Preliminary Attachment (Rule 57)

Lim vs Lazaro
G.R. No. 185734 July 3, 2013

FACTS:

 Petitioner Lim filed a complaint for a sum of money with a prayer for the issuance of a writ of
preliminary attachment against the respondent Sps. Lazaro. The RTC granted the writ and upon
the posting of the required bond, issued the corresponding writ which levied 3 parcels of land
owned by the respondent spouses.
 The parties later entered into a Compromise Agreement whereby Sps. Lazaro agreed to pay Lim
the amount of P2.3M on an installment basis. The RTC rendered a decision based on the
compromise.
 Sps. Lazaro then filed an Omnibus Motion, seeking to lift the writ of preliminary attachment
annotated on the subject TCTs.
 In granting the Motion, the RTC ruled that a writ of preliminary attachment is a mere provisional
or ancillary remedy, resorted to by a litigant to protect and preserve certain rights and interests
pending final judgment. Considering that the case had already been considered closed and
terminated by the rendition of the decision based on the compromise agreement, the writ of
preliminary attachment should be lifted and quashed.

ISSUE: Whether or not the writ of preliminary attachment was properly lifted.

HELD: NO.

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

In this relation, while the provisions of Rule 57 are silent on the length of time within which an
attachment lien shall continue to subsist after the rendition of a final judgment, jurisprudence dictates
that the said lien continues until the debt is paid, or the sale is had under execution issued on the
judgment or until the judgment is satisfied, or the attachment discharged or vacated in the same
manner provided by law.

Applying these principles, the Court finds that the discharge of the writ of preliminary attachment
against the properties of Sps. Lazaro was improper.

Records indicate that while the parties have entered into a compromise agreement which had already
been approved by the RTC in its Decision, the obligations thereunder have yet to be fully complied with
– particularly, the payment of the total compromise amount of P2,3M. Hence, given that the foregoing
debt remains unpaid, the attachment of Sps. Lazaro’s properties should have continued to subsist.

In the earlier case of Chemphil Export & Import Corporation v. CA, the Court ruled that a writ of
attachment is not extinguished by the execution of a compromise agreement between the parties. In
that case the Court held thus:

“The case at bench admits of peculiar character in the sense that it involves a compromise agreement.
Nonetheless, x x x. The parties to the compromise agreement should not be deprived of the protection
provided by an attachment lien especially in an instance where one reneges on his obligations under the
agreement, as in the case at bench, where Antonio Garcia failed to hold up his own end of the deal, so
to speak.”

If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape
his creditors. Consequently, we would be faced with an anomalous situation where a debtor, to buy
time to dispose of his properties, would enter into a compromise agreement he has no intention of
honoring in the first place. The purpose of the provisional remedy of attachment would thus be lost. It
would become, in analogy, a declawed and toothless tiger.

The Court held that the writ of preliminary attachment should be restored, and its annotation revived in
the subject TCTs, re-vesting unto Lim, Jr. his preferential lien over the properties covered by the same as
it were before the cancellation of the said writ. The lien or security obtained by an attachment even
before judgment, is in the nature of a vested interest which affords specific security for the satisfaction
of the debt put in suit. The lifting of the attachment lien would be tantamount to an abdication of Lim’s
rights over Sps. Lazaro’s properties which the Court, absent any justifiable ground therefor, cannot
allow.

Ligon vs RTC of Makati

G.R. No. 190028               February 26, 2014

FACTS:

