Rizal Commercial Vs de Castro
Rizal Commercial Vs de Castro
Rizal Commercial Vs de Castro
G.R. No. L-34548 November 29, 1988 Respondent PVTA filed a Motion for Reconsideration dated
February 26,1970 which was granted in an Order dated April
6,1970, setting aside the Orders of Execution and of Payment
RIZAL COMMERCIAL BANKING
and the Writ of Execution and ordering petitioner and BADOC
CORPORATION, petitioner,
"to restore, jointly and severally, the account of PVTA with
vs.
the said bank in the same condition and state it was before
THE HONORABLE PACIFICO P. DE CASTRO and
the issuance of the aforesaid Orders by reimbursing the PVTA
PHILIPPINE VIRGINIA TOBACCO
of the amount of P 206, 916.76 with interests at the legal rate
ADMINISTRATION, respondents
from January 27, 1970 until fully paid to the account of the
PVTA This is without prejudice to the right of plaintiff to move
Meer, Meer & Meer for petitioner. for the execution of the partial judgment pending appeal in
case the motion for reconsideration is denied and appeal is
The Solicitor General for respondents. taken from the said partial judgment." [Record on Appeal, p.
58]
Applying the foregoing to the case at bar, MERALCO, as The Court disagrees.
garnishee, after having been judicially compelled to pay the
amount of the judgment represented by funds in its
possession belonging to the judgment debtor or NPC, should The said case which reiterated the rule in Republic v.
be released from all responsibilities over such amount after Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899] that
delivery thereof to the sheriff. The reason for the rule is self- government funds and properties may not be seized under
evident. To expose garnishees to risks for obeying court writs of execution or garnishment to satisfy such judgment is
orders and processes would only undermine the definitely distinguishable from the case at bar.
administration of justice. [Emphasis supplied.]
In the Commissioner of Public Highways case [supra], the
The aforequoted ruling thus bolsters RCBC's stand that its bank which precipitately allowed the garnishment and
immediate compliance with the lower court's order should not delivery of the funds failed to inform its depositor thereof,
have been met with the harsh penalty of joint and several charged as it was with knowledge of the nullity of the writ of
liability. Nor can its liability to reimburse PVTA of the amount execution and notice of garnishment against government
delivered in check be premised upon the subsequent funds. In the aforementioned case, the funds involved
declaration of nullity of the order of delivery. As correctly belonged to the Bureau of Public Highways, which being an
pointed out by the petitioner: arm of the executive branch of the government, has no
personality of its own separate from the National
Government. The funds involved were government
xxx xxx xxx funds covered by the rule on exemption from execution.
That the respondent Judge, after his Order This brings us to the first issue raised by the petitioner: Are
was enforced, saw fit to recall said Order the PVTA funds public funds exempt from garnishment? The
and decree its nullity, should not prejudice Court holds that they are not.
one who dutifully abided by it, the
presumption being that judicial orders are
valid and issued in the regular performance Republic Act No. 2265 created the PVTA as an ordinary
of the duties of the Court" [Section 5(m) corporation with all the attributes of a corporate entity
Rule 131, Revised Rules of Court]. This subject to the provisions of the Corporation Law. Hence, it
should operate with greater force in relation possesses the power "to sue and be sued" and "to acquire
to the herein petitioner which, not being a and hold such assets and incur such liabilities resulting
party in the case, was just called upon to directly from operations authorized by the provisions of this
perform an act in accordance with a judicial Act or as essential to the proper conduct of such operations."
flat. A contrary view will invite disrespect for [Section 3, Republic Act No. 2265.]
the majesty of the law and induce
reluctance in complying with judicial orders Among the specific powers vested in the PVTA are: 1) to buy
out of fear that said orders might be Virginia tobacco grown in the Philippines for resale to local
subsequently invalidated and thereby bona fide tobacco manufacturers and leaf tobacco dealers
expose one to suffer some penalty or [Section 4(b), R.A. No. 2265]; 2) to contracts of any kind as
prejudice for obeying the same. And this is may be necessary or incidental to the attainment of its
what will happen were the controversial purpose with any person, firm or corporation, with the
4
Government of the Philippines or with any foreign 1. Indebtedness of the Philippine Virginia
government, subject to existing laws [Section 4(h), R.A. No. Tobacco Administration and the former
22651; and 3) generally, to exercise all the powers of a Agricultural Credit and Cooperative
corporation under the Corporation Law, insofar as they are Financing Administration to FACOMAS and
not inconsistent with the provisions of this Act [Section 4(k), farmers and planters regarding Virginia
R.A. No. 2265.] tobacco transactions in previous years;
From the foregoing, it is clear that PVTA has been endowed 2. Indebtedness of the Philippine Virginia
with a personality distinct and separate from the government Tobacco Administration and the former
which owns and controls it. Accordingly, this Court has Agricultural Credit and Cooperative
heretofore declared that the funds of the PVTA can be Financing Administration to the Central
garnished since "funds of public corporation which can sue Bank in gradual amounts regarding Virginia
and be sued were not exempt from garnishment" [Philippine tobacco transactions in previous years;
National Bank v. Pabalan, G.R. No. L-33112, June 15, 1978,
83 SCRA 595, 598.]
3. Continuation of the Philippine Virginia
Tobacco Administration support and subsidy
In National Shipyards and Steel Corp. v. CIR [G.R. No. L- operations including the purchase of locally
17874, August 31, 1964, 8 SCRA 781], this Court held that grown and produced Virginia leaf tobacco,
the allegation to the effect that the funds of the NASSCO are at the present support and subsidy prices,
public funds of the government and that as such, the same its procurement, redrying, handling,
may not be garnished, attached or levied upon is untenable warehousing and disposal thereof, and the
for, as a government-owned or controlled corporation, it has redrying plants trading within the purview of
a personality of its own, distinct and separate from that of the their contracts;
government. This court has likewise ruled that other
govemment-owned and controlled corporations like National
4. Operational, office and field expenses,
Coal Company, the National Waterworks and Sewerage
and the establishment of the Tobacco
Authority (NAWASA), the National Coconut Corporation
Research and Grading Institute. [Emphasis
(NACOCO) the National Rice and Corn Corporation (NARIC)
supplied.]
