHEREFORE, judgment is hereby rendered in favor of plaintiff The Mercantile

Insurance Co., Inc. and against defendant Milagros P. Enriquez, as follows:
(i) Ordering defendant Milagros P. Enriquez to pay plaintiff the claim of P600,000.00
enforced under the Indemnity Agreement plus legal interest at the rate of 12% per
annum from date of judicial demand on October 22, 2004, until fully paid;

(ii) Ordering defendant Milagros P. Enriquez to pay attorney's fees fixed in the
reasonable amount of P50,000.00;

(iii) Ordering defendant Milagros P. Enriquez to pay the costs of

SO ORDERED.22

Enriquez appealed23 with the Court of Appeals, arguing that the replevin bond had
already expired; therefore, she could not have been liable under the indemnity
agreement. She also averred that even assuming that she was still liable under the
indemnity agreement, she should not pay the full amount considering that the value
of the van was only P300,000.00.24

On August 13, 2013, the Court of Appeals rendered a Decision25 affirming the
Regional Trial Court's July 23, 2010 Decision.

The Court of Appeals held that under the Guidelines on Corporate Surety
Bonds,26 the lifetime of any bond issued in any court proceeding shall be from court
approval until the case is finally terminated. Thus, it found that the replevin bond and
indemnity agreement were still in force and effect when Mercantile Insurance paid
P600,000.00 to Asuten.27

The Court of Appeals likewise found that Enriquez was "bound by the incontestability
of payments clause" in the indemnity agreement, which stated that she would be held
liable for any payment made by the surety under the bond, regardless of the actual
cost of the van.28 It held that the issue of whether Enriquez was liable for the full
amount of the replevin bond should have been raised before the Regional Trial Court
in the Complaint for Replevin, and not in her appeal.29

Enriquez moved for reconsideration30 but was denied by the Court of Appeals in its
January 14, 2014 Resolution.31 Hence, this Petition32 was filed before this Court.

Petitioner argues that when respondent paid Asuten on September 3, 2004, the
indemnity agreement was no longer in force and effect since the bond expired on
February 24, 2004.33 She claims that the indemnity agreement was a contract of
adhesion, and that respondent "intended the agreement to be so comprehensive and
all-encompassing to the point of being ambiguous."34

Petitioner contends that even assuming that the indemnity agreement could be
enforced, she should not have been held liable for the full amount of the bond. Citing
Rule 60, Section 2 of the Rules of Court, she argues that a judgment on replevin is
only "either for the delivery of the property or for its value in case delivery cannot be
made and for such damages as either party may prove, with costs." 35

Respondent, on the other hand, contends that the present action has already
prescribed, considering that Rule 60, Section 10, in relation to Rule 57, Section 20 of
the Rules of Court, mandates that any objection on the award should be raised in the
trial court where the complaint for replevin is filed. It argues that since petitioner only
raised the objection before the Court of Appeals, her action should have been
barred.36

Respondent likewise points out that the forfeiture of the bond was due to petitioner's
own negligence. It asserts that in the proceedings before the Regional Trial Court,
Enriquez failed to present her evidence, and it was only when she filed an appeal that
she raised her objections.37 It argues that the Guidelines on Corporate Surety Bonds
specify that the expiry of the bond shall be after the court proceeding is finally decided;
hence, the bond was still in effect when respondent paid Asuten.38

The sole issue for this Court's resolution is whether or not petitioner Milagros P.
Enriquez should be made liable for the full amount of the bond paid by respondent
The Mercantile Insurance Co., Inc. as surety, in relation to a previous case for replevin
filed by petitioner.
I

Replevin is an action for the recovery of personal property.39 It is both a principal

remedy and a provisional relief. When utilized as a principal remedy, the objective is
to recover possession of personal property that may have been wrongfully detained
by another. When sought as a provisional relief, it allows a plaintiff to retain the
contested property during the pendency of the action. In Tillson v. Court of Appeals:40

The term replevin is popularly understood as "the return to or recovery by a person of

goods or chattels claimed to be wrongfully taken or detained upon the person's giving
security to try the matter in court and return the goods if defeated in the action;" "the
writ by or the common-law action in which goods and chattels are replevied," i.e.,
taken or gotten back by a writ for replevin;" and to replevy, means to recover
possession by an action of replevin; to take possession of goods or chattels under a
replevin order. Bouvier's Law Dictionary defines replevin as "a form of action which
lies to regain the possession of personal chattels which have been taken from the
plaintiff unlawfully . . ., (or as) the writ by virtue of which the sheriff proceeds at once
to take possession of the property therein described and transfer it to the plaintiff upon
his giving pledges which are satisfactory to the sheriff to prove his title, or return the
chattels taken if he fail so to do;" the same authority states that the term, "to replevy"
means "to re-deliver goods which have been distrained to the original possessor of
them, on his giving pledges in an action of replevin." The term therefore may refer
either to the action itself, for the recovery of personality, or the provisional remedy
traditionally associated with it, by which possession of the property may be obtained
by the plaintiff and retained during the pendency of the action. In this jurisdiction, the
provisional remedy is identified in Rule 60 of the Rules of Court as an order for
delivery of personal property.41

Similarly, in BA Finance Corporation v. Court of Appeals:42

Replevin, broadly understood, is both a form of principal remedy and of a provisional
relief. It may refer either to the action itself, i.e., to regain the possession of personal
chattels being wrongfully detained from the plaintiff by another, or to the provisional
remedy that would allow the plaintiff to retain the thing during the pendency of the
action and hold it pendente lite. The action is primarily possessory in nature and
generally determines nothing more than the right of possession. Replevin is so usually
described as a mixed action, being partly in rem and partly in personam-in
rem insofar as the recovery of specific property is concerned, and in personam as
regards to damages involved. As an "action in rem," the gist of the replevin action is
the right of the plaintiff to obtain possession of specific personal property by reason
of his being the owner or of his having a special interest therein. Consequently, the
person in possession of the property sought to be replevied is ordinarily the proper
and only necessary party defendant, and the plaintiff is not required to so join as
defendants other persons claiming a right on the property but not in possession
thereof. Rule 60 of the Rules of Court allows an application for the immediate
possession of the property but the plaintiff must show that he has a good legal basis,
i.e., a clear title thereto, for seeking such interim possession.43

As a provisional remedy, a party may apply for an order for the delivery of the property
before the commencement of the action or at any time before an answer is
filed.44 Rule 60 of the Rules of Court outlines the procedure for the application of a
writ of replevin. Rule 60, Section 2 requires that the party seeking the issuance of the
writ must first file the required affidavit and a bond in an amount that is double the
value of the property:

Section 2. Affidavit and bond. — The applicant must show by his own affidavit or that
of some other person who personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly describing it,
or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause
of detention thereof according to the best of his knowledge, information, and belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine
pursuant to law, or seized under a writ of execution or preliminary attachment, or
otherwise placed under custodia legis, or if so seized, that it is exempt from such
seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the
value of the property as stated in the affidavit aforementioned, for the return of the
property to the adverse party if such return be adjudged, and for the payment to the
adverse party of such sum as he may recover from the applicant in the action. 45

Once the affidavit is filed and the bond is approved by the court, the court issues an
order and a writ of seizure requiring the sheriff to take the property into his or her
custody.46 If there is no further objection to the bond filed within five (5) days from the
taking of the property, the sheriff shall deliver it to the applicant.47 The contested
property remains in the applicant's custody until the court determines, after a trial on
the Issues, which among the parties has the right of possession. 48

In Civil Case No. 10846, petitioner Enriquez filed a replevin case against Asuten for
the recovery of the Toyota Hi-Ace van valued at P300,000.00.49 She applied for a
bond in the amount of P600,000.00 with respondent in Asuten's favor. The Regional
Trial Court approved the bond and ordered the sheriff to recover the van from Asuten
and to deliver it to petitioner. While the van was in petitioner's custody, the Regional
Trial Court dismissed the case without prejudice for failure to prosecute. Thus, it
ordered the sheriff to restore the van to Asuten. When petitioner failed to produce the
van, the Regional Trial Court directed respondent to pay Asuten the amount of the
bond.
There was no trial on the merits. The Regional Trial Court's dismissal for failure to
prosecute was a dismissal without prejudice to re-filing. In this particular instance, any
writ of seizure, being merely ancillary to the main action, becomes functus oficio. The
parties returned to the status quo as if no case for replevin had been filed. Thus, upon
the dismissal of the case, it was imperative for petitioner to return the van to Asuten.
In Advent Capital and Finance Corporation v. Young:50

We agree with the Court of Appeals in directing the trial court to return the seized car
to Young since this is the necessary consequence of the dismissal of the replevin
case for failure to prosecute without prejudice. Upon the dismissal of the replevin case
for failure to prosecute, the writ of seizure, which is merely ancillary in nature,
became functus officio and should have been lifted. There was no adjudication on the
merits, which means that there was no determination of the issue who has the better
right to possess the subject car. Advent ca mot therefore retain possession of the
subject car considering that it was not adjudged as the prevailing party entitled to the
remedy of replevin.

Contrary to Advent's view, Olympia International Inc. v. Court of Appeals applies to

this case. The dismissal of the replevin case for failure to prosecute results in the
restoration of the parties' status prior to litigation, as if no complaint was filed at all.
To let the writ of seizure stand after the dismissal of the complaint would be adjudging
Advent as the prevailing party, when precisely no decision on the merits had been
rendered. Accordingly, the parties must be reverted to their status quo ante. Since
Young possessed the subject car before the filing of the replevin case, the same must
be returned to him, as if no complaint was filed at all.51

Petitioner argues that she should not have been made liable for the bond despite her
failure to return the van, considering that it was effective only until February 24, 2004,
and that she did not renew or post another bond.

De Guia v. Alto Surety & Insurance, Co.52 requires that any application on the bond
be made after hearing but before the entry of judgment. Otherwise, the surety can no
longer be made liable under the bond:
Construing and applying these provisions of the Rules, we have held in a long line of
cases that said provisions are mandatory and require the application upon the bond
against the surety or bondsmen and the award thereof to be made after hearing and
before the entry of final judgment in the case; that if the judgment under execution
contains no directive for the surety to pay, and the proper party fails to make any claim
for such directive before such judgment had become final and executory, the surety
or bondsman cannot be later made liable under the bond. The purpose of the
aforementioned rules is to avoid multiplicity of suits.53

For this reason, a surety bond remains effective until the action or proceeding is finally
decided, resolved, or terminated. This condition is deemed incorporated in the
contract between the applicant and the surety, regardless of whether they failed to
expressly state it. Under the Guidelines on Corporate Surety Bonds:54

VII. LIFETIME OF BONDS IN CRIMINAL AND CIVIL ACTIONS/SPECIAL

PROCEEDINGS

Unless and until the Supreme Court directs otherwise,55 the lifetime or duration of the
effectivity of any bond issued in criminal and civil actions/special proceedings, or in
any proceeding or incident therein shall be from its approval by the court, until the
action or proceeding is finally decided, resolved or terminated. This condition must be
incorporated in the terms and condition of the bonding contract and shall bind the
parties notwithstanding their failure to expressly state the same in the said contract
or agreement. (Emphasis supplied)

Civil Case No. 10846 is a rare instance where the writ of seizure is dissolved due to
the dismissal without prejudice, but the bond stands because the case has yet to be
finally terminated by the Regional Trial Court.

