7/29/2019 rem case 1

1/32

ANITA MANGILA,petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents.

Petitioner Anita Mangila, an exporter of sea foods under the name and style of Seafoods Products contracted thefreight forwarding services of respondent Loreta Guina is the President and GM of Air Swift International for shipmentproducts, such as crabs, prawns and assorted fishes, to Guam (USA) where petitioner maintains an outlet. Petitioneragreed to pay private respondent cash on delivery. Private respondents invoice stipulates a charge of 18% interestper annum on all overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to 25 %ofthe amount due plus costs of suit.i[3] On the first shipment, petitioner requested for 7 days within which topay,however, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to pay private respondent

shipping charges amounting to P109, 376.95.ii[4]

Despite several demands, petitioner never paid private respondent. Thus, respondent filed before the RTC ofPasay City for collection of sum of money. The sheriff filed his Sheriffs Return showing that summons was notserved on petitioner. A woman found at petitioners house informed the sheriff that petitioner transferred herresidence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that petitioner had left the Philippines forGuam.iii[5]

Thus, construing petitioners departure from the Philippines as done with intent to defraud her creditors, privaterespondent filed a Motion for Preliminary Attachment. The trial court issued an Order of Preliminary Attachment iv[6]

against petitioner. The following day, the trial court issued a Writ of Preliminary Attachment.

The trial court granted the request of its sheriff for assistance from their counterparts in RTC, Pampanga. Thus,Sheriff Alfredo San Miguel of RTC Pampanga served on petitioners household help in San Fernando, Pampanga, theNotice of Levy with the Order, Affidavit and Bond. v[7]Petitioner filed an Urgent Motion to Discharge Attachmentvi[8]

without submitting herself to the jurisdiction of the trial court. She pointed out that up to then, she had not beenserved a copy of the Complaint and the summons. Hence, petitioner claimed the court had not acquired jurisdictionover her person.vii[9]

In the hearing of the Urgent Motion to Discharge Attachment, private respondent sought and was granted a re-setting. On that date, private respondents counsel did not appear, so the Urgent Motion to Discharge Attachmentwas deemed submitted for resolution.viii[10]The trial court granted the Motion to Discharge Attachment upon filing ofpetitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and on the validity ofthe writ of preliminary attachment.Private respondent applied for an alias summons, which the trial court issued onJanuary 19, 1989.ix[11] It was only on January 26, 1989 that summons was finally served on petitioner.x[12]

The trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30 a.m. and requiring the parties tosubmit their pre-trial briefs. Meanwhile, private respondent filed a Motion to Sell Attached Properties but the trialcourt denied the motion.On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18,1989 to August 24, 1989 at 8:30 a.m. On August 24, 1989, the day of the pre-trial, the trial court issued an Orderxi[17]

terminating the pre-trial and allowing the private respondent to present evidence ex-parte on September 12, 1989 at8:30 a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the counsel for privaterespondent appeared. Upon the trial courts second call 20 minutes later, petitioners counsel was still nowhere to befound. Thus, upon motion of private respondent, the pre-trial was considered terminated.

On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order terminating the pre-trial.Petitioner explained that her counsel arrived 5 minutes after the second call, as shown by the transcript ofstenographic notes, and was late because of heavy traffic. Petitioner claims that the lower court erred in allowingprivate respondent to present evidence ex-parte since there was no Order considering the petitioner as in default.Petitioner contends that the Order of August 24, 1989 did not state that petitioner was declared as in default but stillthe court allowed private respondent to present evidence ex-parte.xii[18]

On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the presentation ofprivate respondents evidence ex-parte on October 10, 1989.On October 10, 1989, petitioner filed an Omnibus Motionstating that the presentation of evidence ex-parte should be suspended because there was no declaration ofpetitioner as in default and petitioners counsel was not absent, but merely late.On October 18, 1989, the trial court

denied the Omnibus Motion.xiii[19]On November 20, 1989, the petitioner received a copy of the Decision of November10, 1989 , ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 percentattorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending Appeal but the trial courtdenied the same.

Court of Appeals rendered a decision affirming the decision of the trial court.

The Issues

WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF ATTACHMENT WAS

7/29/2019 rem case 1

2/32

IMPROPERLY ISSUED AND SERVED;

The Ruling of the Court

Improper Issuance and Service of Writ of Attachment

Petitioner ascribes several errors to the issuance and implementation of the writ of attachment. Amongpetitioners arguments are: first, there was no ground for the issuance of the writ since the intent to defraud hercreditors had not been established; second, the value of the properties levied exceeded the value of privaterespondents claim. However, the crux of petitioners arguments rests on the question of the validity of the writ ofattachment. Because of failure to serve summons on her before or simultaneously with the writs implementation,petitioner claims that the trial court had not acquired jurisdiction over her person and thus the service of the writ isvoid.

As a preliminary note, a distinction should be made between issuance and implementation of the writ ofattachment. It is necessary to distinguish between the two to determine when jurisdiction over the person of thedefendant should be acquired to validly implement the writ. This distinction is crucial in resolving whether there ismerit in petitioners argument.

This Court has long settled the issue of when jurisdiction over the person of the defendant should be acquired incases where a party resorts to provisional remedies. A party to a suit may, at any time after filing the complaint, availof the provisional remedies under the Rules of Court. Specifically, Rule 57 on preliminary attachment speaks of thegrant of the remedy at the commencement of the action or at any time thereafter.xiv[21]This phrase refers tothe date of filing of the complaint which is the moment that marks the commencement of the action. The referenceplainly is to a time before summons is served on the defendant, or even before summons issues.

In Davao Light & Power Co., Inc. v. Court of Appeals,xv[22] this Court clarified the actual time whenjurisdiction should be had:

It goes without saying that whatever be the acts done by the Court prior to the acquisition ofjurisdiction over the person of defendant - issuance of summons, order of attachment and writ ofattachment - these do not and cannot bind and affect the defendant until and unless jurisdictionover his person is eventually obtained by the court,either by service on him of summons or othercoercive process or his voluntary submission to the courts authority. Hence, when the sheriff or otherproper officer commences implementation of the writ of attachment, it is essential that he serve on thedefendant not only a copy of the applicants 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 asa copy of the complaint xxx. (Emphasis supplied.)

Furthermore, we have held that the grant of the provisional remedy of attachment involves three stages: first, thecourt issues the order granting the application; second, the writ of attachment issues pursuant to the order grantingthe writ; and third, the writ is implemented.For the initial two stages, it is not necessary that jurisdictionover the person of the defendant be first obtained. However, once the implementation of the writcommences,the court must have acquired jurisdiction over the defendant for without such jurisdiction, the court hasno power and authority to act in any manner against the defendant. Any order issuing from the Court will not bind thedefendant.xvi[23]

In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and implemented onOctober 28, 1988. However, the alias summons was served only on January 26, 1989 or almost threemonths after the implementation of the writ of attachment.

The trial court had the authority to issue the Writ of Attachment on September 27 since a motion for its issuancecan be filed at the commencement of the action. However, on the day the writ was implemented, the trial courtshould have, previously or simultaneously with the implementation of the writ, acquired jurisdiction over thepetitioner. Yet, as was shown in the records of the case, the summons was actually served on petitioner severalmonths after the writ had been implemented.

Private respondent, nevertheless, claims that the prior or contemporaneous service of summons contemplated inSection 5 of Rule 57 provides for exceptions. Among such exceptions are where the summons could not be servedpersonally or by substituted service despite diligent efforts or where the defendant is a resident temporarily absenttherefrom x x x. Private respondent asserts that when she commenced this action, she tried to serve summons onpetitioner but the latter could not be located at her customary address in Kamuning, Quezon City or at her newaddress in Guagua, Pampanga.xvii[24] Furthermore, respondent claims that petitioner was not even in Pampanga;rather, she was in Guam purportedly on a business trip.

7/29/2019 rem case 1

3/32

Private respondent never showed that she effected substituted service on petitioner after her personal servicefailed. Likewise, if it were true that private respondent could not ascertain the whereabouts of petitioner after adiligent inquiry, still she had some other recourse under the Rules of Civil Procedure.

The rules provide for certain remedies in cases where personal service could not be effected on a party. Section14, Rule 14 of the Rules of Court provides that whenever the defendants whereabouts are unknown and cannot beascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper ofgeneral circulation x x x. Thus, if petitioners whereabouts could not be ascertained after the sheriff had served thesummons at her given address, then respondent could have immediately asked the court for service of summons bypublication on petitioner.xviii[25]

Moreover, as private respondent also claims that petitioner was abroad at the time of the service of summons,this made petitioner a resident who is temporarily out of the country. This is the exact situation contemplated inSection 16,xix[26] Rule 14 of the Rules of Civil Procedure, providing for service of summons by publication.