and the Price Stabilization Council (PRISCO) which possess
attributes similar to those of the PVTA are clothed with
personalities of their own, separate and distinct from that of Inasmuch as the Tobacco Fund, a special fund, was by law,
the government [National Coal Company v. Collector of earmarked specifically to answer obligations incurred by PVTA
Internal Revenue, 46 Phil. 583 (1924); Bacani and Matoto v. in connection with its proprietary and commercial operations
National Coconut Corporation et al., 100 Phil. 471 (1956); authorized under the law, it follows that said funds may be
Reotan v. National Rice & Corn Corporation, G.R. No. L- proceeded against by ordinary judicial processes such as
16223, February 27, 1962, 4 SCRA 418.] The rationale in execution and garnishment. If such funds cannot be executed
vesting it with a separate personality is not difficult to find. It upon or garnished pursuant to a judgment sustaining the
is well-settled that when the government enters into liability of the PVTA to answer for its obligations, then the
commercial business, it abandons its sovereign capacity and purpose of the law in creating the PVTA would be defeated.
is to be treated like any other corporation [Manila Hotel For it was declared to be a national policy, with respect to the
Employees' Association v. Manila Hotel Co. and CIR, 73 Phil. local Virginia tobacco industry, to encourage the production of
734 (1941).] local Virginia tobacco of the qualities needed and in quantities
marketable in both domestic and foreign markets, to establish
this industry on an efficient and economic basis, and to create
Accordingly, as emphatically expressed by this Court in a
a climate conducive to local cigarette manufacture of the
1978 decision, "garnishment was the appropriate remedy for
qualities desired by the consuming public, blending imported
the prevailing party which could proceed against the funds of
and native Virginia leaf tobacco to improve the quality of
a corporate entity even if owned or controlled by the
locally manufactured cigarettes [Section 1, Republic Act No.
government" inasmuch as "by engaging in a particular
4155.]
business thru the instrumentality of a corporation, the
government divests itself pro hac vice of its sovereign
character, so as to render the corporation subject to the rules The Commissioner of Public Highways case is thus
of law governing private corporations" [Philippine National distinguishable from the case at bar. In said case, the
Bank v. CIR, G.R No. L-32667, January 31, 1978, 81 SCRA Philippine National Bank (PNB) as custodian of funds
314, 319.] belonging to the Bureau of Public Highways, an agency of the
government, was chargeable with knowledge of the
exemption of such government funds from execution and
Furthermore, in the case of PVTA, the law has expressly
garnishment pursuant to the elementary precept that public
allowed it funds to answer for various obligations, including
funds cannot be disbursed without the appropriation required
the one sought to be enforced by plaintiff BADOC in this case
by law. On the other hand, the same cannot hold true for
(i.e. for unpaid deliveries of tobacco). Republic Act No. 4155,
RCBC as the funds entrusted to its custody, which belong to a
which discounted the erstwhile support given by the Central
public corporation, are in the nature of private funds insofar
Bank to PVTA, established in lieu thereof a "Tobacco Fund" to
as their susceptibility to garnishment is concerned. Hence,
be collected from the proceeds of fifty per centum of the tariff
RCBC cannot be charged with lack of prudence for
or taxes of imported leaf tobacco and also fifty per centum of
immediately complying with the order to deliver the garnished
the specific taxes on locally manufactured Virginia type
amount. Since the funds in its custody are precisely meant for
cigarettes.
the payment of lawfully-incurred obligations, RCBC cannot
rightfully resist a court order to enforce payment of such
Section 5 of Republic Act No. 4155 provides that this fund obligations. That such court order subsequently turned out to
shall be expended for the support or payment of: have been erroneously issued should not operate to the
detriment of one who complied with its clear order.
5
Finally, it is contended that RCBC was bound to inquire into about thirty (30) feet and then fell on its right side pinning
the legality and propriety of the Writ of Execution and Notice down Calixto Palmes. He died as a result of cardio-respiratory
of Garnishment issued against the funds of the PVTA arrest due to a crushed chest. 4 The accident also caused
deposited with said bank. But the bank was in no position to physical injuries on the part of Adeudatus Borbon who was
question the legality of the garnishment since it was not even then only two (2) years old.
a party to the case. As correctly pointed out by the petitioner,
it had neither the personality nor the interest to assail or
On 25 June 1976, private respondents Primitiva Palmes
controvert the orders of respondent Judge. It had no choice
(widow of Calixto Palmes) and Honorato Borbon, Sr. (father of
but to obey the same inasmuch as it had no standing at all to
minor Adeudatus Borbon) filed a complaint 5 against Cosme
impugn the validity of the partial judgment rendered in favor
Casas and Nelia Enriquez (assisted by her husband Leonardo
of the plaintiff or of the processes issued in execution of such
Enriquez) before the then Court of First Instance of Cebu,
judgment.
Branch 3, claiming actual, moral, nominal and exemplary
damages as a result of the accident.
RCBC cannot therefore be compelled to make restitution
solidarily with the plaintiff BADOC. Plaintiff BADOC alone was
The claim of private respondent Honorato Borbon, Sr., being
responsible for the issuance of the Writ of Execution and
distinct and separate from that of co-plaintiff Primitiva
Order of Payment and so, the plaintiff alone should bear the
Palmes, and the amount thereof falling properly within the
consequences of a subsequent annulment of such court
jurisdiction of the inferior court, respondent Judge Jose R.
orders; hence, only the plaintiff can be ordered to restore the
Ramolete ordered the Borbon claim excluded from the
account of the PVTA.
complaint, without prejudice to its being filed with the proper
inferior court.