The peculiar circumstances in this case arose when petitioner failed to return the van
to Asuten, despite the dismissal of her action. This is an instance not covered by the
Rules of Court or jurisprudence. In its discretion, the Regional Trial Court proceeded
to rule on the forfeiture of the bond. As a result, respondent paid Asuten twice the
value of the van withheld by petitioner. Respondent, thus, seeks to
recover this amount from petitioner, despite the van only being worth half the amount
of the bond.

Of all the provisional remedies provided in the Rules of Court, only Rule 60, Section
256 requires that the amount of the bond be double the value of the property. The
other provisional remedies provide that the amount be fixed by court or be merely
equal to the value of the property:
Provisional Remedies

Rule 57
Preliminary Attachment

....

Section 4. Condition of applicant's bond. — The party applying for the order must
thereafter give a bond executed to the adverse party in the amount fixed by the court
in its order granting the issuance of the writ, 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.
....

Section 12. Discharge of attachment upon giving counter-bond. — After a writ of

attachment has been enforced, the party whose property has been attached, or the
person appearing on his behalf, may move for the discharge of the attachment wholly
or in part on the security given. The court shall, after due notice and hearing, order
the discharge of the attachment if the movant makes a cash deposit, or files a counter-
bond executed to the attaching party with the clerk of the court where the application
is made, in an amount equal to that fixed by the court in the order of attachment,
exclusive of costs. But if the attachment is sought to be discharged with respect to a
particular property, the counter-bond shall be equal to the value of that property as
determined by the court. In either case, the cash deposit or the counter-bond shall
secure the payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching party. 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 to the person appearing on his
behalf, the deposit or counter-bond aforesaid standing in 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 party may apply for a new order of attachment.
....

Section 14. Proceedings where property claimed by third person. — If the property
attached is claimed by any person other than the party against whom attachment had
been issued or his agent, and such person makes an affidavit of his title thereto, or
right to the possession thereof, stating the grounds of such right or title, and serves
such affidavit upon the sheriff while the latter has possession of the attached property,
and a copy thereof upon the attaching party, the sheriff shall not be bound to keep
the property under attachment, unless the attaching party or his agent, on demand of
the sheriff, shall file a bond approved by the court to indemnify the third-party
claimant in a sum not less than the value of the property levied upon. In case of
disagreement as to such value, the same shall be decided by the court issuing the
writ of attachment. No claim for damages for the taking or keeping of the property
may be enforced against the bond unless the action therefor is filed within one
hundred twenty (120) days from the date of the filing of the bond.
....
Rule 58
Preliminary Injunction

....

Section 4. Verified application and bond for preliminary injunction or temporary

restraining order. — A preliminary injunction or temporary restraining order may be
granted only when:

....

(b) Unless exempted by the court, the applicant files with the court where the action
or proceeding is pending, a bond executed to the party or person enjoined, in an
amount to be fixed by the court, to the effect that the applicant will pay to such party
or person all damages which he may sustain by reason of the injunction or temporary
restraining order if the court should finally decide that the applicant was not entitled
thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be
issued.
....

Section 6. Grounds for objection to, or for motion of dissolution of, injunction or
restraining order. — The application for injunction or restraining order may be denied,
upon a showing of its insufficiency. The injunction or restraining order may also be
denied, or, if granted, may be dissolved, on other grounds upon affidavits of the party
or person enjoined, which may be opposed by the applicant also by affidavits. It may
further be denied, or, if granted, may be dissolved, if it appears after hearing that
although the applicant is entitled to the injunction or restraining order, the issuance or
continuance thereof, as the case may be, would cause irreparable damage to the
party or person enjoined while the applicant can be fully compensated for such
damages as he may suffer, and the former files a bond in an amount fixed by the
court conditioned that he will pay all damages which the applicant may suffer by the
denial or the dissolution of the injunction or restraining order. If it appears that the
extent of the preliminary injunction or restraining order granted is too great, it may be
modified.
....

Rule 59
Receivership

....

Section 2. Bond on appointment of receiver. — Before issuing the order appointing a

receiver the court shall require the applicant to file a bond executed to the party
against whom the application is presented, in an amount to be fixed by the court, to
the effect that the applicant will pay such party all damages he may sustain by reason
of the appointment of such receiver in case the applicant shall have procured such
appointment without sufficient cause; and the court may, in its discretion, at any time
after the appointment, require an additional bond as further security for such
damages.

Section 3. Denial of application or discharge of receiver. — The application may be

denied, or the receiver discharged, when the adverse party files a bond executed to
the applicant, in an amount to be fixed by the court, to the effect that such party will
pay the applicant all damages he may suffer by reason of the acts, omissions, or other
matters specified in the application as ground for such appointment. The receiver may
also be discharged if it is shown that his appointment was obtained without sufficient
cause.
....

Rule 60
Replevin

....

Section 7. Proceedings where property claimed by third person. — If the property

taken is claimed by any person other than the party against whom the writ of replevin
had been issued or his agent, and such person makes an affidavit of his title thereto,
or right to the possession thereof, stating the grounds therefor, and serves such
affidavit upon the sheriff while the latter has possession of the property and a copy
thereof upon the applicant, the sheriff shall not be bound to keep the property under
replevin or deliver it to the applicant unless the applicant or his agent, on demand of
said sheriff, shall file a bond approved by the court to indemnify the third-party
claimant in a sum not less than the value of the property under replevin as provided
in section 2 hereof. In case of disagreement as to such value, the court shall
determine the same. No claim for damages for the taking or keeping of the property
may be enforced against the bond unless the action therefor is filed within one
hundred twenty (120) days from the date of the filing of the bond. 57 (Emphasis
supplied)

However, there is a rationale to the requirement that the bond for a writ of seizure in
a replevin be double the value of the property. The bond functions not only to
indemnify the defendant in case the property is lost, but also to answer for any
damages that may be awarded by the court if the judgment is rendered in defendant's
favor. In Citibank, N.A. v. Court of Appeals:58
It should be noted that a replevin bond is intended to indemnify the defendant against
any loss that he may suffer by reason of its being compelled to surrender the
possession of the disputed property pending trial of the action. The same may also
be answerable for damages if any when judgment is rendered in favor of the
defendant or the party against whom a writ of replevin was issued and such judgment
includes the return of the property to him. Thus, the requirement that the bond be
double the actual value of the properties litigated upon. Such is the case because the
bond will answer for the actual loss to the plaintiff, which corresponds to the value of
the properties sought to be recovered and for damages, if any.59

Any application of the bond in a replevin case, therefore, is premised on the judgment
rendered in favor of the defendant. Thus, the Rules of Court imply that there must be
a prior judgment on the merits before there can be any application on the bond:

Rule 60
Replevin

....

Section 9. Judgment. — After trial of the issues, the court shall determine who has
the right of possession to and the value of the property and shall render judgment in
the alternative for the delivery thereof to the party entitled to the same, or for its value
in case delivery cannot be made, and also for such damages as either party may
prove, with costs.

Section 10. Judgment to include recovery against sureties. — The amount, if any, to
be awarded to any party upon any bond filed in accordance with the provisions of this
Rule, shall be claimed, ascertained, and granted under the same procedure as
prescribed in section 20 of Rule 57.

The Rules of Court likewise require that for the defendant to be granted
the full amount of the bond, he or she must first apply to the court for damages. These
damages will be awarded only after a proper hearing:

Rule 57
Preliminary Attachment

....

Section 20. Claim for damages on account of improper, irregular or excessive

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

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

Nothing herein contained shall prevent the party against whom the attachment was
issued from recovering in the same action the damages awarded to him from any
property of the attaching party not exempt from execution should the bond or deposit
given by the latter be insufficient or fail to fully satisfy the award.

Forfeiture of the replevin bond, therefore, requires first, a judgment on the merits in
the defendant's favor, and second, an application by the defendant for damages.
Neither circumstance appears in this case. When petitioner failed to produce the van,
equity demanded that Asuten be awarded only an amount equal to the value of the
van. The Regional Trial Court would have erred in ordering the forfeiture of
the entire bond in Asuten's favor, considering that there was no trial on the merits or
an application by Asuten for damages. This judgment could have been reversed had
petitioner appealed the Regional Trial Court's May 24, 2004 Order in Civil Case No.
10846. Unfortunately, she did not. Respondent was, thus, constrained to follow the
Regional Trial Court's directive to pay Asuten the full amount of the bond.
II

This is a simple case for collection of a sum of money. Petitioner cannot substitute
this case for her lost appeal in Civil Case No. 10846.

In applying for the replevin bond, petitioner voluntarily undertook with respondent an
Indemnity Agreement, which provided:

INDEMNIFICATION – to indemnify the SURETY for all damages, payments,

advances, losses, costs, taxes, penalties, charges, attorney's fees and expenses of
whatever kind and nature that the SURETY may at any time sustain or incur as a
consequence of having become a surety upon the above-mentioned bond, and to
pay, reimburse and make good to the SURETY, its successors and assigns, all sums
or all money which it shall pay or become liable to pay by virtue of said bond even if
said payment/s or liability exceeds the amount of the bond. . . .

INCONTESTABILITY OF PAYMENTS MADE BY THE SURETY – any payment or

disbursement made by the surety on account of the above-mentioned bond, either in
the belief that the SURETY was obligated to make such payment or in the belief that
said payment was necessary in order to avoid a greater loss or obligation for which
the SURETY might be liable by virtue of the . . . above-mentioned bond, shall be final,
and will not be contested by the undersigned, who jointly and severally bind
themselves to indemnify the SURETY for any of such payment or disbursement.60

Basic is the principle that "a contract is law between the parties"61 for as long as it is
"not contrary to law, morals, good customs, public order, or public policy." 62 Under
their Indemnity Agreement, petitioner held herself liable for any payment made by
respondent by virtue of the replevin bond.

Petitioner contends that the Indemnity Agreement was a contract of adhesion since
respondent made the extent of liability "so comprehensive and all-encompassing to
the point of being ambiguous."63

A contract of insurance is, by default, a contract of adhesion. It is prepared by the

insurance company and might contain terms and conditions too vague for a layperson
to understand; hence, they are construed liberally in favor of the insured. In Verendia
v. Court of Appeals:64

Basically a contract of indemnity, an insurance contract is the law between the parties.
Its terms and conditions constitute the measure of the insurer's liability and
compliance therewith is a condition precedent to the insured's right to recovery from
the insurer. As it is also a contract of adhesion, an insurance contract should be
liberally construed in favor of the insured and strictly against the insurer company
which usually prepares it.65

Respondent, however, does not seek to recover an amount which exceeds the
amount of the bond or any "damages, payments, advances, losses, costs, taxes,
penalties, charges, attorney's fees and expenses of whatever kind and nature,"66 all
of which it could have sought under the Indemnity Agreement. It only seeks to recover
from petitioner the amount of the bond, or P600,000.00.

Respondent paid P600,000.00 to Asuten pursuant to a lawful order of the Regional

Trial Court in Civil Case No. 10846. If there were any errors in the judgment of the
Regional Trial Court, as discussed above, petitioner could have appealed this.
Petitioner, however, chose to let Civil Case No. 10846 lapse into finality. This case
cannot now be used as a substitute for her lost appeal.