In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to have curedthe fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive process on petitionerwithout first obtaining jurisdiction over her person. The preliminary writ of attachment must be served after orsimultaneous with the service of summons on the defendant whether by personal service, substituted service or bypublication as warranted by the circumstances of the case.xx[27] The subsequent service of summons does not confer aretroactive acquisition of jurisdiction over her person because the law does not allow for retroactivity of a belatedservice.

RIMEO S. GUSTILO vs. HON. RICARDO S. REAL, SR.

QUISUMBING, J.:

In a verified complaint, Rimeo S. Gustilo charged respondent Judge Ricardo S. Real, Sr., of the MTC of Victorias-Manapla, Negros Occidental with gross misconduct, gross incompetence, gross ignorance of the law, and violation ofthe Anti-Graft and Corrupt Practices Act relative to Civil Case No. 703-M entitled Weddy C. Libo-on v. Rimeo S.Gustilo, et al. for recounting of ballots of Precinct Nos. 27 and 27-A, Barangay Punta Mesa, Manapla, NegrosOccidental.

Complainant avers that he was a candidate for punong barangay of Barangay Punta Mesa, Manapla, NegrosOccidental in the May 12, 1997 elections. His lone opponent was Weddy C. Libo-on, then the incumbent punongbarangay. Both complainant and Libo-on garnered (819) votes during the elections, resulting in a tie. The breaking ofthe tie by the Board of Canvassers was in complainants favor and he was proclaimed duly elected punong barangayof Punta Mesa, Manapla.xxi[2]

His opponent filed an election protest case,Libo-on sought the recounting of ballots in two precincts, preliminary

prohibitory injunction, and damages. Respondent ordered the issuance of summons to the parties and set thehearing, however, Libo-on filed a motion to advance the hearing which was granted. Complainant avers that he wasnot furnished a copy of this Order

On May 29, 1997, respondent judge issued a (TRO) and annulled the proclamation of complainant as the dulyelectedpunong barangayof Punta Mesa, Manapla.xxii[5] Complainant declares that no copy of this Order was served onhim. That same day, however, he was able to secure copies of the orders of respondent from the COMELEC Registrarof Manapla, Negros Occidental and (DILG). Moreover, it was only in the afternoon of May 29, 1997 that complainantreceived a copy of Libo-ons petition in Civil Case No. 703-M and respondents Order dated May 21, 1997.

On May 30, 1997, complainant took his oath of office as punong barangay.xxiii[6]That same day, he also filed apetition for certiorari before the Regional Trial Court of Silay City, Negros Occidental. On June 5, 1997, the RTC liftedthe TRO issued by respondent and declared as null and void the order nullifying complainants proclamation as dulyelectedpunong barangay. Believing that respondent could not decide the case impartially, complainant moved for hisinhibition.

On June 11, 1997, respondent denied complainants motion for inhibition and after hearing Libo-ons motion forpermanent injunction, issued a second TRO to maintain the status quo between the contending parties. Complainantargues that by issuing the second TRO, respondent reversed the order of the RTC of Silay City dated June 5, 1997. Healso claims that by preventing him from assuming office, he was excluded by the DILG from participating in theelection of the Liga ng Mga Barangayon June 14, 1997.

In his Comment, respondent denied the allegations. He claimed that when Libo-on filed his motion to advancethe hearing of the prayer for injunction on May 27, 1997, complainant was served a copy by registered mail as shownby the registry receipts attached to said motion. Considering the urgency of the matter and since there wassubstantial compliance with due process, he issued the Order.

Respondent claims that on May 29, 1997, Libo-on and his counsel appeared but complainant did not, despite duenotice. The hearing then proceeded, with Libo-on presenting his evidence. As a result, he issued the TRO prayed for

7/29/2019 rem case 1

4/32

and annulled complainants proclamation. Respondent admits that the Order particularly the annulment ofcomplainants proclamation, was outside the jurisdiction of his court. But since the COMELEC ignored Libo-onspetition for correction of erroneous tabulation and Libo-on had no other remedy under the law, he was constrained toannul complainants proclamation, which from the very beginning was illegal. He justified his action by our rulings inBince, Jr. v. COMELEC, 312 Phil. 316 (1995) and Tatlonghari v. COMELEC, 199 SCRA849 (1991), which held that afaulty tabulation cannot be the basis of a valid proclamation.

Respondent also faults the RTC of Silay City for issuing the Order dated June 5, 1997, which lifted the TRO heissued and declared void his nullification of complainants proclamation. Respondent contends that complainantshould first have exhausted all remedies in his court before resorting to the special civil action for certiorari with theRTC. The latter court, in turn, should have dismissed the action for certiorari for failure to exhaust judicial remedies.

With respect to his Order of June 11, 1997, respondent explains that it was never meant to reverse the Order ofthe RTC of Silay City dated June 5, 1997. He points out that both parties in Civil Case No. 703-M were present duringthe hearing after due notice. After receiving their evidence, he found that unless a TRO was issued, Libo-on wouldsuffer a grave injustice and irreparable injury. He submits that absent fraud, dishonesty, or corruption, his acts, evenif erroneous, are not the subject of disciplinary action.

In its evaluation and recommendation report dated November 29, 1999, the Office of the Court Administrator(OCA) found that respondents errors were not honest mistakes in the performance of his duties. Rather, his actionsshowed a bias in favor of Libo-on and evinced a pattern to prevent the complainant from assuming office as the dulyelected punong barangay despite his having been proclaimed as such by the Board of Canvassers. The OCArecommends that respondent be fined P20,000.00 and warned that a repetition of similar acts in the future will bedealt with more severely.

The foregoing clearly show that whenever an application for a TRO is filed, the court may act on the applicationonly after all parties have been notified and heard in a summary hearing. In other words, a summary hearing may notbe dispensed with.xxiv[9] In the instant case, respondent admits that he issued the injunctive writ sought on May 29,1997 after receiving the applicants evidence ex parte. His failure to abide by Administrative Circular No. 20-95 inissuing the first TRO is grave abuse of authority, misconduct, and conduct prejudicial to the proper administration ofjustice.

Worse, he compounded the infraction by annulling complainants proclamation as the duly elected punongbarangayof Punta Mesa, Manapla and prohibiting him from assuming office. Respondent admits that his court wasnot vested with the power or jurisdiction to annul the proclamation, but seeks to justify his action on the ground thatthe proclamation was void ab initio. In so doing, respondent wantonly usurped a power exclusively vested by law inthe COMELEC.xxv[10]

Moreover, in willfully nullifying complainants proclamation despite his courts want of authority, respondentknowingly issued an unjust order.

Note that the RTC of Silay City corrected respondents errors by declaring null and void his Order dated May 29,1997. Nonetheless, he compounded his previous errors of judgment by proceeding to hear Libo-ons motion forpermanent injunction and issuing a second TRO on June 11, 1997 on the ground that extreme urgency and graveinjustice and irreparable injury will arise if no injunctive remedy were granted. Respondent insists that his act did notreverse the Order of the RTC in Special Civil Action No. 1936-69, since the second TRO he issued satisfied the noticeand hearing requirements of Circular No. 20-95.

Before an injunctive writ can be issued, it is essential that the following requisites be present: (1) there must bea right in esse or the existence of a right to be protected; and (2) the act against which injunction to be directed is aviolation of such right. In this case, complainant had been duly proclaimed as the winning candidate for punongbarangay. He had taken his oath of office. Unless his election was annulled, he was entitled to all the rights of saidoffice. We do not see how the complainants exercise of such rights would cause an irreparable injury or violate theright of the losing candidate so as to justify the issuance of a temporary restraining order to maintain the statusquo. We see no reason to disagree with the finding of the OCA that the evident purpose of the second TRO was toprevent complainant from participating in the election of the Liga ng mga Barangay. Respondent must be held liablefor violating Rule 3.02 of the Code of Judicial Conduct which provides that, In every case, a judge shall endeavordiligently to ascertain the facts and the applicable law unswayed by partisan interests, public opinion, or fear ofcriticism.