 Petitioner Ligon filed before the QC RTC a complaint for the collection of a sum of money with
prayer for the issuance of a writ of preliminary attachment against the Sps. Baladjay, a certain
Olivia Marasigan (Marasigan), Polished Arrow Holdings, Inc. (Polished Arrow), and its
incorporators.
 The complaint alleges among others that the spouses Baladjay enticed her to extend a short-
term loan secured by a PDC which bounced upon presentment, and that the subject property
was transferred to respondent Polished Arrow allegedly defendants’ dummy corporation to
defraud creditors. The application for the writ was granted so the subject property was levied
upon by annotating the writ on the dorsal portion of TCT No. 9273.
 While the case was pending, a similar complaint for the sum of money damages, and
cancellation of title with prayer for issuance of a writ of preliminary attachment was lodged
before the RTC Makati by the Sps Vicente against the same respondents. During the proceedings
 therein, a writ of preliminary attachment also against the subject property was issued and
annotated on the dorsal portion of TCT No. 9273.
 While the case is still pending in QC, the Makati RTC rendered a decision rescinding the transfer
of the subject property to Polished Arrow upon a finding that the same was made in fraud of
creditors. Consequently, the Makati City RTC directed the Register of Deeds of Muntinlupa City
to: (a) cancel TCT No. 9273 in the name of Polished Arrow; and (b) restore TCT No. 8502 “in its
previous condition”  in the name of Rosario Baladjay. In the subsequent execution proceedings,
the property was sold at a public auction to respondent Ting.
 The RTC Makati then ordered the RD under pain of contempt to issue a new certificate in favor
of Ting free from any liens and encumbrances.
 Meanwhile the QC RTC ruled in favor of Ligon who sought its execution and discovered the
earlier attachment annotation in her favor has been deleted.

ISSUE: W/N the Makati RTC gravely abused its discretion when it ordered the deletion of Ligon’s
attachment lien

HELD: YES.

Case law instructs that an attachment is a proceeding in rem, and, hence, is against the particular
property, enforceable against the whole world. Accordingly, the attaching creditor acquires a specific
lien on the attached property which nothing can subsequently destroy except the very dissolution of the
attachment or levy itself. Such a proceeding, in effect, means that the property attached is an indebted
thing and a virtual condemnation of it to pay the owner’s debt. The lien continues until the debt is paid,
or sale is had under execution issued on the judgment, or until the judgment is satisfied, or the
attachment discharged or vacated in some manner provided by law. Thus, a prior registration of an
attachment lien creates a preference, such that when an attachment has been duly levied upon a
property, a purchaser thereof after the attachment takes the property subject to the
said attachment. As provided under PD 1529, said registration operates as a form of constructive notice
to all.

Notwithstanding the subsequent cancellation of TCT No. 9273 due to the Makati City RTC’s December 9,
2004 Decision rescinding the transfer of the subject property from Sps. Baladjay to Polished Arrow upon
a finding that the same was made in fraud of creditors, Ligon’s attachment lien over the subject property
continued to subsist since the attachment she had earlier secured binds the property itself, and, hence,
continues until the judgment debt of Sps. Baladjay to Ligon as adjudged in the Quezon City Case is
satisfied, or the attachment discharged or vacated in some manner provided by law. The grave abuse of
discretion of the Makati City RTC lies with its directive to issue a new certificate of title in the name of
Ting (i.e., TCT No. 19756), free from any liens and encumbrances. This course of action clearly negates
the efficacy of Ligon’s attachment lien and, also, defies the legal characterization of attachment
proceedings. It bears noting that Ligon’s claim, secured by the aforesaid attachment, is against Sps.
Baladjay whose ownership over the subject property had been effectively restored in view of the RTC’s
rescission of the property’s previous sale to Polished Arrow. Thus, Sps. Ligon’s attachment lien against
Sps. Baladjay as well as their successors-in-interest should have been preserved, and the annotation
thereof carried over to any subsequent certificate of title, the most recent of which as it appears on
record is TCT No. 31001 in the name of Techico, without prejudice to the latter’s right to protect his own
ownership interest over the subject property.
Mangila vs CA
G.R. No. 125027            August 12, 2002

FACTS:

 Private respondent filed a complaint for collection of sum of money against petitioner. The
sheriff was not able to serve the summon on petitioner as she left the Philippines for Guam.
 Construing petitioner’s departure from the Philippines as done with intent to defraud her
creditors, private respondent filed a Motion for Preliminary Attachment. The trial court issued
an Order of Preliminary Attachment against petitioner. The following day, the trial court issued a
Writ of Preliminary Attachment.
 With the assistance from their counterparts in RTC, Pampanga, the sheriff of RTC Pampanga
served on petitioner’s household help in San Fernando, Pampanga, the Notice of Levy with the
Order, Affidavit and Bond.
 Petitioner filed a motion to discharge attachment claiming that the court had not acquired
jurisdiction over her person.
 The trial court granted the Motion to Discharge Attachment upon filing of petitioner’s counter-
bond. The trial court, however, did not rule on the question of jurisdiction and on the validity of
the writ of preliminary attachment. Thereafter private respondent applied for an alias summons
which was granted by the court.