It is clear from the antecedents that any losses which petitioner has suffered were
due to the consequences of her actions, or more accurately, her inactions. Civil Case
No. 10846, which she filed, was dismissed due to her failure to prosecute. The
Regional Trial Court forfeited the replevin bond which she had filed because she
refused to return the property. She is now made liable for the replevin bond because
she failed to appeal its forfeiture.

WHEREFORE, the Petition is DENIED. The August 13, 2013 Decision and January
14, 2014 Resolution of the Court of Appeals in CA-G.R. CV No. 95955
are AFFIRMED.

SO ORDERED.

A.
UPPORT PENDETE LITE RULE 61

25. G.R. No. 125041 June 30, 2006

MA. BELEN B. MANGONON, for and in behalf of her minor children REBECCA
ANGELA DELGADO and REGINA ISABEL DELGADO. Petitioner,
vs.
HON. COURT OF APPEALS, HON. JUDGE JOSEFINA GUEVARA-SALONGA,
Presiding Judge, RTC-Makati, Branch 149, FEDERICO C. DELGADO and
FRANCISCO C. DELGADO, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 of the Court of
Appeals dated 20 March 1996, affirming the Order, dated 12 September 19952 of the
Regional Trial Court (RTC), Branch 149, Makati, granting support pendente lite to
Rebecca Angela (Rica) and Regina Isabel (Rina), both surnamed Delgado.

The generative facts leading to the filing of the present petition are as follows:

On 17 March 1994, petitioner Ma. Belen B. Mangonon filed, in behalf of her then minor
children Rica and Rina, a Petition for Declaration of Legitimacy and Support, with
application for support pendente lite with the RTC Makati.3In said petition, it was
alleged that on 16 February 1975, petitioner and respondent Federico Delgado were
civilly married by then City Court Judge Eleuterio Agudo in Legaspi City, Albay. At
that time, petitioner was only 21 years old while respondent Federico was only 19
years old. As the marriage was solemnized without the required consent per Article
85 of the New Civil Code,4 it was annulled on 11 August 1975 by the Quezon City
Juvenile and Domestic Relations Court.5

On 25 March 1976, or within seven months after the annulment of their marriage,
petitioner gave birth to twins Rica and Rina. According to petitioner, she, with the
assistance of her second husband Danny Mangonon, raised her twin daughters as
private respondents had totally abandoned them. At the time of the institution of the
petition, Rica and Rina were about to enter college in the United States of America
(USA) where petitioner, together with her daughters and second husband, had moved
to and finally settled in. Rica was admitted to the University of Massachusetts
(Amherst) while Rina was accepted by the Long Island University and Western New
England College. Despite their admissions to said universities, Rica and Rina were,
however, financially incapable of pursuing collegiate education because of the
following:

i) The average annual cost for college education in the US is about US$22,000/year,
broken down as follows:

Tuition Fees US$13,000.00

Room & Board 5,000.00

Books 1,000.00

Yearly Transportation &

Meal Allowance 3,000.00

Total US$ 22,000.00

or a total of US$44,000.00, more or less, for both Rica and Rina

ii) Additionally, Rica and Rina need general maintenance support each in the amount
of US$3,000.00 per year or a total of US$6,000 per year.

iii) Unfortunately, petitioner’s monthly income from her 2 jobs is merely US$1,200
after taxes which she can hardly give general support to Rica and Rina, much less
their required college educational support.

iv) Neither can petitioner’s present husband be compelled to share in the general
support and college education of Rica and Rina since he has his own son with
petitioner and own daughter (also in college) to attend to.
v) Worse, Rica and Rina’s petitions for Federal Student Aid have been rejected by
the U.S. Department of Education.6

Petitioner likewise averred that demands7 were made upon Federico and the latter’s
father, Francisco,8 for general support and for the payment of the required college
education of Rica and Rina. The twin sisters even exerted efforts to work out a
settlement concerning these matters with respondent Federico and respondent
Francisco, the latter being generally known to be financially well-off.9 These
demands, however, remained unheeded. Considering the impending deadline for
admission to college and the opening of classes, petitioner and her then minor
children had no choice but to file the petition before the trial court.

Petitioner also alleged that Rica and Rina are her legitimate daughters by respondent
Federico since the twin sisters were born within seven months from the date of the
annulment of her marriage to respondent Federico. However, as respondent Federico
failed to sign the birth certificates of Rica and Rina, it was imperative that their status
as legitimate children of respondent Federico, and as granddaughters of respondent
Francisco, be judicially declared pursuant to Article 173 of the Family Code.10

As legitimate children and grandchildren, Rica and Rina are entitled to general and
educational support under Articles 17411 and 195(b)12 in relation to Articles 194(1 and
2)13 and 199(c)14 of the Family Code. Petitioner alleged that under these provisions,
in case of default on the part of the parents, the obligation to provide support falls
upon the grandparents of the children; thus, respondent Federico, or in his default,
respondent Francisco should be ordered to provide general and educational support
for Rica and Rina in the amount of US$50,000.00, more or less, per year.

Petitioner also claimed that she was constrained to seek support pendente lite from
private respondents - who are millionaires with extensive assets both here and abroad
- in view of the imminent opening of classes, the possibility of a protracted litigation,
and Rica and Rina’s lack of financial means to pursue their college education in the
USA.

In his Answer,15 respondent Francisco stated that as the birth certificates of Rica and
Rina do not bear the signature of respondent Federico, it is essential that their
legitimacy be first established as "there is no basis to claim support until a final and
executory judicial declaration has been made as to the civil status of the
children."16 Whatever good deeds he may have done to Rica and Rina, according to
respondent Francisco, was founded on pure acts of Christian charity. He, likewise,
averred that the order of liability for support under Article 199 of the Family Code is
not concurrent such that the obligation must be borne by those more closely related
to the recipient. In this case, he maintained that responsibility should rest on the
shoulders of petitioner and her second husband, the latter having voluntarily assumed
the duties and responsibilities of a natural father. Even assuming that he is
responsible for support, respondent Francisco contends that he could not be made to
answer beyond what petitioner and the father could afford.

On 24 May 1994, petitioner filed a Motion to Declare Defendant (respondent herein)

Federico in Default.17 This was favorably acted upon by the trial court in the Order
dated 16 June 1994.18

On 5 August 1994, respondent Federico filed a Motion to Lift Order of Default alleging
that the summons and a copy of the petition were not served in his correct
address.19 Attached thereto was his Answer20 where he claimed that petitioner had
no cause of action against him. According to him, he left for abroad and stayed there
for a long time "[w]ithin the first one hundred twenty (120) days of the three hundred
days immediately preceding March 25, 1976" and that he only came to know about
the birth of Rica and Rina when the twins introduced themselves to him seventeen
years later. In order not to antagonize the two, respondent Federico claimed he did
not tell them that he could not be their father. Even assuming that Rica and Rina are,
indeed, his daughters, he alleged that he could not give them the support they were
demanding as he was only making P40,000.00 a month.

Finding sufficient ground in the motion filed by respondent Federico, the trial court
lifted its Order dated 16 June 1994 and admitted his Answer.21

In the meantime, on 25 April 1994, petitioner filed an Urgent Motion to Set Application
for Support Pendente Lite for Hearing because Rica and Rina both badly needed
immediate financial resources for their education.22 This Motion was opposed by
respondent Francisco.23 After both parties submitted supplemental pleadings to
bolster their respective positions, the trial court resolved the motion in an Order dated
12 September 1995 in this wise:

WHEREFORE, in the light of the foregoing considerations, respondents are hereby

directed to provide a monthly support (pendente lite) of P5,000.00 each or a total
of P10,000.00 for the education of Rebecca Angela and Regina Isabel Delgado to be
delivered within the first five days of each month without need of demand. 24

Unsatisfied with the Order of the trial court, petitioner brought the case to the Court
of Appeals via Petition for Certiorari. The Court of Appeals affirmed the holding of the
trial court and disposed the petition in the following manner:

WHEREFORE, the petition for certiorari is hereby DISMISSED and the Order of the
lower court dated September 12, 1995 is hereby AFFIRMED.25

Petitioner’s Motion for Reconsideration was denied through the Resolution of the
Court of Appeals dated 16 May 1996.26

Petitioner is now before this Court claiming that the Decision of the Court of Appeals
was tainted with the following errors:

RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT

RESPONDENT JUDGE DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN
FIXING THE AMOUNT OF MONTHLY SUPPORT PENDENTE LITE GRANTED TO
PETITIONER’S CHILDREN AT A MEASLEY P5,000.00 PER CHILD.

I.

RESPONDENT COURT IGNORED EVIDENCE ON RECORD OF THE FINANCIAL

INCAPACITY OF RICA AND RINA’S PARENTS IN DEFAULT OF WHOM THE
OBLIGATION TO GIVE SUPPORT DEVOLVES ON THE GRANDFATHER.

II.

IT BEING ESTABLISHED THAT THE PERSON OBLIGED TO GIVE SUPPORT –

GRANDFATHER DON PACO – IS UNDOUBTEDLY CAPABLE OF GIVING THE
AMOUNT DEMANDED, RESPONDENT COURT ERRED IN NOT HOLDING THAT
RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION IN FIXING
AN AMOUNT OF SUPPORT PENDENTE LITE THAT IS OBVIOUSLY INADEQUATE
TO SUPPORT THE EDUCATIONAL REQUIREMENTS OF THE RECIPIENTS.27
At the time of the filing of the present Petition, it is alleged that Rica had already
entered Rutgers University in New Jersey with a budget of US$12,500.00 for
academic year 1994-1995. She was able to obtain a tuition fee grant of US$1,190.00
and a Federal Stafford loan from the US government in the amount of
US$2,615.00.28 In order to defray the remaining balance of Rica’s education for said
school year, petitioner claims that she had to secure a loan under the Federal Direct
Student Loan Program.

Meanwhile, Rina entered CW Post, Long Island University, where she was expected
to spend US$20,000.00 for the school year 1994-1995. She was given a financial
grant of US$6,000.00, federal work study assistance of US$2,000.00, and a Federal
Stafford loan of US$2,625.00.29 Again, petitioner obtained a loan to cover the
remainder of Rina’s school budget for the year.

Petitioner concedes that under the law, the obligation to furnish support to Rica and
Rina should be first imposed upon their parents. She contends, however, that the
records of this case demonstrate her as well as respondent Federico’s inability to give
the support needed for Rica and Rina’s college education. Consequently, the
obligation to provide support devolves upon respondent Francisco being the
grandfather of Rica and Rina.

Petitioner also maintains that as respondent Francisco has the financial resources to
help defray the cost of Rica and Rina’s schooling, the Court of Appeals then erred in
sustaining the trial court’s Order directing respondent Federico to pay Rica and Rina
the amount of award P5,000.00 each as monthly support pendente lite.