WHEREFORE, the petition is hereby granted and the petitioner
is ABSOLVED from any liability to respondent PVTA for
On 4 April 1977, the Court of First Instance rendered a
reimbursement of the funds garnished. The questioned Order
Decision 6 in favor of private respondent Primitiva Palmes,
of the respondent Judge ordering the petitioner, jointly and
ordering common carrier Nelia Enriquez to pay her
severally with BADOC, to restore the account of PVTA are
P10,000.00 as moral damages, P12,000.00 as compensatory
modified accordingly.
damages for the death of Calixto Palmes, P3,000.00 as
exemplary damages, P5,000.00 as actual damages, and
SO ORDERED. P1,000.00 as attorney's fees.
G.R. No. L-60887 November 13, 1991 The judgment of the trial court became final and executory
and a writ of execution was thereafter issued. The writ of
execution was, however, returned unsatisfied. Consequently,
PERLA COMPANIA DE SEGUROS, INC., petitioner,
the judgment debtor Nelia Enriquez was summoned before
vs.
the trial court for examination on 23 July 1979. She declared
HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES,
under oath that the Cimarron PUJ registered in her name was
HONORATO BORBON, SR., OFFICE OF THE PROVINCIAL
covered by a third-party liability insurance policy issued by
SHERIFF, PROVINCE OF CEBU, respondents.
petitioner Perla.
FELICIANO, J.: Petitioner then appeared before the trial court and moved for
reconsideration of the 6 August 1979 Order and for quashal of
the writ of garnishment, 9 alleging that the writ was void on
The present Petition for Certiorari seeks to annul: (a) the the ground that it (Perla) was not a party to the case and that
Order dated 6 August 1979 1 which ordered the Provincial jurisdiction over its person had never been acquired by the
Sheriff to garnish the third-party liability insurance policy trial court by service of summons or by any process. The trial
issued by petitioner Perla Compania de Seguros, Inc. ("Perla") court denied petitioner's motion. 10 An Order for issuance of
in favor of Nelia Enriquez, judgment debtor in Civil Case No. an alias writ of garnishment was subsequently issued on 8
R-15391; (b) the Order dated 24 October 1979 2 which April 1980. 11
denied the motion for reconsideration of the 6 August 1979
Order; and (c) the Order dated 8 April 19803 which ordered
the issuance of an alias writ of garnishment against
petitioner.
More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this
Court on 25 June 1982 alleging grave abuse of discretion on the part of respondent Judge
In the afternoon of 1 June 1976, a Cimarron PUJ owned and Ramolete in ordering garnishment of the third-party liability insurance contract issued by petitioner
registered in the name of Nelia Enriquez, and driven by Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed
Cosme Casas, was travelling from Cebu City to Danao City. forthwith for having been filed way out of time but, for reasons which do not appear on the record,
While passing through Liloan, Cebu, the Cimarron PUJ collided was nonetheless entertained.
with a private jeep owned by the late Calixto Palmes
(husband of private respondent Primitiva Palmes) who was
then driving the private jeep. The impact of the collision was
such that the private jeep was flung away to a distance of
6
In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be xxx xxx xxx
subjected to garnishment or execution to satisfy the judgment in Civil Case No. R-15391 because
petitioner was not a party to the case and the trial court did not acquire jurisdiction over
(Emphasis supplied)
petitioner's person. Perla further argues that the writ of garnishment had been issued solely on the
basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the effect
that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without
granting it the opportunity to set up any defenses which it may have under the insurance contract;
and that the proceedings taken against petitioner are contrary to the procedure laid down
Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced
which held that under
in Economic Insurance Company, Inc. v. Torres, et al., 12
intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance
Rule 39, Section 45, the Court "may only authorize" the with all orders and processes of the trial court with a view to the complete satisfaction of the
judgment creditor to institute an action against a third person judgment of the court. In Bautista v. Barredo, 16
the Court, through Mr. Justice
who holds property belonging to the judgment debtor. Bautista Angelo, held:
We find no grave abuse of discretion or act in excess of or While it is true that defendant Jose M. Barredo was
without jurisdiction on the part of respondent Judge Ramolete not a party in Civil Case No. 1636 when it was
in ordering the garnishment of the judgment debtor's third- instituted by appellant against the Philippine Ready
party liability insurance. Mix Concrete Company, Inc., however, jurisdiction
was acquired over him by the court and he became a
Garnishment has been defined as a species of attachment for virtual party to the case when, after final judgment
reaching any property or credits pertaining or payable to a was rendered in said case against the company, the
judgment debtor. 13 In legal contemplation, it is a forced sheriff served upon him a writ of garnishment in
novation by the substitution of creditors: 14 the judgment behalf of appellant. Thus, as held by this Court in the
debtor, who is the original creditor of the garnishee is, case of Tayabas Land Company vs. Sharruf, 41 Phil.
through service of the writ of garnishment, substituted by the 382, the proceeding by garnishment is a species of
judgment creditor who thereby becomes creditor of the attachment for reaching credits belonging to the
garnishee. Garnishment has also been described as a warning judgment debtor and owing to him from a stranger
to a person having in his possession property or credits of the to the litigation. By means of the citation, the
judgment debtor, not to pay the money or deliver the stranger becomes a forced intervenor; and the court,
property to the latter, but rather to appear and answer the having acquired jurisdiction over him by means of
plaintiff's suit. 15 the citation, requires him to pay his debt, not to his
former creditor, but to the new creditor, who is
creditor in the main litigation. (Emphasis supplied).
In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is In Rizal Commercial Banking Corporation v. De Castro, 17 the
not necessary that summons be served upon him. The garnishee need not be impleaded as a party Court stressed that the asset or credit garnished is thereupon
to the case. All that is necessary for the trial court lawfully to bind the person of the garnishee or
subjected to a specific lien:
any person who has in his possession credits belonging to the judgment debtor is service upon him
of the writ of garnishment. The garnishment of property to satisfy a writ of
execution operates as an attachment and fastens
The Rules of Court themselves do not require that the garnishee be served with summons or upon the property a lien by which the property is
impleaded in the case in order to make him liable. brought under the jurisdiction of the court issuing
the writ. It is brought into custodia legis, under the
sole control of such
Rule 39, Section 15 provides:
court. 18 (Emphasis supplied)
Sec. 15. Execution of money judgments. — The officer must enforce an execution of
a money judgment by levying on all the property, real or personal of every name and
nature whatsoever, and which may be disposed of for value, of the judgment debtor
In the present case, there can be no doubt, therefore, that the trial court actually acquired
not exempt from execution . . .
jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party
liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot
Real property, stocks, shares, debts, credits, and other personal property, or any successfully evade liability thereon by such a contention.
interest in either real or personal property, may be levied on in like manner and with
like effect as under a writ of attachment.(Emphasis supplied).