LIMITLESS POTENTIALS, INC vs.HON. COURT OF APPEALS

Digital Networks Communications and Computers, Inc. (Digital) and herein petitioner Limitless Potentials, Inc. (LPI), adomestic corporation duly organized and existing under Philippine laws, entered into a Billboard AdvertisementContract whereby petitioner was to construct one billboard advertisement for Digitals product for a period of oneyear, with an agreed rental of P60,000.00/ month plus VAT. It was agreed, among other things, that Digital will make

7/29/2019 rem case 1

5/32

a three-month deposit in the following manner, to wit: (a) P60,000.00 plus VAT upon the signing of the contract, and(b) P120,000.00 plus VAT upon completion of the billboard. Digital complied with the aforesaid agreement.

The billboard, however, was destroyed by unknown persons. In view thereof, the contract between Digital and thepetitioner was considered terminated. Digital demanded for the return of their rental deposit for two months, but thepetitioner refused to do so claiming that the loss of the billboard was due to force majeure and that any cause ofaction should be directed against the responsible persons. Thus, Digital commenced a suit against herein petitionerbefore the (MeTC) of Makati City, for the return of Digitals deposit, which was equivalent to two months rentalinclusive of VAT and attorneys fees.

consistent with its defense against Digitals Complaint, petitioner filed a ThirdParty Complaint4against MacgraphicsCarranz International Corporation (Macgraphics) etc alleging that it had entered into a contract of lease with RomanCatholic Archbishop of Manila (RCAM), as represented by the private respondents, over a space inside San CarlosManor Seminary in Guadalupe Viejo, Makati City, where petitioner erected the subject billboard.

Petitioner further averred that despite its full compliance with the terms and conditions of the lease contract, hereinprivate respondents, together with their cohorts, maliciously dismantled and destroyed the subject billboard andprevented its men from reconstructing it. Thereafter, petitioner learned that Macgraphics had "cajoled and induced"RCAM, through the private respondents, to destroy the subject billboard to enable Macgraphics to erect its ownbillboard and advertising signs. Thus, by way of affirmative defenses, petitioner claimed that: (a) the destruction ofthe subject billboard was not of its own making and beyond its control, and (b) Digitals cause of action, if any, shouldbe directed against the private respondents and Macgraphics.

Private respondents filed a Petition for Certiorari with Prayer for Preliminary Restraining Order and/or Writ ofPreliminary Injunction before the Regional Trial Court (RTC) of Makati City, assailing the Orders of the MeTC of MakatiCity denying their Motion to Dismiss Third-Party Complaint and Motion to Dismiss Amended Third-Party Complaint

The RTC issued an Order on 6 February 1998,7 granting private respondents prayer for a writ of preliminaryinjunction, conditioned upon the posting of an injunction bond in the amount of P10,000.00. Thus, the MeTC wasenjoined from hearing the Third-Party Complaint in Civil Case No. 55170. The pertinent portion of the aforesaid Orderreads, as follows:

When the application for temporary restraining order and/or preliminary injunction was heard this afternoon, [hereinpetitioner] who did not file comment on the petition appeared thru counsel Emmanuel Magnaye. It was brought out tothe attention of this Court that respondent judge is poised on pursuing the hearing of the case before her despite thependency of this petition. It appeared that the case was set by respondent judge for hearing ex-parte for the

reception of [herein petitioners] evidence on 23 February 1998. It also appeared that [herein private respondents]were declared in default despite the fact that they have filed their answer and the motion to lift such order of defaultand for admission of the answer was denied by respondent judge.

Upon consideration of the allegations in the petition and the oral manifestations and admissions of both parties, thisCourt hereby resolves to issue the writ of preliminary injunction in order to preserve the status quo as well as not torender the issue herein raised moot and academic. Subsequently, however, the RTC rendered a Decision9 dismissingthe Petition for Certiorari filed by private respondents. The preliminary injunction issued by the Court was therebydissolved.

private respondents filed an Urgent Motion for Reconsideration, which was denied by the RTC.

Petitioner filed its Motion for Judgment Against the Bond, The RTC, denied petitioners Motion for Judgment Againstthe Bond declaring that the preliminary injunction was not wrongfully obtained; therefore, the claim for damages on

the bond is untenable.Aggrieved, the petitioner moved for the reconsideration of the aforesaid Order, which was alsodenied by the RTC

Dissatisfied, the petitioner filed a Petition for Certiorari under Rule 65 of the Revised Rules of Civil Procedure beforethe Court of Appeals assailing the Orders of the RTC for having been issued with grave abuse of discretion amountingto lack and/or excess of jurisdiction. the Court of Appeals rendered a Decision dismissing the Petition filed by thepetitioner for utter lack of merit.

Hence, this Petition.

Petitioner pointed out two basic legal issues wherein the appellate court committed serious and reversible errors, towit:

http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt9http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt9

7/29/2019 rem case 1

6/32

I. Is malice or bad faith a condition sine qua non for liability to attach on the injunction bond?

Petitioner argues that malice or lack of good faith is not an element of recovery on the bond. The dissolution of theinjunction, even if the injunction was obtained in good faith, amounts to a determination that the injunction waswrongfully obtained and a right of action on the injunction immediately accrues to the defendant. The petitionermaintains that the attorneys fees, litigation costs, and cost of delay by reason of the injunction are proper and validitems of damages which can be claimed against the injunction bond. Hence, having proven through testimonial anddocumentary evidence that it suffered damages because of the issuance of the writ of injunction, and since malice orlack of good faith is not an element of recovery on the injunction bond, petitioner asserts that it can properly collect

such damages on the said bond.

In the case at bar, petitioner repeatedly argues that malice or lack of good faith is not an element of recovery on theinjunction bond. In answering this issue raised by petitioner, this Court must initially establish the nature of thepreliminary injunction, the purpose of the injunction bond, as well as the manner of recovering damages on the saidbond.

A preliminary injunction is a provisional remedy that a party may resort to in order to preserve and protect certainrights and interests during the pendency of an action.19It is an order granted at any stage of an action, prior to thejudgment or final order, requiring a party, court, agency or person to perform or to refrain from performing aparticular act or acts. A preliminary injunction, as the term itself suggests, is merely temporary, subject to the finaldisposition of the principal action.20It is issued to preserve the status quo ante, which is the last actual, peaceful, anduncontested status that preceded the actual controversy,21 in order to protect the rights of the plaintiff during thependency of the suit. Otherwise, if no preliminary injunction is issued, the defendant may, before final judgment, do

the act which the plaintiff is seeking the court to restrain. This will make ineffectual the final judgment that the courtmay afterwards render in granting relief to the plaintiff.22 The status quo should be existing ante litem motam, or atthe time of the filing of the case. For this reason, a preliminary injunction should not establish new relations betweenthe parties, but merely maintain or re-establish the pre-existing relationship between them.23

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of theparties before their claims can be thoroughly studied and adjudicated. Thus, to be entitled to an injunctive writ, thepetitioner has the burden to establish the following requisites:

(1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.24

A preliminary injunction or temporary restraining order may be granted only when, among other things, the applicant,not explicitly exempted, files with the court, where the action or proceeding is pending, a bond executed to the partyor person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay such party orperson all damages which he may sustain by reason of the injunction or temporary restraining order if the courtshould finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ ofpreliminary injunction shall be issued.25 Thus, the posting of a bond is a condition sine qua non for a writ ofpreliminary injunction to be issued.

The injunction bond is intended as a security for damages in case it is finally decided that the injunction ought not tohave been granted. Its principal purpose is to protect the enjoined party against loss or damage by reason of theinjunction,26 and the bond is usually conditioned accordingly.