On the other hand, respondent Francisco argues that the trial court correctly declared
that petitioner and respondent Federico should be the ones to provide the support
needed by their twin daughters pursuant to Article 199 of the Family Code. He also
maintains that aside from the financial package availed of by Rica and Rina in the
form of state tuition aid grant, work study program and federal student loan program,
petitioner herself was eligible for, and had availed herself of, the federal parent loan
program based on her income and properties in the USA. He, likewise, insists that
assuming he could be held liable for support, he has the option to fulfill the obligation
either by paying the support or receiving and maintaining in the dwelling here in the
Philippines the person claiming support.30 As an additional point to be considered by
this Court, he posits the argument that because petitioner and her twin daughters are
now US citizens, they cannot invoke the Family Code provisions on support as "[l]aws
relating to family rights and duties, or to the status, condition and legal capacity of
persons are binding upon citizens of the Philippines, even though living abroad."31

Respondent Federico, for his part, continues to deny having sired Rica and Rina by
reiterating the grounds he had previously raised before the trial court. Like his father,
respondent Federico argues that assuming he is indeed the father of the twin sisters,
he has the option under the law as to how he would provide support. Lastly, he
assents with the declaration of the trial court and the Court of Appeals that the parents
of a child should primarily bear the burden of providing support to their offspring.

The petition is meritorious.

As a preliminary matter, we deem it necessary to briefly discuss the essence of

support pendente lite. The pertinent portion of the Rules of Court on the matter
provides:
Rule 61
SUPPORT ‘PENDENTE LITE’

SECTION 1. Application.- At the commencement of the proper action or proceeding,

or at any time prior to the judgment or final order, a verified application for support
pendente lite may be filed by any party stating the grounds for the claim and the
financial conditions of both parties, and accompanied by affidavits, depositions or
other authentic documents in support thereof.

xxxx

SEC. 4. Order.- The court shall determine provisionally the pertinent facts, and shall
render such orders as justice and equity may require, having due regard to the
probable outcome of the case and such other circumstances as may aid in the proper
resolution of the question involved. If the application is granted, the court shall fix the
amount of money to be provisionally paid or such other forms of support as should be
provided, taking into account the necessities of the applicant and the resources or
means of the adverse party, and the terms of payment or mode for providing the
support. If the application is denied, the principal case shall be tried and decided as
early as possible.

Under this provision, a court may temporarily grant support pendente lite prior to the
rendition of judgment or final order. Because of its provisional nature, a court does
not need to delve fully into the merits of the case before it can settle an application
for this relief. All that a court is tasked to do is determine the kind and amount of
evidence which may suffice to enable it to justly resolve the application. It is enough
that the facts be established by affidavits or other documentary evidence appearing
in the record.32lavvphi1.net

After the hearings conducted on this matter as well as the evidence presented, we
find that petitioner was able to establish, by prima facie proof, the filiation of her twin
daughters to private respondents and the twins’ entitlement to support pendente lite.
In the words of the trial court –

By and large, the status of the twins as children of Federico cannot be denied. They
had maintained constant communication with their grandfather Francisco. As a matter
of fact, respondent Francisco admitted having wrote several letters to Rica and Rina
(Exhs. A, B, C, D, E, F, G, G-1 to G-30). In the said letters, particularly at the bottom
thereof, respondent Francisco wrote the names of Rica and Rina Delgado. He
therefore was very well aware that they bear the surname Delgado. Likewise, he
referred to himself in his letters as either "Lolo Paco" or "Daddy Paco." In his letter of
October 13, 1989 (Exh. G-21), he said "as the grandfather, am extending a financial
help of US$1,000.00." On top of this, respondent Federico even gave the twins a treat
to Hongkong during their visit to the Philippines. Indeed, respondents, by their
actuations, have shown beyond doubt that the twins are the children of Federico.33

Having addressed the issue of the propriety of the trial court’s grant of support
pendente lite in favor of Rica and Rina, the next question is who should be made
liable for said award.

The pertinent provision of the Family Code on this subject states:

ART. 199. Whenever two or more persons are obliged to give support, the liability
shall devolve upon the following persons in the order herein provided:

(1) The spouse;

(2) The descendants in the nearest degree;

(3) The ascendants in the nearest degree; and

(4) The brothers and sisters.

An eminent author on the subject explains that the obligation to give support rests
principally on those more closely related to the recipient. However, the more remote
relatives may be held to shoulder the responsibility should the claimant prove that
those who are called upon to provide support do not have the means to do so.34

In this case, both the trial court and the Court of Appeals held respondent Federico
liable to provide monthly support pendente lite in the total amount of P10,000.00 by
taking into consideration his supposed income of P30,000.00 to P40,000.00 per
month. We are, however, unconvinced as to the veracity of this ground relied upon
by the trial court and the Court of Appeals.

It is a basic procedural edict that questions of fact cannot be the proper subject of a
petition for review under Rule 45 of the 1997 Rules of Civil Procedure. The rule finds
a more stringent application where the Court of Appeals upholds the findings of fact
of the trial court; in such a situation, this Court, as the final arbiter, is generally bound
to adopt the facts as determined by the appellate and the lower courts. This rule,
however, is not ironclad as it admits of the following recognized exceptions: "(1) when
the findings are grounded entirely on speculation, surmises or conjectures; (2) when
the inference made is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of facts are conflicting; (6) when in making its findings the
Court of Appeals went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee; (7) when the findings are
contrary to that of the trial court; (8) when the findings are conclusions without citation
of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioner’s main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different conclusion." 35 The case at bar
falls within the seventh and eleventh exceptions.

The trial court gave full credence to respondent Federico’s allegation in his
Answer36 and his testimony37 as to the amount of his income. We have, however,
reviewed the records of this case and found them bereft of evidence to support his
assertions regarding his employment and his earning. Notably, he was even required
by petitioner’s counsel to present to the court his income tax return and yet the records
of this case do not bear a copy of said document.38 This, to our mind, severely
undermines the truthfulness of respondent Federico’s assertion with respect to his
financial status and capacity to provide support to Rica and Rina.

In addition, respondent Francisco himself stated in the witness stand that as far as he
knew, his son, respondent Federico did not own anything –

"Atty. Lopez:

I have here another letter under the letter head of Mr. & Mrs. Dany Mangonon, dated
October 19, 1991 addressed to Mr. Francisco Delgado signed by "sincerely, Danny
Mangonon, can you remember."
xxxx

WITNESS:

A: I do remember this letter because it really irritated me so much that I threw it away
in a waste basket. It is a very demanding letter, that is what I do not like at all.

ATTY. LOPEZ:

Q: It is stated in this letter that "I am making this request to you and not to your son,
Rico, for reasons we both are aware of." Do you know what reason that is?

A: Yes. The reason is that my son do not have fix employment and do not have fix
salary and income and they want to depend on the lolo.

x x x xlavvphi1.net

Q: Would you have any knowledge if Federico owns a house and lot?

A: Not that I know. I do not think he has anything.

Q: How about a car?

A: Well, his car is owned by my company.39

Respondent Federico himself admitted in court that he had no property of his own,
thus:

Q: You also mentioned that you are staying at Mayflower Building and you further
earlier testified that this building belongs to Citadel Corporation. Do you confirm that?

A: Yes, sir.

Q: What car are you driving, Mr. Witness?

A: I am driving a lancer, sir.

Q: What car, that registered in the name of the corporation?

A: In the corporation, sir.

Q: What corporation is that?

A: Citadel Commercial, Inc., sir.

Q: What properties, if any, are registered in your name, do you have any properties,
Mr. Witness?

A: None, sir."40 (Emphasis supplied.)

Meanwhile, respondent Francisco asserts that petitioner possessed the capacity to

give support to her twin daughters as she has gainful employment in the USA. He
even went as far as to state that petitioner’s income abroad, when converted to
Philippine peso, was much higher than that received by a trial court judge here in the
Philippines. In addition, he claims that as she qualified for the federal parent loan
program, she could very well support the college studies of her daughters.
We are unconvinced. Respondent Francisco’s assertion that petitioner had the means
to support her daughters’ education is belied by the fact that petitioner was even
forced by her financial status in the USA to secure the loan from the federal
government. If petitioner were really making enough money abroad, she certainly
would not have felt the need to apply for said loan. The fact that petitioner was
compelled to take out a loan is enough indication that she did not have enough money
to enable her to send her daughters to college by herself. Moreover, even Rica and
Rina themselves were forced by the circumstances they found themselves in to
secure loans under their names so as not to delay their entrance to college.

There being prima facie evidence showing that petitioner and respondent Federico
are the parents of Rica and Rina, petitioner and respondent Federico are primarily
charged to support their children’s college education. In view however of their
incapacities, the obligation to furnish said support should be borne by respondent
Francisco. Under Article 199 of the Family Code, respondent Francisco, as the next
immediate relative of Rica and Rina, is tasked to give support to his granddaughters
in default of their parents. It bears stressing that respondent Francisco is the majority
stockholder and Chairman of the Board of Directors of Citadel Commercial,
Incorporated, which owns and manages twelve gasoline stations, substantial real
estate, and is engaged in shipping, brokerage and freight forwarding. He is also the
majority stockholder and Chairman of the Board of Directors of Citadel Shipping which
does business with Hyundai of Korea. Apart from these, he also owns the Citadel
Corporation which, in turn, owns real properties in different parts of the country. He is
likewise the Chairman of the Board of Directors of Isla Communication Co. and he
owns shares of stocks of Citadel Holdings. In addition, he owns real properties here
and abroad.41 It having been established that respondent Francisco has the financial
means to support his granddaughters’ education, he, in lieu of petitioner and
respondent Federico, should be held liable for support pendente lite.

Anent respondent Francisco and Federico’s claim that they have the option under the
law as to how they could perform their obligation to support Rica and Rina, respondent
Francisco insists that Rica and Rina should move here to the Philippines to study in
any of the local universities. After all, the quality of education here, according to him,
is at par with that offered in the USA. The applicable provision of the Family Code on
this subject provides:

Art. 204. The person obliged to give support shall have the option to fulfill the
obligation either by paying the allowance fixed, or by receiving and maintaining in the
family dwelling the person who has a right to receive support. The latter alternative
cannot be availed of in case there is a moral or legal obstacle thereto.

Under the abovecited provision, the obligor is given the choice as to how he could
dispense his obligation to give support. Thus, he may give the determined amount of
support to the claimant or he may allow the latter to stay in the family dwelling. The
second option cannot be availed of in case there are circumstances, legal or moral,
which should be considered.

In this case, this Court believes that respondent Francisco could not avail himself of
the second option. From the records, we gleaned that prior to the commencement of
this action, the relationship between respondent Francisco, on one hand, and
petitioner and her twin daughters, on the other, was indeed quite pleasant. The
correspondences exchanged among them expressed profound feelings of
thoughtfulness and concern for one another’s well-being. The photographs presented
by petitioner as part of her exhibits presented a seemingly typical family celebrating
kinship. All of these, however, are now things of the past. With the filing of this case,
and the allegations hurled at one another by the parties, the relationships among the
parties had certainly been affected. Particularly difficult for Rica and Rina must be the
fact that those who they had considered and claimed as family denied having any
familial relationship with them. Given all these, we could not see Rica and Rina
moving back here in the Philippines in the company of those who have disowned
them.

Finally, as to the amount of support pendente lite, we take our bearings from the
provision of the law mandating the amount of support to be proportionate to the
resources or means of the giver and to the necessities of the recipient.42 Guided by
this principle, we hold respondent Francisco liable for half of the amount of school
expenses incurred by Rica and Rina as support pendente lite. As established by
petitioner, respondent Francisco has the financial resources to pay this amount given
his various business endeavors.

Considering, however, that the twin sisters may have already been done with their
education by the time of the promulgation of this decision, we deem it proper to award
support pendente lite in arrears43 to be computed from the time they entered college
until they had finished their respective studies.