The instant petition stemmed from Civil Case No. 7329 of the
It is clear from Section 45, Rule 39 that if a persons
Court of First Instance of Davao (Branch 1) in which a writ of
alleged to have property of the judgment debtor or
preliminary attachment was issued ex-parte by the Court on
to be indebted to him claims an interest in the
the strength of an affidavit of merit attached to the verified
property adverse to him or denies the debt, the court
complaint filed by petitioner herein, Aboitiz & Co., Inc., on
may only authorize the judgment creditor to institute
November 2, 1971, as plaintiff in said case, for the collection
an action against such person for the recovery of
of money in the sum of P 155,739.41, which defendant
such interest or debt. Said section does not authorize
therein, the respondent in the instant case, Cotabato Bus Co.,
the court to make a finding that the third person has
owed the said petitioner.
in his possession property belonging to the judgment
debtor or is indebted to him and to order said third
person to pay the amount to the judgment creditor. By virtue of the writ of preliminary attachment, the provincial
sheriff attached personal properties of the defendant bus
company consisting of some buses, machinery and
It has been held that the only power of the court in
equipment. The ground for the issuance of the writ is, as
proceedings supplemental to execution is to niake an
alleged in the complaint and the affidavit of merit executed by
order authorizing the creditor to sue in the proper
the Assistant Manager of petitioner, that the defendant "has
court to recover an indebtedness due to the
removed or disposed of its properties or assets, or is about to
judgment debtor. The court has no jurisdiction to try
do so, with intent to defraud its creditors."
summarily the question whether the third party
served with notice of execution and levy is indebted
to defendant when such indebtedness is denied. To Respondent company filed in the lower court an "Urgent
make an order in relation to property which the Motion to Dissolve or Quash Writ of Attachment" to which was
garnishee claimed to own in his own right, requiring attached an affidavit executed by its Assistant Manager,
its application in satisfaction of judgment of another, Baldovino Lagbao, alleging among other things that "the
would be to deprive the garnishee of property upon Cotabato Bus Company has not been selling or disposing of
summary proceeding and without due process of law. its properties, neither does it intend to do so, much less to
(Emphasis supplied) defraud its creditors; that also the Cotabato Bus Company,
Inc. has been acquiring and buying more assets". An
opposition and a supplemental opposition were filed to the
But reliance by petitioner on the case of Economic Insurance
urgent motion. The lower court denied the motion stating in
Company, Inc. v. Torres (supra) is misplaced. The Court there
its Order that "the testimony of Baldovino Lagbao, witness for
held that a separate action needs to be commenced when the
the defendant, corroborates the facts in the plaintiff's affidavit
garnishee "claims an interest in the property adverse to him
instead of disproving or showing them to be untrue."
(judgment debtor) or denies the debt." In the instant case,
petitioner Perla did not deny before the trial court that it had
indeed issued a third-party liability insurance policy in favor of A motion for reconsideration was filed by the defendant bus
the judgment debtor. Petitioner moreover refrained from company but the lower court denied it. Hence, the defendant
setting up any substantive defense which it might have went to the Court of Appeals on a petition for certiorari
against the insured-judgment debtor. The only ground alleging grave abuse of discretion on the part of herein
asserted by petitioner in its "Motion for Reconsideration of the respondent Judge, Hon. Vicente R. Cusi Jr. On giving due
Order dated August 6, 1979 and to Quash Notice of course to the petition, the Court of Appeals issued a
Garnishment" was lack of jurisdiction of the trial court for restraining order restraining the trial court from enforcing
failure to implead it in the case by serving it with summons. further the writ of attachment and from proceeding with the
Accordingly, Rule 39, Section 45 of the Rules of Court is not hearing of Civil Case No. 7329. In its decision promulgated on
applicable in the instant case, and we see no need to require October 3, 1971, the Court of Appeals declared "null and void
a separate action against Perla: a writ of garnishment suffices the order/writ of attachment dated November 3, 1971 and
to hold petitioner answerable to the judgment creditor. If the orders of December 2, 1971, as well as that of December
Perla had any substantive defenses against the judgment 11, 1971, ordered the release of the attached properties, and
debtor, it is properly deemed to have waived them by laches. made the restraining order originally issued permanent.
WHEREFORE, the Petition for Certiorari and Prohibition is The present recourse is an appeal by certiorari from the
hereby DISMISSED for having been filed out of time and for decision of the Court of Appeals reversing the assailed orders
lack of merit. The assailed Orders of the trial court are hereby of the Court of First Instance of Davao, (Branch I), petitioner
AFFIRMED. Costs against petitioner. This Decision is assigning against the lower court the following errors:
immediately executory.
ERROR I
SO ORDERED.
THE COURT OF APPEALS ERRED IN HASTILY
G.R. No. L-35990 June 17, 1981 AND PERFUNCTORILY RENDERING, ON
OCTOBER 3, 1971, A DECISION WITHOUT
CONSIDERING MOST OF THE EVIDENCE
ABOITIZ & COMPANY, INC., HONORABLE VICENTE N.