The damages sustained as a result of a wrongfully obtained injunction may be recovered upon the injunction bondwhich is required to be deposited with court.27Rule 57, Section 20, of the 1997 Revised Rules of Civil Procedure,which is similarly applicable to preliminary injunction,28 has outlined the procedure for the filing of a claim fordamages against an injunction bond. The aforesaid provision of law pertinently provides:

SEC. 20. Claim for damages on account of improper, irregular or excessive attachment. - An application for damageson account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfectedor before the judgment becomes executory, with due notice to the attaching party and his surety or sureties, settingforth the facts showing his right to damages and the amount thereof. Such damages may be awarded only afterproper hearing and shall be included in the judgment on the main case.

http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt21http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt22http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt23http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt24http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt25http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt26http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt28http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt21http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt22http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt23http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt24http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt25http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt26http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt27http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt28

7/29/2019 rem case 1

7/32

If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he mustclaim damages sustained during the pendency of the appeal by filing an application in the appellate court, with noticeto the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellatecourt 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 thesame action the damages awarded to him from any property of the attaching party not exempt from executionshould the bond or deposit given by the latter be insufficient or fail to fully satisfy the award.29

Now, it can be clearly gleaned that there is nothing from the aforequoted provision of law which requires an enjoinedparty, who suffered damages by reason of the issuance of a writ of injunction, to prove malice or lack of good faith inthe issuance thereof before he can recover damages against the injunction bond. This Court was very succinct in thecase of Aquino v. Socorro,30citing the case of Pacis v. Commission on Elections,31 thus:

Malice or lack of good faith is not an element of recovery on the bond. This must be so, because to require malice asa prerequisite would make the filing of a bond a useless formality. The dissolution of the injunction, even if theinjunction was obtained in good faith, amounts to a determination that the injunction was wrongfully obtained and aright of action on the injunction bond immediately accrues. Thus, for the purpose of recovery upon the injunctionbond, the dissolution of the injunction because of petitioners main cause of action provides the actionable wrong forthe purpose of recovery upon the bond.

We, therefore, agree with the petitioner that indeed, malice or lack of good faith is not a condition sine qua non forliability to attach on the injunction bond.

LUZ GARCIA, JUSTO LUKBAN, ALICE ADEVA, MARCEL LUKBAN, WAVA ANN BAYLON, PAMELA ROSANNAAPUYA, ALBERTO GARCIA, JR., AIDA FERRER and JANET VENIDA, vs. ROMULO M. ADEVA, CEZAR E.ECHANO and LIBRADO GUERRA

The petition stemmed from a dispute between two groups of shareholders within the Mabini College, Inc. (Mabini),with petitioners comprising the Garcia-Lukban group, and respondents, the Adeva group.

petitioners filed SEC LEO Case No. 95-0005 (EB 496), a petition for Annual Elections of Stockholders and SECSupervision in the Procedural Matter of Corporate Inspection with Mandatory Injunction, wherein a committee wascomposed for the reconstitution of Mabinis stock and transfer books. the incumbent Board of Trustees passed aresolution authorizing the sale through bidding of 106 treasury shares of stock of Mabini by its Pre-qualification, Bidsand Award Committee (PBAC). 2 The Board agreed during its Special Meeting to direct the PBAC to send out to all

known stockholders invitations to bid for the entire 106 treasury shares for a minimum bulk bid ofP1,081,200.00)Pesos or (P10,200.00) Pesos per share. 3 The bidding, however, was deferred to September 4, 1999. 4

Thus, petitioners filed on August 31, 1999, SEC Case No. 08-99-6398 seeking to enjoin the scheduled sale, allegingthat since 1983, respondent Romulo Adeva (Adeva) intentionally failed to call a stockholders meeting for the electionof Mabinis Board of Trustees on the pretext that its stock and transfer books are missing, ensuring his indefinitetenure as President of the corporation. Petitioners prayed that the impending sale be enjoined on the grounds thatthe authority given by the Board of Trustees to the PBAC contravenes Section 9 of the Corporation Code which givesthe Board of Directors or Trustees the right to dispose said shares for a reasonable price fixed by the Board; that thescheme to bid out the shares is violative of the stockholders preemptive right to purchase treasury shares; 5 that thestock and transfer book of Mabini has yet to be reconstituted; that as of the date of filing of the petition, there is noofficial list of stockholders of Mabini; and, that two members of the PBAC, namely: Cesar F. Echano (Echano) andLibrado Guerra (Guerra) are not registered stockholders of Mabini. 6

Then SEC Chairman Perfecto Yasay, Jr. issued a (TRO) on September 2, 1999 which was extended until September 22,1999. Hearing on the application for the issuance of a preliminary injunction was set on September 20 and 21, 1999.

On September 23, 1999, after the expiration of the TRO, the PBAC re-scheduled the sale of the shares on September28, 1999 at 1:00 to 3:00 p.m. 7But before said date came, the Hearing Panel issued an Order dated September 27,1999 granting the issuance of a writ of preliminary injunction, and enjoining the sale of the treasury shares, subject tothe posting of an injunction bond in the amount of P50,000.00. 8

Attempt was made to serve a copy of the SEC Order in the morning of September 28, 1999, but it was refused byrespondents counsel for the reason that the order was not signed by the majority of the Hearing Panel. 9 The matterwas subsequently rectified and at 3:30 p.m. of the same day, the Hearing Panel telefaxed a copy of the signed orderbut respondents counsel still refused to receive the same on the ground that petitioners did not post an injunction

http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt29http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt31http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt6http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt9http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt29http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt30http://www.lawphil.net/judjuris/juri2007/apr2007/gr_164459_2007.html#fnt31http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt4http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt6http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt7http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt8http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt9

7/29/2019 rem case 1

8/32

bond and that the bidding had already commenced at 1:00 p.m. that day and was already finished, 10 with respondentGuerra as the winning bidder.

As a result, petitioners filed an Omnibus Motion praying that the sale of the treasury shares be nullified and thatrespondents be cited in indirect contempt. The Hearing Panel denied petitioners Omnibus Motion finding that there isno ground to nullify the sale or hold respondents in indirect contempt since at the time the sale was held, petitionershad yet to post an injunction bond which was done only on October 8, 1999, or 10 days after the scheduled sale.Petitioners appealed to the SEC En Banc, and in its Resolution dated July 11, 2000, it affirmed the Hearing Panelsfinding that respondents may not be held in indirect contempt as the injunction order was released "with some

defects," but it nullified the sale of the treasury shares based on the Hearing Panels "prima facie" finding that itlacked authority from Mabinis Board of Trustees. 13

This prompted respondents to file a petition for review with the CA. which granted the petition. It nullified the SEC EnBancs Resolution. 14 In sustaining the sale of the treasury shares, the CA found that the SEC En Banc went beyondthe issue of the propriety of granting the writ of preliminary injunction when it annulled the Mabinis board resolutionauthorizing the sale of the treasury shares. According to the CA, the SEC En Banc delved on matters that were notbefore it when it ruled that the board of trustees lacked the authority to dispose of the shares, instead of just rulingon whether the Hearing Panel abused its discretion in denying petitioners Omnibus Motion. The CA further statedthat it does not concur with the SEC En Bancs ruling that the sale lacked authority from Mabinis board, as it was theboard itself which authorized the sale through the PBAC. Lastly, the CA sustained the Hearing Panels denial ofpetitioners Omnibus Motion due to their failure to timely post an injunction bond.15

However, it must first be made clear whether the petition filed by petitioners docketed as SEC Case No. 08-99-6398 is

one which seeks only an ancillary remedy or one for Injunction, as a principal action.

At first glance, it seems obvious that petitioners action is only to enjoin respondents Adeva, in his capacity asmember of the Board of Trustees and President of Mabini, Echano, Lydia E. Cacawa, and Guerra, as Chairmen andMembers, respectively of the PBAC of Mabini, "from offering for sale the treasury shares of Mabini College in a biddingto be held for the purpose, on September 4, 1999 at 12:00 noon."

Garayblas v. Atienza, Jr.19is instructive, 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 Court hasdistinguished the main action for injunction from the provisional or ancillary remedy of preliminary injunction, thus:

The main action for injunction is distinct from the provisional or ancillary remedy of preliminary injunction whichcannot exist except only as part or an incident of an independent action or proceeding. As a matter of course, in anaction 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 topreserve the status quo until the merits can be heard. A preliminary injunction is granted at any stage of an action orproceeding prior to the judgment or final order. It persists until it is dissolved or until the termination of the actionwithout the court issuing a final injunction.20

Considering the fact that in this case petitioners also prayed that the injunction be made permanent; and consideringthe allegations in the petition that under Section 9 of the Corporation Code, the power to dispose treasury shares isgiven to the Board of Directors or Trustees and not to any other Committee created by the Board; that the bidding oftreasury shares is a plot by the incumbent President Adeva to corner treasury shares in order to secure majorityshareholdings for purposes of corporate control; and that the right of respondents Echano and Guerra to act as