ISSUE: W/N the writ was validly implemented

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

In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988 and
implemented on October 28, 1988. However, the alias summons was served only on January 26, 1989 or
almost three months 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
issuance can be filed “at the commencement of the action.” However, on the day the writ was
implemented, the trial court should have, previously or simultaneously with the implementation of the
writ, acquired jurisdiction over the petitioner. Yet, as was shown in the records of the case, the
summons was actually served on petitioner several months after the writ had been implemented.

Private respondent never showed that she effected substituted service on petitioner after her personal
service failed. Likewise, if it were true that private respondent could not ascertain the whereabouts of
petitioner after a diligent inquiry, still she had some other recourse under the Rules of Civil Procedure.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be deemed to have
cured the fatal defect in the enforcement of the writ. The trial court cannot enforce such a coercive
process on petitioner without first obtaining jurisdiction over her person.

The preliminary writ of attachment must be served after or simultaneous with the service of summons
on the defendant whether by personal service, substituted service or by publication as warranted by the
circumstances of the case. The subsequent service of summons does not confer a retroactive acquisition
of jurisdiction over her person because the law does not allow for retroactivity of a belated service.

Chuidian vs Sandiganbayan
G.R. No. 1339941 | JANUARY 19, 2001

FACTS:

In September 1980, Chuidian allegedly a dummy of Ferdinand and Imelda Marcos, was able to obtain,
allegedly under false pretenses, a loan guarantee from Philguarantee Corp., the BOI and the Central
Bank, in favor of the Asian Reliability Co. Inc. (ARCI). ARCI, 98% of which was allegedly owned by
Chuidian, was granted a loan guarantee of US $25M for the establishment of 5 inter-related projects in
the country.

However, Chuidian used the same in investing in corporations operating in the US. ARCI then defaulted
in the payments of the loan, compelling Philguarantee to undertake payments for the
same. Philguarantee sued Chuidian before a Californian court, charging him of violating the terms of the
loan, defaulting in payments and misusing the proceeds for his personal benefit. Chuidian claimed that
he himself was a victim of the systematic plunder perpetrated by the Marcoses.

On November 1985, Philguarantee entered into a compromise agreement with Chuidian whereby
Chuidian shall assign and surrender title to all his companies in favor of the Phil. Gov’t.  In return,
Philguarantee shall absolve Chuidian from all civil and criminal liability concerning the payments
Philguarantee had made on Chuidian’s defaulted loans. It was further stipulated that the Phil.
government shall pay Chuidian the amount of US $5.3M. Chuidian received the 1 st two installments of
the payment. The remaining balance of US $4.6M was to be paid through an irrevocable Letter of Credit
(L/C) from which Chuidian would draw US $100k monthly.

With the advent of the Aquino administration, the newly-established PCGG exerted earnest efforts to
search and recover properties and assets suspected as having been illegally acquired by the Marcoses,
their relatives and cronies. Chuidian was among those whose assets were sequestered by the
PCGG.  The PNB was directed to place the letters of credit under its custody, in behalf of the PCGG.

In the meantime, Philguarantee filed a motion before the Superior Court of California, seeking to vacate
the stipulated judgment containing the settlement between Philguarantee and Chuidian on the grounds
that: (a) Philguarantee was compelled by the Marcos administration to agree to the terms of the
settlement; (b) Chuidian blackmailed Marcos into pursuing the settlement agreement by threatening to
expose the fact that the Marcoses made investments in Chuidian’s American enterprises; and (c) the
Aquino administration had ordered Philguarantee not to make further payments on the L/C to
Chuidian.  However, the Californian court concluded that Philguarantee was not able to sufficiently show
that the settlement should be set aside. On appeal, the CA of the State of California affirmed the
judgment of the Superior Court denying Philguarantee’s motion.