SUCH THAT —
CUSI JR., Judge of the Court of First Instance of Davao,
and the PROVINCIAL SHERIFF OF DAVAO DEL
SUR, petitioners, l) EVEN AN IMPORTANT FACT,
vs. ESTABLISHED BY DOCUMENTARY
COTABATO BUS COMPANY, INC., respondent. EVIDENCE AND NOT DENIED BY
8
RESPONDENT, IS MENTIONED ONLY AS A issued upon a showing that defendant is on the verge of
"CLAIM" OF PETITIONER COMPANY; insolvency and may no longer satisfy its just debts without
issuing the writ. This may be inferred from the emphasis laid
by petitioner on the fact that even for the measly amount of P
2) THE DECISION CONTAINS NO
634.00 payment thereof was made with a personal check of
DISCUSSION AND APPRECIATION OF THE
the respondent company's president and majority
FACTS AS PROVED, ASSEMBLED AND
stockholder, and its debts to several creditors, including
PRESENTED BY PETITIONER COMPANY
secured ones like the DBP, have remained unpaid, despite its
SHOWING IN — THEIR TOTALITY — THAT
supposed daily income of an average of P 12,000.00, as
RESPONDENT HAS REMOVED, DIVERTED
declared by its assistant manager, Baldovino Lagbao. 1
OR DISPOSED OF ITS BANK DEPOSITS,
INCOME AND OTHER LIQUID ASSETS WITH
INTENT TO DEFRAUD ITS CREDITORS, Going forthwith to this question of whether insolvency, which
ESPECIALLY ITS UNSECURED SUPPLIERS; petitioners in effect claims to have been proven by the
evidence, particularly by company's bank account which has
been reduced to nil, may be a ground for the issuance of a
3) THE DECISION IGNORES THE
writ of attachment, the respondent Court of Appeals correctly
SIGNIFICANCE OF THE REFUSAL OF
took its position in the negative on the strength of the explicit
RESPONDENT TO PERMIT, UNDER REP. ACT
ruling of this Court in Max Chamorro & Co. vs. Philippine
NO. 1405, THE METROPOLITAN BANK &
Ready Mix Concrete Company, Inc. and Hon. Manuel P.
TRUST CO. TO BRING, IN COMPLIANCE
Barcelona. 2
WITH A subpoena DUCES TECUM TO THE
TRIAL COURT ALL THE RECORDS OF
RESPONDENT'S DEPOSITS AND Petitioner, however, disclaims any intention of advancing the
WITHDRAWALS UNDER ITS CURRENT AND theory that insolvency is a ground for the issuance of a writ of
SAVINGS ACCOUNTS (NOW NIL) FOR attachment , 3 and insists that its evidence -is intended to
EXAMINATION BY PETITIONER COMPANY prove his assertion that respondent company has disposed, or
FOR THE PURPOSE OF SHOWING DIRECTLY is about to dispose, of its properties, in fraud of its creditors.
THE REMOVAL, DIVERSION OR DISPOSAL Aside from the reference petitioner had made to respondent
OF RESPONDENT'S DEPOSITS AND INCOME company's "nil" bank account, as if to show removal of
WITH INTENT TO DEFRAUD ITS company's funds, petitioner also cited the alleged non-
CREDITORS. payment of its other creditors, including secured creditors like
the DBP to which all its buses have been mortgaged, despite
its daily income averaging P12,000.00, and the rescue and
ERROR II
removal of five attached buses.
ERROR III
Moreover, as the buses were mortgaged to the DBP, their
removal or disposal as alleged by petitioner to provide the
THE COURT OF APPEALS ERRED IN NOT basis for its prayer for the issuance of a writ of attachment
APPRECIATING THE RESCUE AND REMOVAL should be very remote, if not nil. If removal of the buses had
BY RESPONDENT OF FIVE ATTACHED in fact been committed, which seems to exist only in
BUSES, DURING THE DEPENDENCY OF ITS petitioner's apprehensive imagination, the DBP should not
MOTION TO DISSOLVE THE ATTACHMENT have failed to take proper court action, both civil and
IN THE, TRIAL COURT, AS A FURTHER ACT criminal, which apparently has not been done.
OF REMOVAL OF PROPERTIES BY
RESPONDENT WITH INTENT TO DEFRAUD
The dwindling of respondent's bank account despite its daily
PETITIONER COMPANY, FOR WHOSE
income of from P10,000.00 to P14,000.00 is easily explained
BENEFIT SAID BUSES HAD BEEN
by its having to meet heavy operating expenses, which
ATTACHED.
include salaries and wages of employees and workers. If,
indeed the income of the company were sufficiently profitable,
The questions raised are mainly, if not solely, factual it should not allow its buses to fall into disuse by lack of
revolving on whether respondent bus company has in fact repairs. It should also maintain a good credit standing with its
removed its properties, or is about to do so, in fraud of its suppliers of equipment, and other needs of the company to
creditors. This being so, the findings of the Court of Appeals keep its business a going concern. Petitioner is only one of
on said issues of facts are generally considered conclusive the suppliers.
and final, and should no longer be disturbed. However, We
gave due course to the petition because it raises also a legal
It is, indeed, extremely hard to remove the buses, machinery
question of whether the writ of attachment was properly
and other equipments which respondent company have to
9
own and keep to be able to engage and continue in the On 3 November 1966, the plaintiff filed a motion to admit his
operation of its transportation business. The sale or other amended complaint, which the court granted on 12 November
form of disposition of any of this kind of property is not 1966. In this amended complaint, the plaintiff averred that of
difficult of detection or discovery, and strangely, petitioner, the sum of P43,017.32 alleged in the original complaint, the
has adduced no proof of any sale or transfer of any of them, defendant has paid P3,900.00, thereby leaving a balance of
which should have been easily obtainable. P39,117.32 unpaid, but that, as indicated by invoices,
defendant's purchases were payable within thirty (30) days
and were to bear interest of 12% per annum plus 25%
In the main, therefore, We find that the respondent Court of
attorney's fees. The amended complaint accordingly prayed
Appeals has not committed any reversible error, much less
for the increased amounts. Defendant did not answer this
grave abuse of discretion, except that the restraining order
amended complaint.
issued by it should not have included restraining the trial
court from hearing the case, altogether. Accordingly, the
instant petition is hereby denied, but the trial court is hereby After trial, the court, on 15 June 1967, rendered judgment. It
ordered to immediately proceed with the hearing of Civil Case found the following facts:
No. 7329 and decide it in accordance with the law and the
evidence. No special pronouncement as to costs.