Members of the Board of the PBAC is "very dubious" because their names, as subsequent buyers of shares, are notrecorded in the Stock and Transfer Book of Mabini which has been declared missing and has yet to be reconstituted,21 the Court is convinced that SEC Case No. 08-99-6398 is a principal action for Injunction, not merely for an ancillaryremedy of writ of preliminary injunction, wherein the main issues involved, among others, are: (1) whether thecreation of the PBAC by the Board of Trustees is valid under the Corporation Code; (2) whether there was a quorumwhen the Board of Trustees authorized the sale of the treasury shares; and (3) whether respondents Echano andGuerra are bona fide shareholders. These issues are not involved in SEC LEO Case No. 95-0005 (EB 496). The lattercase is a separate action which involves the annual elections of stockholders and SEC supervision in the proceduralmatter of corporate injunction as well as the reconstitution of Mabinis stock and transfer books; and thereconstitution is still being undertaken at the time that SEC Case No. 08-99-6398 was filed by petitioners. Thus, SECCase No. 08-99-6398 cannot even be referred to or consolidated with SEC LEO Case No. 95-0005 (EB 496). It is for theHearing Panel in SEC Case No. 08-99-6398 to determine whether a final injunction may be issued under the facts andthe law of the case.

http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt10http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt13http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt14http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt21http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt10http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt13http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt14http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt15http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt19http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt20http://www.lawphil.net/judjuris/juri2007/apr2007/gr_161338_2007.html#fnt21

7/29/2019 rem case 1

9/32

i

ii

iii

iv

v

vi

vii

viii

ix

x

xi

xii

xiii

xiv

xv

xvi

xvii

xviii

xix

xx

xxi

xxii

VICENTE B. CHUIDIAN,petitioner, vs. SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THEPHILIPPINES, respondents.

D E C I S I O N

YNARES-SANTIAGO,J.:

The instant petition arises from transactions that were entered into by the government in thepenultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a dummy or

7/29/2019 rem case 1

10/32

nominee of Ferdinand and Imelda Marcos in several companies said to have been illegally acquired by theMarcos spouses. As a favored business associate of the Marcoses, Chuidian allegedly used false pretenses toinduce the officers of the Philippine Export and Foreign Loan Guarantee Corporation (PHILGUARANTEE), theBoard of Investments (BOI) and the Central Bank, to facilitate the procurement and issuance of a loanguarantee in favor of the Asian Reliability Company, Incorporated (ARCI) sometime in September 1980. ARCI,98% of which was allegedly owned by Chuidian, was granted a loan guarantee of Twenty-Five Million U.S.Dollars (US$25,000,000.00).

While ARCI represented to Philguarantee that the loan proceeds would be used to establish five inter-related projects in the Philippines, Chuidian reneged on the approved business plan and instead invested theproceeds of the loan in corporations operating in the United States, more particularly Dynetics, Incorporatedand Interlek, Incorporated. Although ARCI had received the proceeds of the loan guaranteed byPhilguarantee, the former defaulted in the payments thereof, compelling Philguarantee to undertakepayments for the same. Consequently, in June 1985, Philguarantee sued Chuidian before the Santa ClaraCounty Superior Court,[1] charging that in violation of the terms of the loan, Chuidian not only defaulted inpayment, but also misused the funds by investing them in Silicon Valley corporations and using them for hispersonal benefit.

For his part, Chuidian claimed that he himself was a victim of the systematic plunder perpetrated by theMarcoses as he was the true owner of these companies, and that he had in fact instituted an action beforethe Federal Courts of the United States to recover the companies which the Marcoses had illegally wrestedfrom him.[2]

On November 27, 1985, or three (3) months before the successful peoples revolt that toppled theMarcos dictatorship, Philguarantee entered into a compromise agreement with Chuidian whereby petitionerChuidian shall assign and surrender title to all his companies in favor of the Philippine government. In return,Philguarantee shall absolve Chuidian from all civil and criminal liability, and in so doing, desist from pursuingany suit against Chuidian concerning the payments Philguarantee had made on Chuidians defaulted loans.

It was further stipulated that instead of Chuidian reimbursing the payments made by Philguaranteearising from Chuidians default, the Philippine government shall pay Chuidian the amount of Five Million ThreeHundred Thousand Dollars (US$5,300,000.00). Initial payment of Five Hundred Thousand Dollars(US$500,000.00) was actually received by Chuidian, as well as succeeding payment of Two HundredThousand Dollars (US$200,000.00). The remaining balance of Four Million Six Hundred Thousand Dollars(US$4,600,000.00) was to be paid through an irrevocable Letter of Credit (L/C) from which Chuidian woulddraw One Hundred Thousand Dollars (US$100,000.00) monthly. [3] Accordingly, on December 12, 1985, L/CNo. SSD-005-85 was issued for the said amount by the Philippine National Bank (PNB). Subsequently,Chuidian was able to make two (2) monthly drawings from said L/C at the Los Angeles branch of the PNB.[4]

With the advent of the Aquino administration, the newly-established Presidential Commission on GoodGovernment (PCGG) exerted earnest efforts to search and recover money, gold, properties, stocks and otherassets suspected as having been illegally acquired by the Marcoses, their relatives and cronies.

Petitioner Chuidian was among those whose assets were sequestered by the PCGG. On May 30, 1986,the PCGG issued a Sequestration Order[5] directing the PNB to place under its custody, for and in behalf of thePCGG, the irrevocable L/C (No. SSD-005-85). Although Chuidian was then residing in the United States, hisname was placed in the Department of Foreign Affairs Hold Order list.[6]

In the meantime, Philguarantee filed a motion before the Superior Court of Santa Clara County ofCalifornia in Civil Case Nos. 575867 and 577697 seeking to vacate the stipulated judgment containing thesettlement between Philguarantee and Chuidian on the grounds that: (a) Philguarantee was compelled bythe Marcos administration to agree to the terms of the settlement which was highly unfavorable toPhilguarantee and grossly disadvantageous to the government; (b) Chuidian blackmailed Marcos intopursuing and concluding the settlement agreement by threatening to expose the fact that the Marcoses

made investments in Chuidians American enterprises; and (c) the Aquino administration had orderedPhilguarantee not to make further payments on the L/C to Chuidian. After considering the factual mattersbefore it, the said court concluded that Philguarantee had not carried its burden of showing that thesettlement between the parties should be set aside. [7] On appeal, the Sixth Appellate District of the Court ofAppeal of the State of California affirmed the judgment of the Superior Court of Sta. Clara County denyingPhilguarantees motion to vacate the stipulated judgment based on the settlement agreement.[8]

After payment on the L/C was frozen by the PCGG, Chuidian filed before the United States District Court,Central District of California, an action against PNB seeking, among others, to compel PNB to pay theproceeds of the L/C. PNB countered that it cannot be held liable for a breach of contract under principles ofillegality, international comity and act of state, and thus it is excused from payment of the L/C. Philguaranteeintervened in said action, raising the same issues and arguments it had earlier raised in the action before the

7/29/2019 rem case 1

11/32

Santa Clara Superior Court, alleging that PNB was excused from making payments on the L/C since thesettlement was void due to illegality, duress and fraud.[9]

The Federal Court rendered judgment ruling: (1) in favor of PNB excusing the said bank from makingpayment on the L/C; and (2) in Chuidians favor by denying intervenor Philguarantees action to set aside thesettlement agreement.[10]

Meanwhile, on February 27, 1987, a Deed of Transfer[11] was executed between then Secretary ofFinance Jaime V. Ongpin and then PNB President Edgardo B. Espiritu, to facilitate the rehabilitation of PNB,among others, as part of the governments economic recovery program. The said Deed of Transfer providedfor the transfer to the government of certain assets of PNB in exchange for which the government wouldassume certain liabilities of PNB.[12] Among those liabilities which the government assumed were unusedcommercial L/Cs and Deferred L/Cs, including SSD-005-85 listed under Dynetics, Incorporated in favor ofChuidian in the amount of Four Million Four Hundred Thousand Dollars (US$4,400,000.00).[13]

On July 30, 1987, the government filed before the Sandiganbayan Civil Case No. 0027 against theMarcos spouses, several government officials who served under the Marcos administration, and a number ofindividuals known to be cronies of the Marcoses, including Chuidian. The complaint sought thereconveyance, reversion, accounting and restitution of all forms of wealth allegedly procured illegally andstashed away by the defendants.

In particular, the complaint charged that Chuidian, by himself and/or in conspiracy with the Marcosspouses, engaged in devices, schemes and stratagems by: (1) forming corporations for the purpose ofhiding and avoiding discovery of illegally obtained assets; (2) pillaging the coffers of government financial

institutions such as the Philguarantee; and (3) executing the court settlement between Philguarantee andChuidian which was grossly disadvantageous to the government and the Filipino people.