The issue of the applicability of Article 15 of the Civil Code on petitioner and her twin
daughters raised by respondent Francisco is best left for the resolution of the trial
court. After all, in case it would be resolved that Rica and Rina are not entitled to
support pendente lite, the court shall then order the return of the amounts already
paid with legal interest from the dates of actual payment.44

WHEREFORE, premises considered, this Petition is PARTIALLY GRANTED. The

Decision of the Court of Appeals dated 20 March 1996 and Resolution dated 16 May
1996 affirming the Order dated 12 September 1995 of the Regional Trial Court,
Branch 149, Makati, fixing the amount of support pendente lite to P5,000.00 for
Rebecca Angela and Regina Isabel, are hereby MODIFIED in that respondent
Francisco Delgado is hereby held liable for support pendente lite in the amount to be
determined by the trial court pursuant to this Decision. Let the records of this case be
remanded to the trial court for the determination of the proper amount of support
pendente lite for Rebecca Angela and Regina Isabel as well as the arrearages due
them in accordance with this Decision within ten (10) days from receipt hereof.
Concomitantly, the trial court is directed to proceed with the trial of the main case and
the immediate resolution of the same with deliberate dispatch. The RTC Judge,
Branch 149, Makati, is further directed to submit a report of his compliance with the
directive regarding the support pendente lite within ten (10) days from compliance
thereof.

SO ORDERED.

26. G.R. Nos. 175279-80 June 5, 2013

SUSAN LIM-LUA, Petitioner,

vs.
DANILO Y. LUA, Respondent.

DECISION

VILLARAMA, JR., J.:

In this petition for review on certiorari under Rule 45, petitioner seeks to set aside the
Decision1 dated April 20, 2006 and Resolution2 dated October 26, 2006 of the Court
of Appeals (CA) dismissing her petition for contempt (CA-G.R. SP No. 01154) and
granting respondent's petition for certiorari (CA-G.R. SP No. 01315).

The factual background is as follows:

On September 3, 2003,3 petitioner Susan Lim-Lua filed an action for the declaration
of nullity of her marriage with respondent Danilo Y. Lua, docketed as Civil Case No.
CEB-29346 of the Regional Trial Court (RTC) of Cebu City, Branch 14.

In her prayer for support pendente lite for herself and her two children, petitioner
sought the amount of ₱500,000.00 as monthly support, citing respondent’s huge
earnings from salaries and dividends in several companies and businesses here and
abroad.4

After due hearing, Judge Raphael B. Yrastorza, Sr. issued an Order5 dated March 31,
2004 granting support pendente lite, as follows:

From the evidence already adduced by the parties, the amount of Two Hundred Fifty
(₱250,000.00) Thousand Pesos would be sufficient to take care of the needs of the
plaintiff. This amount excludes the One hundred thirty-five (₱135,000.00) Thousand
Pesos for medical attendance expenses needed by plaintiff for the operation of both
her eyes which is demandable upon the conduct of such operation. The amounts
already extended to the two (2) children, being a commendable act of defendant,
should be continued by him considering the vast financial resources at his disposal.

According to Art. 203 of the Family Code, support is demandable from the time plaintiff
needed the said support but is payable only from the date of judicial demand. Since
the instant complaint was filed on 03 September 2003, the amount of Two Hundred
Fifty (₱250,000.00) Thousand should be paid by defendant to plaintiff retroactively to
such date until the hearing of the support pendente lite. ₱250,000.00 x 7
corresponding to the seven (7) months that lapsed from September, 2003 to March
2004 would tantamount to a total of One Million Seven Hundred Fifty (₱1,750,000.00)
Thousand Pesos. Thereafter, starting the month of April 2004, until otherwise ordered
by this Court, defendant is ordered to pay a monthly support of Two Hundred Fifty
Thousand (₱250,000.00) Pesos payable within the first five (5) days of each
corresponding month pursuant to the third paragraph of Art. 203 of the Family Code
of the Philippines. The monthly support of ₱250,000.00 is without prejudice to any
increase or decrease thereof that this Court may grant plaintiff as the circumstances
may warrant i.e. depending on the proof submitted by the parties during the
proceedings for the main action for support.6

Respondent filed a motion for reconsideration,7 asserting that petitioner is not entitled
to spousal support considering that she does not maintain for herself a separate
dwelling from their children and respondent has continued to support the family for
their sustenance and well-being in accordance with family’s social and financial
standing. As to the ₱250,000.00 granted by the trial court as monthly support
pendente lite, as well as the ₱1,750,000.00 retroactive support, respondent found it
unconscionable and beyond the intendment of the law for not having considered the
needs of the respondent.

In its May 13, 2004 Order, the trial court stated that the March 31, 2004 Order had
become final and executory since respondent’s motion for reconsideration is treated
as a mere scrap of paper for violation of the threeday notice period under Section 4,
Rule 15 of the 1997 Rules of Civil Procedure, as amended, and therefore did not
interrupt the running of the period to appeal. Respondent was given ten (10) days to
show cause why he should not be held in contempt of the court for disregarding the
March 31, 2004 order granting support pendente lite.8

His second motion for reconsideration having been denied, respondent filed a petition
for certiorari in the CA.

On April 12, 2005, the CA rendered its Decision,9 finding merit in respondent’s
contention that the trial court gravely abused its discretion in granting ₱250,000.00
monthly support to petitioner without evidence to prove his actual income. The said
court thus decreed:

WHEREFORE, foregoing premises considered, this petition is given due course. The
assailed Orders dated March 31, 2004, May 13, 2004, June 4, 2004 and June 18,
2004 of the Regional Trial Court, Branch 14, Cebu City issued in Civil Case No. CEB
No. 29346 entitled "Susan Lim Lua versus Danilo Y. Lua" are hereby nullified and set
aside and instead a new one is entered ordering herein petitioner:

a) to pay private respondent a monthly support pendente lite of ₱115,000.00

beginning the month of April 2005 and every month thereafter within the first five (5)
days thereof;

b) to pay the private respondent the amount of ₱115,000.00 a month multiplied by the
number of months starting from September 2003 until March 2005 less than the
amount supposedly given by petitioner to the private respondent as her and their two
(2) children monthly support; and

c) to pay the costs.

SO ORDERED.10

Neither of the parties appealed this decision of the CA. In a Compliance11 dated June
28, 2005, respondent attached a copy of a check he issued in the amount of
₱162,651.90 payable to petitioner. Respondent explained that, as decreed in the CA
decision, he deducted from the amount of support in arrears (September 3, 2003 to
March 2005) ordered by the CA -- ₱2,185,000.00 -- plus ₱460,000.00 (April, May,
June and July 2005), totaling ₱2,645,000.00, the advances given by him to his
children and petitioner in the sum of ₱2,482,348.16 (with attached photocopies of
receipts/billings).

In her Comment to Compliance with Motion for Issuance of a Writ of

Execution,12 petitioner asserted that none of the expenses deducted by respondent
may be chargeable as part of the monthly support contemplated by the CA in CA-
G.R. SP No. 84740.

On September 27, 2005, the trial court issued an Order13 granting petitioner’s motion
for issuance of a writ of execution as it rejected respondent’s interpretation of the CA
decision. Respondent filed a motion for reconsideration and subsequently also filed a
motion for inhibition of Judge Raphael B. Yrastorza, Sr. On November 25, 2005,
Judge Yrastorza, Sr. issued an Order14 denying both motions.

WHEREFORE, in view of the foregoing premises, both motions are DENIED. Since
a second motion for reconsideration is prohibited under the Rules, this denial has
attained finality; let, therefore, a writ of execution be issued in favor of plaintiff as
against defendant for the accumulated support in arrears pendente lite.
Notify both parties of this Order.

SO ORDERED.15

Since respondent still failed and refused to pay the support in arrears pendente lite,
petitioner filed in the CA a Petition for Contempt of Court with Damages, docketed as
CA-G.R. SP No. 01154 ("Susan Lim Lua versus Danilo Y. Lua"). Respondent, on the
other hand, filed CA-G.R. SP No. 01315, a Petition for Certiorari under Rule 65 of the
Rules of Court ("Danilo Y. Lua versus Hon. Raphael B. Yrastorza, Sr., in his capacity
as Presiding Judge of Regional Trial Court of Cebu, Branch 14, and Susan Lim Lua").
The two cases were consolidated.

By Decision dated April 20, 2006, the CA set aside the assailed orders of the trial
court, as follows:

WHEREFORE, judgment is hereby rendered:

a) DISMISSING, for lack of merit, the case of Petition for Contempt of Court with
Damages filed by Susan Lim Lua against Danilo Y. Lua with docket no. SP. CA-GR
No. 01154;

b) GRANTING Danilo Y. Lua’s Petition for Certiorari docketed as SP. CA-GR No.
01315. Consequently, the assailed Orders dated 27 September 2005 and 25
November 2005 of the Regional Trial Court, Branch 14, Cebu City issued in Civil Case
No. CEB-29346 entitled "Susan Lim Lua versus Danilo Y. Lua, are hereby NULLIFIED
and SET ASIDE, and instead a new one is entered:

i. ORDERING the deduction of the amount of Ph₱2,482,348.16 plus 946,465.64, or

a total of PhP3,428,813.80 from the current total support in arrears of Danilo Y. Lua
to his wife, Susan Lim Lua and their two (2) children;

ii. ORDERING Danilo Y. Lua to resume payment of his monthly support of

Ph₱115,000.00 pesos starting from the time payment of this amount was deferred by
him subject to the deductions aforementioned.

iii. DIRECTING the issuance of a permanent writ of preliminary injunction.

SO ORDERED.16

The appellate court said that the trial court should not have completely disregarded
the expenses incurred by respondent consisting of the purchase and maintenance of
the two cars, payment of tuition fees, travel expenses, and the credit card purchases
involving groceries, dry goods and books, which certainly inured to the benefit not
only of the two children, but their mother (petitioner) as well. It held that respondent’s
act of deferring the monthly support adjudged in CA-G.R. SP No. 84740 was not
contumacious as it was anchored on valid and justifiable reasons. Respondent said
he just wanted the issue of whether to deduct his advances be settled first in view of
the different interpretation by the trial court of the appellate court’s decision in CA-
G.R. SP No. 84740. It also noted the lack of contribution from the petitioner in the
joint obligation of spouses to support their children.

Petitioner filed a motion for reconsideration but it was denied by the CA.

Hence, this petition raising the following errors allegedly committed by the CA:

I.
THE HONORABLE COURT ERRED IN NOT FINDING RESPONDENT GUILTY OF
INDIRECT CONTEMPT.

II.

THE HONORABLE COURT ERRED IN ORDERING THE DEDUCTION OF THE

AMOUNT OF PH₱2,482,348.16 PLUS 946,465.64, OR A TOTAL OF
PH₱3,428,813.80 FROM THE CURRENT TOTAL SUPPORT IN ARREARS OF THE
RESPONDENT TO THE PETITIONER AND THEIR CHILDREN.17

The main issue is whether certain expenses already incurred by the respondent may
be deducted from the total support in arrears owing to petitioner and her children
pursuant to the Decision dated April 12, 2005 in CA-G.R. SP No. 84740.