.... During the period from 23 July 1959 to
30 July 1960, defendant, in a series of
SO ORDERED. transactions, purchased from plaintiff wire
ropes, tractors and diesel spare parts, (in)
payment for which he issued several checks
G.R. No. L-28297 March 30, 1970
amounting to P43,017.32, which, when
presented to the bank, were dishonored for
ELPIDIO JAVELLANA, plaintiff-appellant, lack of funds. Defendant substituted these
vs. checks with another set of checks for the
D. O. PLAZA ENTERPRISES, INC., defendant-appellee. same amount, but again, the same were
dishonored for lack of funds, as evidenced
Ramon A. Gonzales for plaintiff-appellant. by Exhibits A to M, except for one check in
the amount of P3,900.00 as evidenced by
Exhibit C. Thus, the principal obligation was
Hermosisima, Maramara and Sol for defendant-appellee. reduced to P39,117.32. At the time of the
issuance of the said checks, the defendant
never informed plaintiff that it had funds to
back them up. Plaintiff made demands to
defendant for payment, but defendant
REYES, J.B.L., J.: pleaded for time and liberalization of
payment, which was rejected by the
Direct appeal, on points of law, from an order of the Court of plaintiff. The transactions in question were
First Instance of Manila, in its Civil Case No. 46762, modifying covered by invoices listed in Exhibit P, a
an earlier decision for the plaintiff by reducing the rate of sample of which is evidenced by Exhibit C,
interest on the sum adjudged, and also the attorney's fees; wherein said transactions were for 30-day
and by ordering the plaintiff to pay damages to the defendant term, 12% interest per annum to be
on account of a preliminary attachment obtained by the charged from date of invoice, and 25%
former upon the latter's counterclaim. attorney's fees in case of litigation.
The complaint in the aforesaid civil case was for collection of The defendant claims that there were other
the sum of P43,017.32 representing balance due on transactions between plaintiff and defendant
purchases of wire ropes, tractors and diesel parts made by involving the amount of P196,828.58; that
the defendant-appellee, D. O. Plaza Enterprises, Inc., from it had no intention not to pay the checks it
the plaintiff-appellant, Elpidio Javellana. The complaint prayed issued upon presentment; and that it
that the defendant be ordered to pay the said sum of suffered damages in the amount of
P43,017.32, with legal interest, plus attorney's fees in the P14,800.00 by reason of the attachment.
sum of P5,000.00; it also prayed for a writ of preliminary
attachment. xxx xxx xxx
Upon plaintiff's putting up a bond, the trial court, on 15 April The counterclaim for damages arising from
1961, issued a writ of attachment. On 20 May 1961, the the attachment is without merit. The
defendant moved to discharge the attachment on the ground defendant was manifestly in bad faith when
that it was improperly issued. The motion was denied. it issued two sets of bouncing checks.
Hence, the attachment was not improper,
On 7 November 1961, the defendant filed its answer and contrary to defendant's claim.
counter-claimed for damages arising from the attachment.
The plaintiff answered and interposed a counterclaim to the The dispositive portion of the decision decreed:
counterclaim.
Plaintiff-appellant assigns the following errors: the reduction G.R. No. 121413 January 29, 2001
of the attorney's fees, the reduction of the interest, and the
grant to the defendant of damages arising from the PHILIPPINE COMMERCIAL INTERNATIONAL BANK
attachment. (formerly INSULAR BANK OF ASIA AND
AMERICA),petitioner,
The first two assigned errors are well taken. The court a vs.
quo reduced the interest stated in its previous decision from COURT OF APPEALS and FORD PHILIPPINES, INC. and
12% to mere legal interest and the attorney's fees from 25% CITIBANK, N.A., respondents.
to P5,000.00 on the basis of estoppel, the ground therefor
being that the reduced amounts were those alleged, hence
admitted, by the plaintiff in his original complaint. This was
error. The original complaint was not formally offered in
evidence. Having been amended, the original complaint lost G.R. No. 121479 January 29, 2001
its character as a judicial admission, which would have
required no proof, and became merely an extrajudicial FORD PHILIPPINES, INC., petitioner-plaintiff,
admission, the admissibility of which, as evidence, requires its vs.
formal offer. COURT OF APPEALS and CITIBANK, N.A. and
PHILIPPINE COMMERCIAL INTERNATIONAL
Pleadings superseded or amended disappear BANK, respondents.
from the record as judicial admissions.
However, any statement contained therein
may be considered as an extrajudicial
admission, and as such, in order that the
G.R. No. 128604 January 29, 2001
court may take it into consideration, it
should be offered formality in evidence. (5
Moran 58, citing Lucido v. Calupitan, 27 FORD PHILIPPINES, INC., petitioner,
Phil. 148; Bastida v. Menzi, 58 Phil. 188.) vs.
CITIBANK, N.A., PHILIPPINE COMMERCIAL
INTERNATIONAL BANK and COURT OF
Where amended pleadings have been filed,
APPEALS, respondents.
allegations in the original pleadings can
have no effect, unless formally offered in
evidence. (Jones on Evidence, Sec. 273.) QUISUMBING, J.:
11
These consolidated petitions involve several fraudulently crossed check in that, on its face were two parallel
negotiated checks. lines and written in between said lines was the
phrase "Payee's Account Only"; and that defendant
Citibank paid the full face value of the check in the
The original actions a quo were instituted by Ford Philippines
amount of P4,746,114.41 to the defendant IBAA.
to recover from the drawee bank, CITIBANK, N.A. (Citibank)
and collecting bank, Philippine Commercial International Bank
(PCIBank) [formerly Insular Bank of Asia and America], the It has been duly established that for the payment of
value of several checks payable to the Commissioner of plaintiff's percentage tax for the last quarter of 1977,
Internal Revenue, which were embezzled allegedly by an the Bureau of Internal Revenue issued Revenue Tax
organized syndicate.1âwphi1.nêt Receipt No. 18747002, dated October 20, 1977,
designating therein in Muntinlupa, Metro Manila, as
the authorized agent bank of Metrobanl, Alabang
G.R. Nos. 121413 and 121479 are twin petitions for review of
branch to receive the tax payment of the plaintiff.
the March 27, 1995 Decision1 of the Court of Appeals in CA-
G.R. CV No. 25017, entitled "Ford Philippines, Inc. vs.