In fine, the PCGG averred that the above-stated acts of Chuidian committed in unlawful concert with theother defendants constituted gross abuse of official position of authority, flagrant breach of public trust andfiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the Constitution andlaws of the land.[14]

While the case was pending, on March 17, 1993, the Republic of the Philippines filed a motion forissuance of a writ of attachment[15] over the L/C, citing as grounds therefor the following:

(1) Chuidian embezzled or fraudulently misapplied the funds of ARCI acting in a fiduciary capacity,justifying issuance of the writ under Section 1(b), Rule 57 of the Rules of Court;

(2)The writ is justified under Section 1(d) of the same rule as Chuidian is guilty of fraud incontracting the debt or incurring the obligation upon which the action was brought, or that heconcealed or disposed of the property that is the subject of the action;

(3)Chuidian has removed or disposed of his property with the intent of defrauding the plaintiff asjustified under Section 1(c) of Rule 57; and

(4) Chuidian is residing out of the country or one on whom summons may be served by publication,which justifies the writ of attachment prayed for under Section 1(e) of the same rule.

The Republic also averred that should the action brought by Chuidian before the U.S. District Court ofCalifornia to compel payment of the L/C prosper, inspite of the sequestration of the said L/C, Chuidian can askthe said foreign court to compel the PNB Los Angeles branch to pay the proceeds of the L/C. Eventually,Philguarantee will be made to shoulder the expense resulting in further damage to the government. Thus,there was an urgent need for the writ of attachment to place the L/C under the custody of the Sandiganbayanso the same may be preserved as security for the satisfaction of judgment in the case before said court.

Chuidian opposed the motion for issuance of the writ of attachment, contending that:(1) The plaintiffs affidavit appended to the motion was in form and substance fatally defective;

(2)Section 1(b) of Rule 57 does not apply since there was no fiduciary relationship between theplaintiff and Chuidian;

(3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such fraudmust be present at the time the contract is entered into;

(4)Chuidian has not removed or disposed of his property in the absence of any intent to defraudplaintiff;

(5) Chuidians absence from the country does not necessarily make him a non-resident; and

7/29/2019 rem case 1

12/32

(6)Service of summons by publication cannot be used to justify the issuance of the writ sinceChuidian had already submitted to the jurisdiction of the Court by way of a motion to lift thefreeze order filed through his counsel.

On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuance of a writ of attachmentagainst L/C No. SSD-005-85 as security for the satisfaction of judgment. [16] The Sandiganbayans ruling wasbased on its disquisition of the five points of contention raised by the parties. On the first issue, theSandiganbayan found that although no separate affidavit was attached to the motion, the motion itself

contained all the requisites of an affidavit, and the verification thereof is deemed a substantial compliance ofRule 57, Section 3 of the Rules of Court.

Anent the second contention, the Sandiganbayan ruled that there was no fiduciary relationship existingbetween Chuidian and the Republic, but only between Chuidian and ARCI. Since the Republic is not privy tothe fiduciary relationship between Chuidian and ARCI, it cannot invoke Section 1(b) of Rule 57.

On the third issue of fraud on the part of Chuidian in contracting the loan, or in concealing or disposingof the subject property, the Sandiganbayan held that there was a prima facie case of fraud committed byChuidian, justifying the issuance of the writ of attachment. The Sandiganbayan also adopted the Republicsposition that since it was compelled to pay, through Philguarantee, the bank loans taken out by Chuidian, theproceeds of which were fraudulently diverted, it is entitled to the issuance of the writ of attachment toprotect its rights as creditor.

Assuming that there is truth to the governments allegation that Chuidian has removed or disposed of hisproperty with the intent to defraud, the Sandiganbayan held that the writ of attachment is warranted,

applying Section 1(e) of Rule 57. Besides, the Rules provide for sufficient security should the owner of theproperty attached suffer damage or prejudice caused by the attachment.[17]

Chuidians absence from the country was considered by the Sandiganbayan to be the most potentinsofar as the relief being sought is concerned. [18] Taking judicial notice of the admitted fact that Chuidianwas residing outside of the country, the Sandiganbayan observed that:

x x x no explanation whatsoever was given by him as to his absence from the country, or as to hishomecoming plans in the future. It may be added, moreover, that he has no definite or clearcut plan toreturn to the country at this juncture given the manner by which he has submitted himself to the jurisdictionof the court.[19]

Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarily resides in the Philippines, but istemporarily living outside, he is still subject to the provisional remedy of attachment.

Accordingly, an order of attachment[20] was issued by the Sandiganbayan on July 19, 1993, ordering theSandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant to the Rules of Court assecurity for the satisfaction of judgment in Sandiganbayan Civil Case No. 0027.

On August 11, 1997, or almost four (4) years after the issuance of the order of attachment, Chuidianfiled a motion to lift the attachment based on the following grounds: First, he had returned to the Philippines;hence, the Sandiganbayans most potent ground for the issuance of the writ of preliminary attachment nolonger existed. Since his absence in the past was the very foundation of the Sandiganbayans writ ofpreliminary attachment, his presence in the country warrants the immediate lifting thereof. Second, therewas no evidence at all of initial fraud or subsequent concealment except for the affidavit submitted by thePCGG Chairman citing mere belief and information and not on knowledge of the facts. Moreover, thisstatement is hearsay since the PCGG Chairman was not a witness to the litigated incidents, was neverpresented as a witness by the Republic and thus was not subject to cross-examination.

Third, Chuidian denies that he ever disposed of his assets to defraud the Republic, and there is nothingin the records that support the Sandiganbayans erroneous conclusion on the matter. Fourth, Chuidian belied

the allegation that he was also a defendant in other related criminal action, for in fact, he had never beena defendant in any prosecution of any sort in the Philippines. [21] Moreover, he could not have personallyappeared in any other action because he had been deprived of his right to a travel document by thegovernment.

Fifth, the preliminary attachment was, in the first place, unwarranted because he was not guilty of fraudin contracting the debt or incurring the obligation. In fact, the L/C was not a product of fraudulenttransactions, but was the result of a US Court-approved settlement. Although he was accused of employingblackmail tactics to procure the settlement, the California Supreme Court ruled otherwise. And in relationthereto, he cites as a sixth ground the fact that all these allegations of fraud and wrongdoing had alreadybeen dealt with in actions before the State and Federal Courts of California. While it cannot technically beconsidered as forum shopping, it is nevertheless a form of suit multiplicity over the same issues, parties and

7/29/2019 rem case 1

13/32

subject matter.[22] These foreign judgments constitute res judicata which warrant the dismissal of the caseitself.

Chuidian further contends that should the attachment be allowed to continue, he will be deprived of hisproperty without due process. The L/C was payment to Chuidian in exchange for the assets he turned over tothe Republic pursuant to the terms of the settlement in Case No. 575867. Said assets, however, had alreadybeen sold by the Republic and cannot be returned to Chuidian should the government succeed in deprivinghim of the proceeds of the L/C. Since said assets were disposed of without his or the Sandiganbayans

consent, it is the Republic who is fraudulently disposing of assets.Finally, Chuidian stressed that throughout the four (4) years that the preliminary attachment had been in

effect, the government had not set the case for hearing. Under Rule 17, Section 3, the case itself should bedismissed for laches owing to the Republics failure to prosecute its action for an unreasonable length of time.Accordingly, the preliminary attachment, being only a temporary or ancillary remedy, must be lifted and thePNB ordered to immediately pay the proceeds of the L/C to Chuidian.

Subsequently, on August 20, 1997, Chuidian filed a motion to require the Republic to deposit the L/C inan interest bearing account.[23] He pointed out to the Sandiganbayan that the face amount of the L/C had,since its attachment, become fully demandable and payable. However, since the amount is just lyingdormant in the PNB, without earning any interest, he proposed that it would be to the benefit of all if theSandiganbayan requires PNB to deposit the full amount to a Sandiganbayan trust account at any bank inorder to earn interest while awaiting judgment of the action.

The Republic opposed Chuidians motion to lift attachment, alleging that Chuidians absence was not the

only ground for the attachment and, therefore, his belated appearance before the Sandiganbayan is not asufficient reason to lift the attachment. Moreover, allowing the foreign judgment as a basis for the lifting ofthe attachment would essentially amount to an abdication of the jurisdiction of the Sandiganbayan to hearand decide the ill gotten wealth cases lodged before it in deference to the judgment of foreign courts.