The pertinent provision of the Family Code of the Philippines provides:

Article 194. Support comprises everything indispensable for sustenance, dwelling,

clothing, medical attendance, education and transportation, in keeping with the
financial capacity of the family.

The education of the person entitled to be supported referred to in the preceding

paragraph shall include his schooling or training for some profession, trade or
vocation, even beyond the age of majority. Transportation shall include expenses in
going to and from school, or to and from place of work. (Emphasis supplied.)

Petitioner argues that it was patently erroneous for the CA to have allowed the
deduction of the value of the two cars and their maintenance costs from the support
in arrears, as these items are not indispensable to the sustenance of the family or in
keeping them alive. She points out that in the Decision in CA-G.R. SP No. 84740, the
CA already considered the said items which it deemed chargeable to respondent,
while the monthly support pendente lite (₱115,000.00) was fixed on the basis of the
documentary evidence of respondent’s alleged income from various businesses and
petitioner’s testimony that she needed ₱113,000.00 for the maintenance of the
household and other miscellaneous expenses excluding the ₱135,000.00 medical
attendance expenses of petitioner.

Respondent, on the other hand, contends that disallowing the subject deductions
would result in unjust enrichment, thus making him pay for the same obligation twice.
Since petitioner and the children resided in one residence, the groceries and dry
goods purchased by the children using respondent’s credit card, totalling
₱594,151.58 for the period September 2003 to June 2005 were not consumed by the
children alone but shared with their mother. As to the Volkswagen Beetle and BMW
316i respondent bought for his daughter Angelli Suzanne Lua and Daniel Ryan Lua,
respectively, these, too, are to be considered advances for support, in keeping with
the financial capacity of the family. Respondent stressed that being children of
parents belonging to the upper-class society, Angelli and Daniel Ryan had never in
their entire life commuted from one place to another, nor do they eat their meals at
"carinderias". Hence, the cars and their maintenance are indispensable to the
children’s day-to-day living, the value of which were properly deducted from the
arrearages in support pendente lite ordered by the trial and appellate courts.

As a matter of law, the amount of support which those related by marriage and family
relationship is generally obliged to give each other shall be in proportion to the
resources or means of the giver and to the needs of the recipient. 18 Such support
comprises everything indispensable for sustenance, dwelling, clothing, medical
attendance, education and transportation, in keeping with the financial capacity of the
family.

Upon receipt of a verified petition for declaration of absolute nullity of void marriage
or for annulment of voidable marriage, or for legal separation, and at any time during
the proceeding, the court, motu proprio or upon verified application of any of the
parties, guardian or designated custodian, may temporarily grant support pendente
lite prior to the rendition of judgment or final order.19 Because of its provisional nature,
a court does not need to delve fully into the merits of the case before it can settle an
application for this relief. All that a court is tasked to do is determine the kind and
amount of evidence which may suffice to enable it to justly resolve the application. It
is enough that the facts be established by affidavits or other documentary evidence
appearing in the record.20

In this case, the amount of monthly support pendente lite for petitioner and her two
children was determined after due hearing and submission of documentary evidence
by the parties. Although the amount fixed by the trial court was reduced on appeal, it
is clear that the monthly support pendente lite of ₱115,000.00 ordered by the CA was
intended primarily for the sustenance of petitioner and her children, e.g., food,
clothing, salaries of drivers and house helpers, and other household expenses.
Petitioner’s testimony also mentioned the cost of regular therapy for her scoliosis and
vitamins/medicines.

ATTY. ZOSA:

xxxx

Q How much do you spend for your food and your two (2) children every month?

A Presently, Sir?

ATTY. ZOSA:

Yes.

A For the food alone, I spend not over ₱40,000.00 to ₱50,000.00 a month for the food
alone.

xxxx

ATTY. ZOSA:

Q What other expenses do you incur in living in that place?

A The normal household and the normal expenses for a family to have a decent living,
Sir.

Q How much other expenses do you incur?

WITNESS:

A For other expenses, is around over a ₱100,000.00, Sir.

Q Why do you incur that much amount?

A For the clothing for the three (3) of us, for the vitamins and medicines. And also I
am having a special therapy to straighten my back because I am scoliotic. I am
advised by the Doctor to hire a driver, but I cannot still afford it now. Because my
eyesight is not reliable for driving. And I still need another househelp to accompany
me whenever I go marketing because for my age, I cannot carry anymore heavy
loads.

xxxx

ATTY. FLORES:

xxxx

Q On the issue of the food for you and the two (2) children, you mentioned ₱40,000.00
to ₱50,000.00?

A Yes, for the food alone.

Q Okay, what other possible expenses that you would like to include in those two (2)
items? You mentioned of a driver, am I correct?

A Yes, I might need two (2) drivers, Sir for me and my children.

Q Okay. How much would you like possibly to pay for those two (2) drivers?

A I think ₱10,000.00 a month for one (1) driver. So I need two (2) drivers. And I need
another househelp.

Q You need another househelp. The househelp nowadays would charge you
something between ₱3,000.00 to ₱4,000.00. That’s quite…

A Right now, my househelp is receiving ₱8,000.00. I need another which I will give a
compensation of ₱5,000.00.

Q Other than that, do you still have other expenses?

A My clothing.

COURT:

How about the schooling for your children?

WITNESS:

A The schooling is shouldered by my husband, Your Honor.

COURT:

Everything?

A Yes, Your Honor.

xxxx

ATTY. FLORES:

Q Madam witness, let us talk of the present needs. x x x. What else, what specific
need that you would like to add so I can tell my client, the defendant.
WITNESS:

A I need to have an operation both of my eyes. I also need a special therapy for my
back because I am scoliotic, three (3) times a week.

Q That is very reasonable. [W]ould you care to please repeat that?

A Therapy for my scoliotic back and then also for the operation both of my eyes. And
I am also taking some vitamins from excel that will cost ₱20,000.00 a month.

Q Okay. Let’s have piece by piece. Have you asked the Doctor how much would it
cost you for the operation of that scoliotic?

A Yes before because I was already due last year. Before, this eye will cost
₱60,000.00 and the other eyes ₱75,000.00.

Q So for both eyes, you are talking of ₱60,000.00 plus ₱75,000.00 is ₱135,000.00?

A Yes.

xxxx

Q You talk of therapy?

A Yes.

Q So how much is that?

A Around ₱5,000.00 a week.21

As to the financial capacity of the respondent, it is beyond doubt that he can solely
provide for the subsistence, education, transportation, health/medical needs and
recreational activities of his children, as well as those of petitioner who was then
unemployed and a full-time housewife. Despite this, respondent’s counsel manifested
during the same hearing that respondent was willing to grant the amount of only
₱75,000.00 as monthly support pendente lite both for the children and petitioner as
spousal support. Though the receipts of expenses submitted in court unmistakably
show how much respondent lavished on his children, it appears that the matter of
spousal support was a different matter altogether. Rejecting petitioner’s prayer for
₱500,000.00 monthly support and finding the ₱75,000.00 monthly support offered by
respondent as insufficient, the trial court fixed the monthly support pendente lite at
₱250,000.00. However, since the supposed income in millions of respondent was
based merely on the allegations of petitioner in her complaint and registration
documents of various corporations which respondent insisted are owned not by him
but his parents and siblings, the CA reduced the amount of support pendente lite to
₱115,000.00, which ruling was no longer questioned by both parties.

Controversy between the parties resurfaced when respondent’s compliance with the
final CA decision indicated that he deducted from the total amount in arrears
(₱2,645,000.00) the sum of ₱2,482,348.16, representing the value of the two cars for
the children, their cost of maintenance and advances given to petitioner and his
children. Respondent explained that the deductions were made consistent with the
fallo of the CA Decision in CA-G.R. SP No. 84740 ordering him to pay support
pendente lite in arrears less the amount supposedly given by him to petitioner as her
and their two children’s monthly support.
The following is a summary of the subject deductions under Compliance dated June
28, 2005, duly supported by receipts22:

Car purchases for Angelli Suzanne -

Php1,350,000.00

and Daniel Ryan -

613,472.86

Car Maintenance fees of Angelli -

Suzanne

51,232.50

Credit card statements of Daniel Ryan -

348,682.28

Car Maintenance fees of Daniel Ryan -

118,960.52

________________________________________

Php2,482,348.16

After the trial court disallowed the foregoing deductions, respondent filed a motion for
reconsideration further asserting that the following amounts, likewise with supporting
receipts, be considered as additional advances given to petitioner and the children23:

Medical expenses of Susan Lim-

Lua

Php 42,450.71

Dental Expenses of Daniel

Ryan

11,500.00

Travel expenses of Susan Lim-

Lua

14,611.15

Credit card purchases of Angelli

Suzanne

408,891.08

Salon and travel expenses of Angelli

Suzanne

87,112.70

School expenses of Daniel Ryan

Lua

260,900.00

Cash given to Daniel and

Angelli

121,000.00

________________________________________

TOTAL -

Php 946,465.64

________________________________________

GRAND TOTAL -

Php 3,428,813.80

The CA, in ruling for the respondent said that all the foregoing expenses already
incurred by the respondent should, in equity, be considered advances which may be
properly deducted from the support in arrears due to the petitioner and the two
children. Said court also noted the absence of petitioner’s contribution to the joint
obligation of support for their children.

We reverse in part the decision of the CA.

Judicial determination of support pendente lite in cases of legal separation and

petitions for declaration of nullity or annulment of marriage are guided by the following
provisions of the Rule on Provisional Orders24

Sec. 2. Spousal Support.–In determining support for the spouses, the court may be
guided by the following rules:

(a) In the absence of adequate provisions in a written agreement between the

spouses, the spouses may be supported from the properties of the absolute
community or the conjugal partnership.

(b) The court may award support to either spouse in such amount and for such period
of time as the court may deem just and reasonable based on their standard of living
during the marriage.

(c) The court may likewise consider the following factors: (1) whether the spouse
seeking support is the custodian of a child whose circumstances make it appropriate
for that spouse not to seek outside employment; (2) the time necessary to acquire
sufficient education and training to enable the spouse seeking support to find
appropriate employment, and that spouse’s future earning capacity; (3) the duration
of the marriage; (4) the comparative financial resources of the spouses, including their
comparative earning abilities in the labor market; (5) the needs and obligations of
each spouse; (6) the contribution of each spouse to the marriage, including services
rendered in home-making, child care, education, and career building of the other
spouse; (7) the age and health of the spouses; (8) the physical and emotional
conditions of the spouses; (9) the ability of the supporting spouse to give support,
taking into account that spouse’s earning capacity, earned and unearned income,
assets, and standard of living; and (10) any other factor the court may deem just and
equitable.

(d) The Family Court may direct the deduction of the provisional support from the
salary of the spouse.

Sec. 3. Child Support.–The common children of the spouses shall be supported from
the properties of the absolute community or the conjugal partnership.

Subject to the sound discretion of the court, either parent or both may be ordered to
give an amount necessary for the support, maintenance, and education of the child.
It shall be in proportion to the resources or means of the giver and to the necessities
of the recipient.

In determining the amount of provisional support, the court may likewise consider the
following factors: (1) the financial resources of the custodial and non-custodial parent
and those of the child; (2) the physical and emotional health of the child and his or
her special needs and aptitudes; (3) the standard of living the child has been
accustomed to; (4) the non-monetary contributions that the parents will make toward
the care and well-being of the child.