Citibank, N.A. and Insular Bank of Asia and America (now On December 19, 1977, plaintiff's Citibank Check No.
Philipppine Commercial International Bank), and the August SN-04867, together with the Revenue Tax Receipt
8, 1995 Resolution,2 ordering the collecting bank, Philippine No. 18747002, was deposited with defendant IBAA,
Commercial International Bank, to pay the amount of Citibank through its Ermita Branch. The latter accepted the
Check No. SN-04867. check and sent it to the Central Clearing House for
clearing on the samd day, with the indorsement at
the back "all prior indorsements and/or lack of
In G.R. No. 128604, petitioner Ford Philippines assails the
indorsements guaranteed." Thereafter, defendant
October 15, 1996 Decision3 of the Court of Appeals and its
IBAA presented the check for payment to defendant
March 5, 1997 Resolution4 in CA-G.R. No. 28430 entitled
Citibank on same date, December 19, 1977, and the
"Ford Philippines, Inc. vs. Citibank, N.A. and Philippine
latter paid the face value of the check in the amount
Commercial International Bank," affirming in toto the
of P4,746,114.41. Consequently, the amount of
judgment of the trial court holding the defendant drawee
P4,746,114.41 was debited in plaintiff's account with
bank, Citibank, N.A., solely liable to pay the amount of
the defendant Citibank and the check was returned
P12,163,298.10 as damages for the misapplied proceeds of
to the plaintiff.
the plaintiff's Citibanl Check Numbers SN-10597 and 16508.
Ford, with leave of court, filed a third-party complaint before 3. Dismissing the counterclaims asserted by
the trial court impleading Pacific Banking Corporation (PBC) the defendants against the plaintiff as well
and Godofredo Rivera, as third party defendants. But the as that asserted by the cross-defendant
court dismissed the complaint against PBC for lack of cause of against the cross-claimant, for lack of
action. The course likewise dismissed the third-party merits.
complaint against Godofredo Rivera because he could not be
served with summons as the NBI declared him as a "fugitive Costs against the defendant IBAA (now PCI
from justice". Bank).
On June 15, 1989, the trial court rendered its decision, as IT IS SO ORDERED."7
follows:
"1. Ordering the defendants Citibank and Separately, PCIBank and Ford filed before this Court, petitions
IBAA (now PCI Bank), jointly and severally, for review by certiorari under Rule 45.
to pay the plaintiff the amount of
P4,746,114.41 representing the face value
of plaintiff's Citibank Check No. SN-04867, In G.R. No. 121413, PCIBank seeks the reversal of the
with interest thereon at the legal rate decision and resolution of the Twelfth Division of the Court of
starting January 20, 1983, the date when Appeals contending that it merely acted on the instruction of
the original complaint was filed until the Ford and such casue of action had already prescribed.
amount is fully paid, plus costs;
PCIBank sets forth the following issues for consideration:
"2. On defendant Citibank's cross-claim:
ordering the cross-defendant IBAA (now PCI I. Did the respondent court err when, after finding
Bank) to reimburse defendant Citibank for that the petitioner acted on the check drawn by
whatever amount the latter has paid or may respondent Ford on the said respondent's
pay to the plaintiff in accordance with next instructions, it nevertheless found the petitioner
preceding paragraph; liable to the said respondent for the full amount of
the said check.
"3. The counterclaims asserted by the
defendants against the plaintiff, as well as II. Did the respondent court err when it did not find
that asserted by the cross-defendant prescription in favor of the petitioner.8
against the cross-claimant are dismissed,
for lack of merits; and
In a counter move, Ford filed its petition docketed as G.R. No.
121479, questioning the same decision and resolution of the
"4. With costs against the defendants. Court of Appeals, and praying for the reinstatement in toto of
the decision of the trial court which found both PCIBank and
SO ORDERED."6 Citibank jointly and severally liable for the loss.
4. As correctly held by the trial court, there The Regional Trial Court of Makati, Branch 57, which tried the
is no evidence of gross negligence on the case, made its findings on the modus operandi of the
part of petitioner Ford.9 syndicate, as follows:
II. PCI Bank is liable to petitioner Ford considering "A certain Mr. Godofredo Rivera was employed by
that: the plaintiff FORD as its General Ledger Accountant.
As such, he prepared the plaintiff's check marked Ex.
'A' [Citibank Check No. Sn-10597] for payment to
1. There were no instructions from
the BIR. Instead, however, fo delivering the same of
petitioner Ford to deliver the proceeds of
the payee, he passed on the check to a co-
the subject check to a person other than the
conspirator named Remberto Castro who was a pro-
payee named therein, the Commissioner of
manager of the San Andres Branch of PCIB.* In
the Bureau of Internal Revenue; thus,
connivance with one Winston Dulay, Castro himself
PCIBank's only obligation is to deliver the
subsequently opened a Checking Account in the
proceeds to the Commissioner of the
name of a fictitious person denominated as
Bureau of Internal Revenue.10
'Reynaldo reyes' in the Meralco Branch of PCIBank
where Dulay works as Assistant Manager.