In a Resolution promulgated on November 13, 1998, the Sandiganbayan denied Chuidians motion to liftattachment.[24]

On the same day, the Sandiganbayan issued another Resolution denying Chuidians motion to requiredeposit of the attached L/C in an interest bearing account.[25]

In a motion seeking a reconsideration of the first resolution, Chuidian assailed the Sandiganbayansfinding that the issues raised in his motion to lift attachment had already been dealt with in the earlierresolution dated July 14, 1993 granting the application for the writ of preliminary attachment based on thefollowing grounds: First, Chuidian was out of the country in 1993, but is now presently residing in the

country. Second, the Sandiganbayan could not have known then that his absence was due to the non-renewal of his passport at the instance of the PCGG. Neither was it revealed that the Republic had alreadydisposed of Chuidians assets ceded to the Republic in exchange for the L/C. The foreign judgment was notan issue then because at that time, said judgment had not yet been issued and much less final. Furthermore,the authority of the PCGG Commissioner to subscribe as a knowledgeable witness relative to the issuance ofthe writ of preliminary attachment was raised for the first time in the motion to lift the attachment. Finally,the issue of laches could not have been raised then because it was the Republics subsequent neglect orfailure to prosecute despite the passing of the years that gave rise to laches.[26]

Chuidian also moved for a reconsideration of the Sandiganbayan resolution denying the motion torequire deposit of the L/C into an interest bearing account. He argued that contrary to the Sandiganbayanspronouncement, allowing the deposit would not amount to a virtual recognition of his right over the L/C, forhe is not asking for payment but simply requesting that it be deposited in an account under the control of theSandiganbayan. He further stressed that the Sandiganbayan abdicated its bounden duty to rule on an issuewhen it found that his motion will render nugatory the purpose of sequestration and freeze orders over the

L/C. Considering that his assets had already been sold by the Republic, he claimed that the Sandiganbayansrefusal to exercise its fiduciary duty over attached assets will cause him irreparable injury. Lastly, theSandiganbayans position that Chuidian was not the owner but a mere payee-beneficiary of the L/C issued inhis favor negates overwhelming jurisprudence on the Negotiable Instruments Law, while at the same timeobliterating his rights of ownership under the Civil Code.[27]

On July 13, 1999, the Sandiganbayan gave due course to Chuidians plea for the attached L/C to bedeposited in an interest-bearing account, on the ground that it will redound to the benefit of both parties.

The Sandiganbayan declared the national government as the principal obligor of the L/C even though theliability remained in the books of the PNB for accounting and monitoring purposes.

The Sandiganbayan, however, denied Chuidians motion for reconsideration of the denial of his motion to

7/29/2019 rem case 1

14/32

lift attachment, agreeing in full with the governments apriorisms that:

x x x (1) it is a matter of record that the Court granted the application for writ of attachment upongrounds other than defendants absence in the Philippine territory. In its Resolution dated July 14, 1993, theCourt found a prima facie case of fraud committed by defendant Chuidian, and that defendant has recoveredor disposed of his property with the intent of defrauding plaintiff; (2) Chuidians belated presence in thePhilippines cannot be invoked to secure the lifting of attachment. The rule is specific that it applies to a partywho is about to depart from the Philippines with intent to defraud his creditors. Chuidians stay in the country

is uncertain and he may leave at will because he holds a foreign passport; and (3) Chuidians other ground,sufficiency of former PCGG Chairman Gunigundos verification of the complaint, has been met fairly andsquarely in the Resolution of July 14, 1993.[28]

Hence, the instant petition for certiorari contending that the respondent Sandiganbayan committedgrave abuse of discretion amounting to lack or excess of jurisdiction when it ruled that:

1) Most of the issues raised in the motion to lift attachment had been substantially addressed in theprevious resolutions dated July 14, 1993 and August 26, 1998, while the rest were of noimperative relevance as to affect the Sandiganbayans disposition; and

2) PNB was relieved of the obligation to pay on its own L/C by virtue of Presidential ProclamationNo. 50.

The Rules of Court specifically provide for the remedies of a defendant whose property or asset has beenattached. As has been consistently ruled by this Court, the determination of the existence of grounds to

discharge a writ of attachment rests in the sound discretion of the lower courts.[29]

The question in this case is: What can the herein petitioner do to quash the attachment of the L/C?There are two courses of action available to the petitioner:

First. To file a counterbond in accordance with Rule 57, Section 12, which provides:

SEC. 12. Discharge of attachment upon giving counterbond. At anytime after an order of attachmenthas been granted, the party whose property has been attached, or the person appearing on his behalf, may,upon reasonable notice to the applicant, apply to the judge who granted the order, or to the judge of thecourt in which the action is pending, for an order discharging the attachment wholly or in part on the securitygiven. The judge shall, after hearing, order the discharge of the attachment if a cash deposit is made, or acounterbond executed to the attaching creditor is filed, on behalf of the adverse party, with the clerk or judgeof the court where the application is made, in an amount equal to the value of the property attached asdetermined by the judge, to secure the payment of any judgment that the attaching creditor may recover inthe action. Upon the filing of such counter-bond, copy thereof shall forthwith be served on the attachingcreditor or his lawyer. Upon the discharge of an attachment in accordance with the provisions of this sectionthe property attached, or the proceeds of any sale thereof, shall be delivered to the party making the depositor giving the counter-bond, or the person appearing on his behalf, the deposit or counter-bond aforesaidstanding in place of the property so released. Should such counterbond for any reason be found to be, orbecome, insufficient, and the party furnishing the same fail to file an additional counter-bond, the attachingcreditor may apply for a new order of attachment.

or

Second. To quash the attachment on the ground that it was irregularly or improvidently issued, asprovided for in Section 13 of the same Rule:

SEC. 13. Discharge of attachment for improper or irregular issuance. - The party whose property hasbeen attached may also, at any time either before or after the release of the attached property, or before anyattachment shall have been actually levied, upon reasonable notice to the attaching creditor, apply to the

judge who granted the order, or to the judge of the court in which the action is pending, for an order todischarge the attachment on the ground that the same was improperly or irregularly issued. If the motion bemade on affidavits on the part of the party whose property has been attached, but not otherwise, theattaching creditor may oppose the same by counter-affidavits or other evidence in addition to that on whichthe attachment was made. After hearing, the judge shall order the discharge of the attachment if it appearsthat it was improperly or irregularly issued and the defect is not cured forthwith.

It would appear that petitioner chose the latter because the grounds he raised assail the propriety of theissuance of the writ of attachment. By his own admission, however, he repeatedly acknowledged that hisjustifications to warrant the lifting of the attachment are facts or events that came to light or took place afterthe writ of attachment had already been implemented.

More particularly, petitioner emphasized that four (4) years after the writ was issued, he had returned to

7/29/2019 rem case 1

15/32

the Philippines. Yet while he noted that he would have returned earlier but for the cancellation of hispassport by the PCGG, he was not barred from returning to the Philippines. Then he informed theSandiganbayan that while the case against him was pending, but after the attachment had already beenexecuted, the government lost two (2) cases for fraud lodged against him before the U.S. Courts, thusinvoking res judicata. Next, he also pointed out that the government is estopped from pursuing the caseagainst him for failing to prosecute for the number of years that it had been pending litigation.

It is clear that these grounds have nothing to do with the issuance of the writ of attachment. Much less

do they attack the issuance of the writ at that time as improper or irregular. And yet, the rule contemplatesthat the defect must be in the very issuance of the attachment writ. For instance, the attachment may bedischarged under Section 13 of Rule 57 when it is proven that the allegations of the complaint weredeceptively framed,[30] or when the complaint fails to state a cause of action. [31] Supervening events whichmay or may not justify the discharge of the writ are not within the purview of this particular rule.

In the instant case, there is no showing that the issuance of the writ of attachment was attended byimpropriety or irregularity. Apart from seeking a reconsideration of the resolution granting the application forthe writ, petitioner no longer questioned the writ itself. For four (4) long years he kept silent and did notexercise any of the remedies available to a defendant whose property or asset has been attached. It is rathertoo late in the day for petitioner to question the propriety of the issuance of the writ.