Chuidian filed before the California Central District Court, an action against PNB seeking to compel the
latter to pay the proceeds of the L/C. Philguarantee intervened in said action, raising the same issues
and arguments it had earlier raised in the action before the Santa Clara Superior Court, alleging that PNB
was excused from making payments on the L/C since the settlement was void due to illegality, duress
and fraud.

The Federal Court rendered judgment ruling:  (1) in favor of PNB excusing the said bank from making
payment on the L/C; and (2) in Chuidian’s favor by denying intervenor Philguarantee’s action to set aside
the settlement agreement.

Meanwhile a Deed of Transfer was executed between then Sec. of Finance and then PNB President
Edgardo Espiritu, to facilitate the rehabilitation of PNB. Thus, the gov’t assumed all liabilities of PNB
including the L/C listed in favor of Chuidian in the amount of US $4.4M

On July 1987, the gov’t filed before the Sandiganbayan a civil case against the Marcos spouses, several
gov’t officials, and a number of individuals known to be cronies of the Marcoses, including Chuidian,
seeking the reconveyance, accounting and restitution of all forms of wealth allegedly procured illegally
by the defendants. 

While the case was pending, the Republic filed a motion for issuance of a writ of attachment over the
L/C in the name of Chuidian, 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 in contracting
the debt or incurring the obligation upon which the action was brought, or that he concealed 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 as
justified 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 of
California to compel payment of the L/C prosper, inspite of the sequestration of the said L/C, Chuidian
can ask the 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 Sandiganbayan so 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 plaintiff’s 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 the plaintiff
and Chuidian;

(3) While Chuidian does not admit fraud on his part, if ever there was breach of contract, such fraud
must 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 defraud
plaintiff;

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

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

On July 1993, the Sandiganbayan ordered the issuance of a writ of attachment against the L/C as
security for the satisfaction of judgment. The Sandiganbayan ruled:

1) Although there was no separate affidavit attached to the motion, the motion itself contained all the
requisites of an affidavit, and the verification thereof is deemed a substantial compliance of Rule 57,
Section 3.

2) Fiduciary relationship exists between Chuidian and ARCI but not with the Republic. Hence, the
Republic cannot invoke Sec. 1(b) of Rule 57.

3) There was a prima facie case of fraud committed by Chuidian, justifying the issuance of the writ of
attachment.  

4) The Sandiganbayan also adopted the Republic’s position that since it was compelled to pay, through
Philguarantee, the bank loans taken out by Chuidian, the proceeds of which were fraudulently diverted,
it is entitled to the issuance of the writ of attachment to protect its rights as creditor.

5) Chuidian’s absence from the country was considered by the Sandiganbayan to be the most
compelling ground for the issuance of the writ.

Almost four (4) years after the issuance of the order of attachment, Chuidian filed a motion to lift the
attachment based on the following grounds:  

1) He had returned to the Philippines, and considering that his absence was the most compelling ground
for the issuance of the writ, the latter should be lifted.

2) There was no evidence at all of initial fraud or subsequent concealment except for the affidavit
submitted by the PCGG Chairman whose statement is hearsay since he was not a witness to the litigated
incidents, was never presented as a witness by the Republic and thus was not subject to cross-
examination.

3) He denies that he ever disposed of his assets to defraud the Republic, and there is nothing in the
records that support the Sandiganbayan’s erroneous conclusion on the matter. 

4) He was never a defendant in any other pending criminal action.

5) He was not guilty of fraud in contracting the debt or incurring the obligation. L/C was not a product of
fraudulent transactions but the result of court-approved settlement.

6) Should the attachment be allowed to continue, he will be deprived of his property without due
process.  The L/C was payment to Chuidian in exchange for the assets he turned over to the
Republic.  Said assets had already been sold by the Republic and cannot be returned to Chuidian should
the government succeed in depriving him of the proceeds of the L/C.