2. PCIBank which affixed its indorsement on
the subject check ("All prior indorsement
After an initial deposit of P100.00 to validate the
and/or lack of indorsement guaranteed"), is
account, Castro deposited a worthless Bank of
liable as collecting bank.11
America Check in exactly the same amount as the
first FORD check (Exh. "A", P5,851,706.37) while
3. PCIBank is barred from raising issues of this worthless check was coursed through PCIB's
fact in the instant proceedings.12 main office enroute to the Central Bank for clearing,
replaced this worthless check with FORD's Exhibit 'A'
4. Petitioner Ford's cause of action had not and accordingly tampered the accompanying
prescribed.13 documents to cover the replacement. As a result,
Exhibit 'A' was cleared by defendant CITIBANK, and
the fictitious deposit account of 'Reynaldo Reyes' was
II. G.R. No. 128604 credited at the PCIB Meralco Branch with the total
amount of the FORD check Exhibit 'A'. The same
The same sysndicate apparently embezzled the proceeds of method was again utilized by the syndicate in
checks intended, this time, to settle Ford's percentage taxes profiting from Exh. 'B' [Citibank Check No. SN-
appertaining to the second quarter of 1978 and the first 16508] which was subsequently pilfered by Alexis
quarter of 1979. Marindo, Rivera's Assistant at FORD.
The facts as narrated by the Court of Appeals are as follows: From this 'Reynaldo Reyes' account, Castro drew
various checks distributing the sahres of the other
participating conspirators namely (1) CRISANTO
Ford drew Citibank Check No. SN-10597 on July 19, 1978 in BERNABE, the mastermind who formulated the
the amount of P5,851,706.37 representing the percentage tax method for the embezzlement; (2) RODOLFO R. DE
due for the second quarter of 1978 payable to the LEON a customs broker who negotiated the initial
Commissioner of Internal Revenue. A BIR Revenue Tax contact between Bernabe, FORD's Godofredo Rivera
Receipt No. 28645385 was issued for the said purpose. and PCIB's Remberto Castro; (3) JUAN VASTILLO
who assisted de Leon in the initial arrangements; (4)
On April 20, 1979, Ford drew another Citibank Check No. SN- GODOFREDO RIVERA, FORD's accountant who
16508 in the amount of P6,311,591.73, representing the passed on the first check (Exhibit "A") to Castro; (5)
payment of percentage tax for the first quarter of 1979 and REMERTO CASTRO, PCIB's pro-manager at San
14
Andres who performed the switching of checks in the III. Defendant PCIBank was, due to its negligence,
clearing process and opened the fictitious Reynaldo clearly liable for the loss or damage resulting to the
Reyes account at the PCIB Meralco Branch; (6) plaintiff Ford as a consequence of the substitution of
WINSTON DULAY, PCIB's Assistant Manager at its the check consistent with Section 5 of Central Bank
Meralco Branch, who assisted Castro in switching the Circular No. 580 series of 1977.
checks in the clearing process and facilitated the
opening of the fictitious Reynaldo Reyes' bank
IV. Assuming arguedo that defedant PCIBank did not
account; (7) ALEXIS MARINDO, Rivera's Assistant at
accept, endorse or negotiate in due course the
FORD, who gave the second check (Exh. "B") to
subject checks, it is liable, under Article 2154 of the
Castro; (8) ELEUTERIO JIMENEZ, BIR Collection
Civil Code, to return the money which it admits
Agent who provided the fake and spurious revenue
having received, and which was credited to it its
tax receipts to make it appear that the BIR had
Central bank account.16
received FORD's tax payments.
No amount of legal jargon can reverse the clear The pro-manager of San Andres Branch of PCIBank,
meaning of defendant's warranty. As the warranty Remberto Castro, received Citibank Check Numbers SN-
has proven to be false and inaccurate, the defendant 10597 and 16508. He passed the checks to a co-conspirator,
is liable for any damage arising out of the falsity of an Assistant Manager of PCIBank's Meralco Branch, who
its representation."25 helped Castro open a Checking account of a fictitious person
named "Reynaldo Reyes." Castro deposited a worthless Bank
of America Check in exactly the same amount of Ford checks.
The syndicate tampered with the checks and succeeded in
17
replacing the worthless checks and the eventual encashment had indeed failed to perform what was incumbent upon it,
of Citibank Check Nos. SN 10597 and 16508. The PCIBank which is to ensure that the amount of the checks should be
Ptro-manager, Castro, and his co-conspirator Assistant paid only to its designated payee. The fact that the drawee
Manager apparently performed their activities using facilities bank did not discover the irregularity seasonably, in our view,
in their official capacity or authority but for their personal and consitutes negligence in carrying out the bank's duty to its
private gain or benefit. depositors. The point is that as a business affected with public
interest and because of the nature of its functions, the bank is
under obligation to treat the accounts of its depositors with
A bank holding out its officers and agents as worthy of
meticulous care, always having in mind the fiduciary nature of
confidence will not be permitted to profit by the frauds these
their relationship.33
officers or agents were enabled to perpetrate in the apparent
course of their employment; nor will t be permitted to shirk
its responsibility for such frauds, even though no benefit may Thus, invoking the doctrine of comparative negligence, we are
accrue to the bank therefrom. For the general rule is that a of the view that both PCIBank and Citibank failed in their
bank is liable for the fraudulent acts or representations of an respective obligations and both were negligent in the
officer or agent acting within the course and apparent scope selection and supervision of their employees resulting in the
of his employment or authority.29 And if an officer or encashment of Citibank Check Nos. SN 10597 AND 16508.
employee of a bank, in his official capacity, receives money to Thus, we are constrained to hold them equally liable for the
satisfy an evidence of indebetedness lodged with his bank for loss of the proceeds of said checks issued by Ford in favor of
collection, the bank is liable for his misappropriation of such the CIR.
sum.30
Time and again, we have stressed that banking business is so
Moreover, as correctly pointed out by Ford, Section 531 of impressed with public interest where the trust and confidence
Central Bank Circular No. 580, Series of 1977 provides that of the public in general is of paramount umportance such that
any theft affecting items in transit for clearing, shall be for the appropriate standard of diligence must be very high, if not
the account of sending bank, which in this case is PCIBank. the highest, degree of diligence.34 A bank's liability as obligor
is not merely vicarious but primary, wherein the defense of
exercise of due diligence in the selection and supervision of
But in this case, responsibility for negligence does not lie on
its employees is of no moment.35
PCIBank's shoulders alone.
Petition granted.
SO ORDERED.