The Family Court may direct the deduction of the provisional support from the salary
of the parent.

Since the amount of monthly support pendente lite as fixed by the CA was not
appealed by either party, there is no controversy as to its sufficiency and
reasonableness. The dispute concerns the deductions made by respondent in settling
the support in arrears.

On the issue of crediting of money payments or expenses against accrued support,

we find as relevant the following rulings by US courts.

In Bradford v. Futrell,25 appellant sought review of the decision of the Circuit Court
which found him in arrears with his child support payments and entered a decree in
favor of appellee wife. He complained that in determining the arrearage figure, he
should have been allowed full credit for all money and items of personal property
given by him to the children themselves, even though he referred to them as gifts.
The Court of Appeals of Maryland ruled that in the suit to determine amount of arrears
due the divorced wife under decree for support of minor children, the husband
(appellant) was not entitled to credit for checks which he had clearly designated as
gifts, nor was he entitled to credit for an automobile given to the oldest son or a
television set given to the children. Thus, if the children remain in the custody of the
mother, the father is not entitled to credit for money paid directly to the children if such
was paid without any relation to the decree.

In the absence of some finding of consent by the mother, most courts refuse to allow
a husband to dictate how he will meet the requirements for support payments when
the mode of payment is fixed by a decree of court. Thus he will not be credited for
payments made when he unnecessarily interposed himself as a volunteer and made
payments direct to the children of his own accord. Wills v. Baker, 214 S. W. 2d 748
(Mo. 1948); Openshaw v. Openshaw, 42 P. 2d 191 (Utah 1935). In the latter case the
court said in part: "The payments to the children themselves do not appear to have
been made as payments upon alimony, but were rather the result of his fatherly
interest in the welfare of those children. We do not believe he should be permitted to
charge them to plaintiff. By so doing he would be determining for Mrs. Openshaw the
manner in which she should expend her allowances. It is a very easy thing for children
to say their mother will not give them money, especially as they may realize that such
a plea is effective in attaining their ends. If she is not treating them right the courts
are open to the father for redress."26

In Martin, Jr. v. Martin,27 the Supreme Court of Washington held that a father, who is
required by a divorce decree to make child support payments directly to the mother,
cannot claim credit for payments voluntarily made directly to the children. However,
special considerations of an equitable nature may justify a court in crediting such
payments on his indebtedness to the mother, when such can be done without injustice
to her.

The general rule is to the effect that when a father is required by a divorce decree to
pay to the mother money for the support of their dependent children and the unpaid
and accrued installments become judgments in her favor, he cannot, as a matter of
law, claim credit on account of payments voluntarily made directly to the children.
Koon v. Koon, supra; Briggs v. Briggs, supra. However, special considerations of an
equitable nature may justify a court in crediting such payments on his indebtedness
to the mother, when that can be done without injustice to her. Briggs v. Briggs, supra.
The courts are justifiably reluctant to lay down any general rules as to when such
credits may be allowed.28 (Emphasis supplied.)

Here, the CA should not have allowed all the expenses incurred by respondent to be
credited against the accrued support pendente lite. As earlier mentioned, the monthly
support pendente lite granted by the trial court was intended primarily for food,
household expenses such as salaries of drivers and house helpers, and also
petitioner’s scoliosis therapy sessions. Hence, the value of two expensive cars bought
by respondent for his children plus their maintenance cost, travel expenses of
petitioner and Angelli, purchases through credit card of items other than groceries
and dry goods (clothing) should have been disallowed, as these bear no relation to
the judgment awarding support pendente lite. While it is true that the dispositive
portion of the executory decision in CA-G.R. SP No. 84740 ordered herein respondent
to pay the support in arrears "less than the amount supposedly given by petitioner to
the private respondent as her and their two (2) children monthly support," the
deductions should be limited to those basic needs and expenses considered by the
trial and appellate courts. The assailed ruling of the CA allowing huge deductions from
the accrued monthly support of petitioner and her children, while correct insofar as it
commends the generosity of the respondent to his children, is clearly inconsistent
with the executory decision in CA-G.R. SP No. 84740. More important, it completely
ignores the unfair consequences to petitioner whose sustenance and well-being, was
given due regard by the trial and appellate courts. This is evident from the March 31,
2004 Order granting support pendente lite to petitioner and her children, when the
trial court observed:

While there is evidence to the effect that defendant is giving some forms of financial
assistance to his two (2) children via their credit cards and paying for their school
expenses, the same is, however, devoid of any form of spousal support to the plaintiff,
for, at this point in time, while the action for nullity of marriage is still to be heard, it is
incumbent upon the defendant, considering the physical and financial condition of the
plaintiff and the overwhelming capacity of defendant, to extend support unto the latter.
x x x29

On appeal, while the Decision in CA-G.R. SP No. 84740 reduced the amount of
monthly support fixed by the trial court, it nevertheless held that considering
respondent’s financial resources, it is but fair and just that he give a monthly support
for the sustenance and basic necessities of petitioner and his children. This would
imply that any amount respondent seeks to be credited as monthly support should
only cover those incurred for sustenance and household expenses.1avvphi1

In the case at bar, records clearly show and in fact has been admitted by petitioner
that aside from paying the expenses of their two (2) children’s schooling, he gave his
two (2) children two (2) cars and credit cards of which the expenses for various items
namely: clothes, grocery items and repairs of their cars were chargeable to him which
totaled an amount of more than One Hundred Thousand (₱100,000.00) for each of
them and considering that as testified by the private respondent that she needs the
total amount of ₱113,000.00 for the maintenance of the household and other
miscellaneous expenses and considering further that petitioner can afford to buy cars
for his two (2) children, and to pay the expenses incurred by them which are
chargeable to him through the credit cards he provided them in the amount of
₱100,000.00 each, it is but fair and just that the monthly support pendente lite for his
wife, herein private respondent, be fixed as of the present in the amount of
₱115,000.00 which would be sufficient enough to take care of the household and
other needs. This monthly support pendente lite to private respondent in the amount
of ₱115,000.00 excludes the amount of One Hundred ThirtyFive (₱135,000.00)
Thousand Pesos for medical attendance expenses needed by private respondent for
the operation of both her eyes which is demandable upon the conduct of such
operation. Likewise, this monthly support of ₱115,000.00 is without prejudice to any
increase or decrease thereof that the trial court may grant private respondent as the
circumstances may warrant i.e. depending on the proof submitted by the parties
during the proceedings for the main action for support.

The amounts already extended to the two (2) children, being a commendable act of
petitioner, should be continued by him considering the vast financial resources at his
disposal.30 (Emphasis supplied.)

Accordingly, only the following expenses of respondent may be allowed as deductions

from the accrued support pendente lite for petitioner and her children:

Medical expenses of Susan Lim-

Lua

Php 42,450.71

Dental Expenses of Daniel

Ryan

11,500.00

Credit card purchases of

Angelli

365,282.20

(Groceries and Dry Goods)

Credit Card purchases of Daniel
Ryan

228,869.38

________________________________________

TOTAL

Php 648,102.29

As to the contempt charge, we sustain the CA in holding that respondent is not guilty
of indirect contempt.

Contempt of court is defined as a disobedience to the court by acting in opposition to

its authority, justice, and dignity. It signifies not only a willful disregard or disobedience
of the court’s order, but such conduct which tends to bring the authority of the court
and the administration of law into disrepute or, in some manner, to impede the due
administration of justice.31 To constitute contempt, the act must be done willfully and
for an illegitimate or improper purpose.32 The good faith, or lack of it, of the alleged
contemnor should be considered.33

Respondent admittedly ceased or suspended the giving of monthly support pendente

lite granted by the trial court, which is immediately executory. However, we agree with
the CA that respondent’s act was not contumacious considering that he had not been
remiss in actually providing for the needs of his children. It is a matter of record that
respondent continued shouldering the full cost of their education and even beyond
their basic necessities in keeping with the family’s social status. Moreover,
respondent believed in good faith that the trial and appellate courts, upon equitable
grounds, would allow him to offset the substantial amounts he had spent or paid
directly to his children.

Respondent complains that petitioner is very much capacitated to generate income

on her own because she presently maintains a boutique at the Ayala Center Mall in
Cebu City and at the same time engages in the business of lending money. He also
claims that the two children have finished their education and are now employed in
the family business earning their own salaries.

Suffice it to state that the matter of increase or reduction of support should be

submitted to the trial court in which the action for declaration for nullity of marriage
was filed, as this Court is not a trier of facts. The amount of support may be reduced
or increased proportionately according to the reduction or increase of the necessities
of the recipient and the resources or means of the person obliged to support.34 As we
held in Advincula v. Advincula35

…Judgment for support does not become final. The right to support is of such nature
that its allowance is essentially provisional; for during the entire period that a needy
party is entitled to support, his or her alimony may be modified or altered, in
accordance with his increased or decreased needs, and with the means of the giver.
It cannot be regarded as subject to final determination.36

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 20, 2006
of the Court of Appeals in CA-G.R. SP Nos. 01154 and 01315 is hereby MODIFIED
to read as follows:

"WHEREFORE, judgment is hereby rendered:

a) DISMISSING, for lack of merit, the case of Petition for Contempt of Court with
Damages filed by Susan Lim Lua against Danilo Y. Lua with docket no. SP. CA-G.R.
No. 01154;

b) GRANTING IN PART Danilo Y. Lua's Petition for Certiorari docketed as SP. CA-
G.R. No. 01315. Consequently, the assailed Orders dated 27 September 2005 and
25 November 2005 of the Regional Trial Court, Branch 14, Cebu City issued in Civil
Case No. CEB-29346 entitled "Susan Lim Lua versus Danilo Y. Lua, are hereby
NULLIFIED and SET ASIDE, and instead a new one is entered:

i. ORDERING the deduction of the amount of Php 648,102.29 from the support
pendente lite in arrears of Danilo Y. Lua to his wife, Susan Lim Lua and their two (2)
children;

ii. ORDERING Danilo Y. Lua to resume payment of his monthly support of

Ph₱115,000.00 pesos starting from the time payment of this amount was deferred by
him subject to the deduction aforementioned.

iii. DIRECTING the immediate execution of this judgment.

SO ORDERED."

27. G.R. No. 159785 April 27, 2007

TEOFISTO I. VERCELES, Petitioner,

vs.
MARIA CLARISSA POSADA, in her own behalf, and as mother of minor
VERNA AIZA POSADA, CONSTANTINO POSADA and FRANCISCA
POSADA, Respondents.

DECISION

QUISUMBING, J.:

This petition for review seeks the reversal of the Decision1 dated May 30, 2003 and
the Resolution2 dated August 27, 2003 of the Court of Appeals in CA-G.R. CV No.
50557. The appellate court had affirmed with modification the Judgment3 dated
January 4, 1995 of the Regional Trial Court (RTC) of Virac, Catanduanes, Branch 42,
in Civil Case No. 1401. The RTC held petitioner liable to pay monthly support to Verna
Aiza Posada since her birth on September 23, 1987 as well as moral and exemplary
damages, attorney’s fees and costs of suit.

The facts in this case as found by the lower courts are as follows:

Respondent Maria Clarissa Posada (Clarissa), a young lass from the barrio of
Pandan, Catanduanes, sometime in 1986 met a close family friend, petitioner Teofisto
I. Verceles, mayor of Pandan. He then called on the Posadas and at the end of the
visit, offered Clarissa a job.