7) Finally, throughout the 4 years that the preliminary attachment had been in effect, the gov’t had not
set the case for hearing.  The case itself should be dismissed for laches owing to the Republic’s 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 the PNB ordered to immediately pay the
proceeds of the L/C to Chuidian.

The Republic opposed the motion and contended that allowing the foreign judgment as a basis for the
lifting of the attachment would essentially amount to an abdication of the jurisdiction of the
Sandiganbayan to hear and decide the ill-gotten wealth cases lodged before it in deference to the
judgment of foreign courts.

The Sandganbayan denied petitioner’s motion and the latter’s subsequent MR.

ISSUE:

WON the writ of preliminary attachment should be lifted as a result of petitioner’s return to the country
and his averments that there was no fraud in incurring the obligation

HELD: No

*Preliminary attachment issued upon a ground which is at the same time the applicant’s cause of
action. When the preliminary attachment is issued upon a ground which is at the same time the
applicant’s cause of action, the defendant is not allowed to file a motion to dissolve the attachment
under Section 13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiff’s
application and affidavits on which the writ was based – and consequently that the writ based thereon
had been improperly or irregularly issued – the reason being that the hearing on such a motion for
dissolution of the writ would be tantamount to a trial of the merits of the action. In other words, the
merits of the action would be ventilated at a mere hearing of a motion, instead of at the regular trial.

The merits of the action in which a writ of preliminary attachment has been issued are not triable on a
motion for dissolution of the attachment; otherwise an applicant for the lifting of the writ could force a
trial of the merits of the case on a mere motion.

There are only two ways of quashing a writ of attachment: (a) by filing a counterbound immediately; or
(b) by moving to quash on the ground of improper and irregular issuance. These grounds for the
dissolution of an attachment are fixed in Rule 57 of the Rules of Court and the power of the Court to
dissolve an attachment is circumscribed by the grounds specified therein. Petitioner’s motion to lift
attachment failed to demonstrate any infirmity or defect in the issuance of the writ of attachment;
neither did he file a counterbond.
Alejandro Ng Wee vs. Manuel Tankiansee
G.R. No. 171124 ; February 13, 2008; Third Division Decision; Nachura

FACTS:

Alejandro Ng Wee, a valued client of Westmont Bank (now United Overseas Bank), made several money
placements totaling P211M with the bank’s affiliate, Westmont Investment Corporation (Wincorp), a
domestic entity engaged in the business of an investment house with the authority and license to
extend credit.

Sometime in Feb. 2000, Petitioner received disturbing news on Wincorp’s financial condition prompting
him to inquire about and investigate the company’s operations and transactions with its borrowers. He
then discovered that the company extended a loan equal to his total money placement to a Corporation
[Power Merge] with a subscribed capital of only P37.5M. This credit facility originated from another loan
of about P1.5B extended by Wincorp to another Corporation [Hottick Holdings]. When the latter
defaulted in its obligation, Wincorp instituted a case against it and its surety. Settlement was, however,
reached in which Hottick’s president, Virata, assumed the obligation of the surety.

Under the scheme agreed upon by Wincorp and Hottick’s president, Petitioner’s money placements
were transferred without his knowledge and consent to the loan account of Power Merge through an
agreement that virtually freed the latter of any liability. Allegedly, through the false representations of
Wincorp and its officers and directors, Petitioner was enticed to roll over his placements so that Wincorp
could loan the same to Virata or Power Merge.

Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp’s officers
and directors to fraudulently obtain for his benefit without any intention of paying the said placements,
Petitioner instituted a case for damages with the RTC of Manila. One of the defendants impleaded in the
complaint is herein respondent Tankiansee, Vice-Chairman and Director of WinCorp. The trial court
ordered the issuance of a writ of preliminary attachment against the properties not exempt from
execution of all the defendants in the subject, among others, to Petitioner’s filing of a P50M bond. The
writ was consequently issued.

Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient,
respondent moved for the discharge of the attachment. The other defendants likewise filed similar
motions. The RTC denied all the motions for the discharge of the attachment. The defendants, including
respondent herein, filed their respective motions for reconsideration but the trial court denied the
same.