Petitioner also makes capital of the two foreign judgments which he claims warrant the application of theprinciple ofres judicata. The first judgment, in Civil Case Nos. 575867 and 577697 brought by Philguaranteebefore the Santa Clara Country Superior Court, denied Philguarantees prayer to set aside the stipulated

judgment wherein Philguarantee and Chuidian agreed on the subject attached L/C. On March 14, 1990, theCourt of Appeal of the State of California affirmed the Superior Courts judgment. The said judgment becamethe subject of a petition for review by the California Supreme Court. There is no showing, however, of anyfinal judgment by the California Supreme Court. The records, including petitioners pleadings, are bereft ofany evidence to show that there is a final foreign judgment which the Philippine courts must defer to. Hence,res judicata finds no application in this instance because it is a requisite that the former judgment or ordermust be final.[32]

Second, petitioner cites the judgment of the United States District Court in Civil Case 86-2255 RSWLbrought by petitioner Chuidian against PNB to compel the latter to pay the L/C. The said Courts judgment,while it ruled in favor of petitioner on the matter of Philguarantees action-in-intervention to set aside thesettlement agreement, also ruled in favor of PNB, to wit:

Under Executive Order No. 1, the PCGG is vested by the Philippine President with the power to enforceits directives and orders by contempt proceedings. Under Executive Order No. 2, the PCGG is empowered tofreeze any, and all assets, funds and property illegally acquired by former President Marcos or his closefriends and business associates.

On March 11, 1986, PNB/Manila received an order from the PCGG ordering PNB to freeze any furtherdrawings on the L/C. The freeze order has remained in effect and was followed by a sequestration orderissued by the PCGG. Subsequently, Chuidians Philippine counsel filed a series of challenges to the freezeand sequestration orders, which challenges were unsuccessful as the orders were found valid by thePhilippine Supreme Court. The freeze and sequestration orders are presently in effect. Thus, under the PCGGorder and Executive Orders Nos. 1 and 2, performance by PNB would be illegal under Philippine Law.Therefore PNB is excused from performance of the L/C agreement as long as the freeze and sequestrationorders remain in effect. (Underscoring ours)

x x x x x x x x x

Chuidian argues that the fact that the L/C was issued pursuant to a settlement in California, that thenegotiations for which occurred in California, and that two of the payments were made at PNB/LA, compels

the conclusion that the act of prohibiting payment of the L/C occurred in Los Angeles. However, the majorityof the evidence and Tchacosh and Sabbatino compel the opposite conclusion. The L/C was issued in Manila,such was done at the request of a Philippine government instrumentality for the benefit of a Philippinecitizen, the L/C was to be performed in the Philippines, all significant events relating to the issuance andimplementation of the L/C occurred in the Philippines, the L/C agreement provided that the L/C was to beconstrued according to laws of the Philippines, and the Philippine government certainly has an interest inpreventing the L/C from being remitted in that it would be the release of funds that are potentially illgottengains. Accordingly, the Court finds that the PCGG orders are acts of state that must be respected by thisCourt, and thus PNB is excused from making payment on the L/C as long as the freeze and sequestrationorders remain in effect.[33] (Underscoring ours)

Petitioners own evidence strengthens the governments position that the L/C is under the jurisdiction of

7/29/2019 rem case 1

16/32

the Philippine government and that the U.S. Courts recognize the authority of the Republic to sequester andfreeze said L/C. Hence, the foreign judgments relied upon by petitioner do not constitute a bar to theRepublics action to recover whatever alleged ill-gotten wealth petitioner may have acquired.

Petitioner may argue, albeit belatedly, that he also raised the issue that there was no evidence of fraudon record other than the affidavit of PCGG Chairman Gunigundo. This issue of fraud, however, touches on thevery merits of the main case which accuses petitioner of committing fraudulent acts in his dealings with thegovernment. Moreover, this alleged fraud was one of the grounds for the application of the writ, and the

Sandiganbayan granted said application after it found aprima facie case of fraud committed by petitioner.In fine, fraud was not only one of the grounds for the issuance of the preliminary attachment, it was at

the same time the governments cause of action in the main case.

We have uniformly held that:

x x x when the preliminary attachment is issued upon a ground which is at the same time theapplicants cause of action; e.g., an action for money or property embezzled or fraudulently misapplied orconverted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker,agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or fora willful violation of duty, or an action against a party who has been guilty of fraud in contracting the debtor incurring the obligation upon which the action is brought, the defendant is not allowed to file a motion todissolve the attachment under Section 13 of Rule 57 by offering to show the falsity of the factual avermentsin the plaintiffs application and affidavits on which the writ was based and consequently that the writ basedthereon had been improperly or irregularly issued the reason being that the hearing on such a motion for

dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the merits ofthe action would be ventilated at a mere hearing of a motion, instead of at the regular trial. [34] (Underscoringours)

Thus, this Court has time and again ruled that the merits of the action in which a writ of preliminaryattachment has been issued are not triable on a motion for dissolution of the attachment, otherwise anapplicant for the lifting of the writ could force a trial of the merits of the case on a mere motion.[35]

It is not the Republics fault that the litigation has been protracted. There is as yet no evidence of fraudon the part of petitioner. Petitioner is only one of the twenty-three (23) defendants in the main action. Assuch, the litigation would take longer than most cases. Petitioner cannot invoke this delay in the proceedingsas an excuse for not seeking the proper recourse in having the writ of attachment lifted in due time. If everlaches set in, it was petitioner, not the government, who failed to take action within a reasonable time period.Challenging the issuance of the writ of attachment four (4) years after its implementation showed petitionersapparent indifference towards the proceedings before the Sandiganbayan.

In sum, petitioner has failed to convince this Court that the Sandiganbayan gravely abused its discretionin a whimsical, capricious and arbitrary manner. There are no compelling reasons to warrant the immediatelifting of the attachment even as the main case is still pending. On the other hand, allowing the discharge ofthe attachment at this stage of the proceedings would put in jeopardy the right of the attaching party torealize upon the relief sought and expected to be granted in the main or principal action. It would have theeffect of prejudging the main case.

The attachment is a mere provisional remedy to ensure the safety and preservation of the thingattached until the plaintiff can, by appropriate proceedings, obtain a judgment and have such propertyapplied to its satisfaction.[36] To discharge the attachment at this stage of the proceedings would renderinutile any favorable judgment should the government prevail in the principal action against petitioner. Thus,the Sandiganbayan, in issuing the questioned resolutions, which are interlocutory in nature, committed nograve abuse of discretion amounting to lack or excess of jurisdiction. As long as the Sandiganbayan actedwithin its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing

more than errors of judgment which are reviewable by timely appeal and not by special civil action ofcertiorari.[37]

Moreover, we have held that when the writ of attachment is issued upon a ground which is at the sametime the applicants cause of action, the only other way the writ can be lifted or dissolved is by acounterbond, in accordance with Section 12 of the same rule. [38] This recourse, however, was not availed ofby petitioner, as noted by the Solicitor General in his comment.[39]

To reiterate, there are only two ways of quashing a writ of attachment: (a) by filing a counterbondimmediately; or (b) by moving to quash on the ground of improper and irregular issuance. [40] These groundsfor the dissolution of an attachment are fixed in Rule 57 of the Rules of Court and the power of the Court todissolve an attachment is circumscribed by the grounds specified therein.[41] Petitioners motion to liftattachment failed to demonstrate any infirmity or defect in the issuance of the writ of attachment; neither did

7/29/2019 rem case 1

17/32

he file a counterbond.

Finally, we come to the matter of depositing the Letter of Credit in an interest-bearing account. Weagree with the Sandiganbayan that any interest that the proceeds of the L/C may earn while the case is beinglitigated would redound to the benefit of whichever party will prevail, the Philippine government included.Thus, we affirm the Sandiganbayans ruling that the proceeds of the L/C should be deposited in an interestbearing account with the Land Bank of the Philippines for the account of the Sandiganbayan in escrow untilordered released by the said Court.

We find no legal reason, however, to release the PNB from any liability thereunder. The Deed ofTransfer, whereby certain liabilities of PNB were transferred to the national government, cannot affect thesaid L/C since there was no valid substitution of debtor. Article 1293 of the New Civil Code provides:

Novation which consists in substituting a new debtor in the place of the original one, may be madewithout the knowledge or against the will of the latter, but not without the consent of the creditor. Paymentby the new debtor gives him the rights mentioned in Articles 1236 and 1237.

Accordingly, any substitution of debtor must be with the consent of the creditor, whose consent theretocannot just be presumed. Even though Presidential Proclamation No. 50 can be considered an insuperablecause, it does not necessarily make the contracts and obligations affected thereby exceptions to the above-quoted law, such that the substitution of debtor can be validly made even without the consent of the creditor.Presidential Proclamation No. 50 was not intended to set aside laws that govern the very lifeblood of thenati