Clarissa accepted petitioner’s offer and worked as a casual employee in the mayor’s
office starting on September 1, 1986. From November 10 to 15 in 1986, with
companions Aster de Quiros, Pat del Valle, Jaime and Jocelyn Vargas, she
accompanied petitioner to Legaspi City to attend a seminar on town planning. They
stayed at the Mayon Hotel.
On November 11, 1986, at around 11:00 a.m., petitioner fetched Clarissa from "My
Brother’s Place" where the seminar was being held. Clarissa avers that he told her
that they would have lunch at Mayon Hotel with their companions who had gone
ahead. When they reached the place her companions were nowhere. After petitioner
ordered food, he started making amorous advances on her. She panicked, ran and
closeted herself inside a comfort room where she stayed until someone knocked. She
said she hurriedly exited and left the hotel. Afraid of the mayor, she kept the incident
to herself. She went on as casual employee. One of her tasks was following-
up barangay road and maintenance projects.

On December 22, 1986, on orders of petitioner, she went to Virac, Catanduanes, to

follow up funds for barangay projects. At around 11:00 a.m. the same day, she went
to Catanduanes Hotel on instructions of petitioner who asked to be briefed on the
progress of her mission. They met at the lobby and he led her upstairs because he
said he wanted the briefing done at the restaurant at the upper floor.

Instead, however, petitioner opened a hotel room door, led her in, and suddenly
embraced her, as he told her that he was unhappy with his wife and would "divorce"
her anytime. He also claimed he could appoint her as a municipal development
coordinator. She succumbed to his advances. But again she kept the incident to
herself.

Sometime in January 1987, when she missed her menstruation, she said she wrote
petitioner that she feared she was pregnant. In another letter in February 1987, she
told him she was pregnant. In a handwritten letter dated February 4, 1987, he replied:

My darling Chris,

Should you become pregnant even unexpectedly, I should have no regret, because I
love you and you love me.

Let us rejoice a common responsibility – you and I shall take care of it and let him/her
see the light of this beautiful world.

We know what to do to protect our honor and integrity.

Just relax and be happy, if true.

With all my love,

Ninoy

2/4/874

Clarissa explained petitioner used an alias "Ninoy" and addressed her as "Chris,"
probably because of their twenty-five (25)-year age gap. In court, she identified
petitioner’s penmanship which she claims she was familiar with as an employee in
his office.

Clarissa presented three other handwritten letters5 sent to her by petitioner, two of
which were in his letterhead as mayor of Pandan. She also presented the
pictures6 petitioner gave her of his youth and as a public servant, all bearing his
handwritten notations at the back.

Clarissa avers that on March 3, 1987, petitioner, aware of her pregnancy, handed her
a letter and ₱2,000 pocket money to go to Manila and to tell her parents that she
would enroll in a CPA review course or look for a job. In June 1987, petitioner went
to see her in Manila and gave her another ₱2,000 for her delivery. When her parents
learned of her pregnancy, sometime in July, her father fetched her and brought her
back to Pandan. On September 23, 1987,7 she gave birth to a baby girl, Verna Aiza
Posada.

Clarissa’s mother, Francisca, corroborated Clarissa’s story. She said they learned of
their daughter’s pregnancy through her husband’s cousin. She added that she felt
betrayed by petitioner and shamed by her daughter’s pregnancy.

The Posadas filed a Complaint for Damages coupled with Support Pendente
Lite before the RTC, Virac, Catanduanes against petitioner on October 23, 1987.8

On January 4, 1995, the trial court issued a judgment in their favor, the dispositive
portion of which reads as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the

[respondents] and against the [petitioner] and ordering the latter:

1. to pay a monthly support of ₱2,000.00 to Verna Aiza Posada since her birth on
September 23, 1987 as he was proved to be the natural father of the above-named
minor as shown by the exhibits and testimonies of the [respondents];

2. to pay the amount of ₱30,000.00 as moral damages;

3. to pay the amount of ₱30,000.00 as exemplary damages;

4. to pay the sum of ₱10,000.00 as attorney’s fees; and

5. to pay the costs of the suit.

SO ORDERED.9

Verceles appealed to the Court of Appeals which affirmed the judgment with
modification, specifying the party to whom the damages was awarded. The dispositive
portion of the Court of Appeals’ decision reads:

WHEREFORE, the appealed judgment is AFFIRMED with modification by ordering

[petitioner] Teofisto I. Verceles:

1. To pay a monthly support of ₱2,000.00 to Verna Aiza Posada from her birth on
September 23, 1987.

2. To pay [respondent] Maria Clarissa Posada the sum of ₱15,000.00 as moral

damages and [P]15,000.00 as exemplary damages.

3. To pay [respondents] spouses Constantino and Francisca Posada the sum of

₱15,000.00 as moral damages and ₱15,000.00 as exemplary damages.

4. To pay each of the said three [respondents] ₱10,000.00 as attorney’s fees; and

5. To pay the costs of suit.

SO ORDERED.10

Hence, this petition.

Petitioner now presents the following issues for resolution:

I.

WAS THERE ANY EVIDENCE ON RECORD TO PROVE THAT APPELLANT

VERCELES WAS THE FATHER OF THE CHILD?

II.

WOULD THIS ACTION FOR DAMAGES PROSPER?

III.

WOULD THE RTC COURT HAVE ACQUIRED JURISDICTION OVER THIS ISSUE
OF APPELLANT’S PATERNITY OF THE CHILD, WHICH IS MADE COLLATERAL
TO THIS ACTION FOR DAMAGES?11

In sum, the pertinent issues in this case are: (1) whether or not paternity and filiation
can be resolved in an action for damages with support pendente lite; (2) whether or
not the filiation of Verna Aiza Posada as the illegitimate child of petitioner was proven;
and (3) whether or not respondents are entitled to damages.

In his Memorandum, petitioner asserts that the fact of paternity and filiation of Verna
Aiza Posada has not been duly established or proved in the proceedings; that the
award for damages and attorney’s fees has no basis; and that the issue of filiation
should be resolved in a direct and not a collateral action.

Petitioner argues he never signed the birth certificate of Verna Aiza Posada as father
and that it was respondent Clarissa who placed his name on the birth certificate as
father without his consent. He further contends the alleged love letters he sent to
Clarissa are not admissions of paternity but mere expressions of concern and
advice.12 As to the award for damages, petitioner argues Clarissa could not have
suffered moral damages because she was in pari delicto, being a willing participant
in the "consensual carnal act" between them.13 In support of his argument that the
issue on filiation should have been resolved in a separate action, petitioner cited the
case of Rosales v. Castillo Rosales14 where we held that the legitimacy of a child
which is controversial can only be resolved in a direct action.15

On the other hand, respondents in their Memorandum maintain that the Court of
Appeals committed no error in its decision. They reiterate that Clarissa’s clear
narration of the circumstances on "how she was deflowered" by petitioner, the love
letters and pictures given by petitioner to Clarissa, the corroborating testimony of
Clarissa’s mother, the fact that petitioner proffered no countervailing evidence, are
preponderant evidence of paternity. They cited the case of De Jesus v.
Syquia16 where we held that a conceived child can be acknowledged because this is
an act favorable to the child.17 They also argue that damages should be awarded
because petitioner inveigled Clarissa to succumb to his sexual advances.18

Could paternity and filiation be resolved in an action for damages? On this score, we
find petitioner’s stance unmeritorious. The caption is not determinative of the nature
of a pleading. In a string of cases we made the following rulings. It is not the caption
but the facts alleged which give meaning to a pleading. Courts are called upon to
pierce the form and go into the substance thereof.19 In determining the nature of an
action, it is not the caption, but the averments in the petition and the character of the
relief sought, that are controlling.20
A perusal of the Complaint before the RTC shows that although its caption states
"Damages coupled with Support Pendente Lite," Clarissa’s averments therein, her
meeting with petitioner, his offer of a job, his amorous advances, her seduction, their
trysts, her pregnancy, birth of her child, his letters, her demand for support for her
child, all clearly establish a case for recognition of paternity. We have held that the
due recognition of an illegitimate child in a record of birth, a will, a statement before a
court of record, or in any authentic writing is, in itself, a consummated act of
acknowledgement of the child, and no further court action is required. In fact, any
authentic writing is treated not just a ground for compulsory recognition; it is in itself
a voluntary recognition that does not require a separate action for judicial approval.21

The letters of petitioner marked as Exhibits "A" to "D" are declarations that lead
nowhere but to the conclusion that he sired Verna Aiza. Although petitioner used an
alias in these letters, the similarity of the penmanship in these letters vis the
annotation at the back of petitioner’s fading photograph as a youth is unmistakable.
Even an inexperienced eye will come to the conclusion that they were all written by
one and the same person, petitioner, as found by the courts a quo.

We also note that in his Memorandum, petitioner admitted his affair with Clarissa, the
exchange of love letters between them, and his giving her money during her
pregnancy. 22

Articles 172 and 175 of the Family Code are the rules for establishing filiation. They
are as follows:

Art. 172. The filiation of legitimate children is established by any of the following:

(1) The record of birth appearing in the civil register or a final judgment; or

(2) An admission of legitimate filiation in a public document or a private handwritten

instrument and signed by the parent concerned.

In the absence of the foregoing evidence, the legitimate filiation shall be proved by:

(1) The open and continuous possession of the status of a legitimate child; or

(2) Any other means allowed by the Rules of Court and special laws.

Art. 175. Illegitimate children may establish their illegitimate filiation in the same way
and on the same evidence as legitimate children.

The action must be brought within the same period specified in Article 173, except
when the action is based on the second paragraph of Article 172, in which case the
action may be brought during the lifetime of the alleged parent.

The letters, one of which is quoted above, are private handwritten instruments of
petitioner which establish Verna Aiza’s filiation under Article 172 (2) of the Family
Code. In addition, the array of evidence presented by respondents, the dates, letters,
pictures and testimonies, to us, are convincing, and irrefutable evidence that Verna
Aiza is, indeed, petitioner’s illegitimate child.

Petitioner not only failed to rebut the evidence presented, he himself presented no
evidence of his own. His bare denials are telling. Well-settled is the rule that denials,
if unsubstantiated by clear and convincing evidence, are negative and self-serving
which merit no weight in law and cannot be given greater evidentiary value over the
testimony of credible witnesses who testify on affirmative matters. 23
We, however, cannot rule that respondents are entitled to damages. Article 221924of
the Civil Code which states moral damages may be recovered in cases of seduction
is inapplicable in this case because Clarissa was already an adult at the time she had
an affair with petitioner.

Neither can her parents be entitled to damages. Besides, there is nothing in law or
jurisprudence that entitles the parents of a consenting adult who begets a love child
to damages. Respondents Constantino and Francisca Posada have not cited any law
or jurisprudence to justify awarding damages to them.

We, however, affirm the grant of attorney’s fees in consonance with Article 2208
(2)25 and (11)26 of the New Civil Code.

WHEREFORE, the assailed Decision dated May 30, 2003 and the Resolution dated
August 27, 2003 of the Court of Appeals in CA-G.R. CV No. 50557 are AFFIRMED,
with the MODIFICATION that the award of moral damages and exemplary damages
be DELETED.

SO ORDERED.