Incidentally, while respondent opted not to question anymore the said orders, his co-defendants, Virata
and UEM-MARA Philippines Corp. (UEM-MARA), assailed the same via certiorari under Rule 65 before
the CA. The CA, however, denied the petition for certiorari, and the MR thereof.

In a Petition for review on certiorari before the SC, in G.R. No. 162928, the court denied the Petition and
affirmed the CA rulings for Virata’s and UEMMARA’s failure to sufficiently show that the appellate court
committed any reversible error. The SC subsequently denied the Petition with finality.
On Sept. 30, 2004, respondent filed before the trial court another Motion to Discharge Attachment, re-
pleading the grounds he raised in his first motion but raising the following additional grounds: (1) that
he was not present in Wincorp’s board meetings approving the questionable transactions; and (2) that
he could not have connived with Wincorp and the other defendants because he and Pearlbank
Securities, Inc., in which he is a major stockholder, filed cases against the company as they were also
victimized by its fraudulent schemes.

Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the CA
and the SC, and that the additional grounds were respondent’s affirmative defenses that properly
pertained to the merits of the case, the trial court denied the motion. With the denial of its MR,
respondent filed a petition for certiorari before the CA and the latter rendered the assailed Decision
reversing and setting aside the aforementioned orders of the trial court and lifting the Writ of
Preliminary Attachment to the extent that it concerned respondent’s properties. Petitioner moved for
the reconsideration of the said ruling, but the CA denied the same. Thus, Petitioner filed the instant
Petition.

ISSUE:

Whether or not the preliminary attachment should be discharged.

RULING:

In the case at bench, the basis of Petitioner’s application for the issuance of the writ of preliminary
attachment against the properties of respondent is Section 1 (d) of Rule 57 of the Rules of Court which
pertinently reads:

Section 1. Grounds upon which attachment may issue.- At the commencement of the action or at any
time before entry of judgment, a plaintiff or any proper party may have the property of the adverse
party attached as security for the satisfaction of any judgment that may be recovered in the following
cases: x xxx

(d) In an action against a party who has been guilty of a fraud in contracting the debt / incurring the
obligation upon which the action is brought, or in the performance thereof.

For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual
circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor’s mere
non-payment of the debt or failure to comply with his obligation. The applicant must then be able to
demonstrate that the debtor has intended to defraud the creditor.

In the instant case, Petitioner’s Affidavit is bereft of any factual statement that respondent committed a
fraud. The affidavit narrated only the alleged fraudulent transaction between Wincorp and Virata and/or
Power Merge, which, by the way, explains why the Supreme Court, in G.R. No. 162928, affirmed the writ
of attachment issued against the latter.

The affidavit, being the foundation of the writ, must contain such particulars as to how the fraud
imputed to respondent was committed for the court to decide whether or not to issue the writ. Absent
any statement of other factual circumstances to show that respondent, at the time of contracting the
obligation, had a preconceived plan or intention not to pay, or without any showing of how respondent
committed the alleged fraud, the general averment in the affidavit that respondent is an officer and
director of Wincorp who allegedly connived w/ the other defendants to commit a fraud, is insufficient to
support the issuance of a writ of preliminary attachment.

In the application for the writ under the said ground, compelling is the need to give a hint about what
constituted the fraud and how it was perpetrated because established is the rule that fraud is never
presumed. Verily, the mere fact that respondent is an officer and director of the company does not
necessarily give rise to the inference that he committed a fraud or that he connived with the other
defendants to commit a fraud.

While under certain circumstances, courts may treat a Corporation as a mere aggroupment of persons,
to whom liability will directly attach, this is only done when the wrongdoing has been clearly &
convincingly established.

Let it be stressed that the provisional remedy of preliminary attachment is harsh and rigorous for it
exposes the debtor to humiliation and annoyance. The rules governing its issuance are, therefore,
strictly construed against the applicant, such that if the requisites for its grant are not shown to be all
present, the court shall refrain from issuing it, for, otherwise, the court which issues it acts in excess of
its jurisdiction.

Likewise, the writ should not be abused to cause unnecessary prejudice. If it is wrongfully issued on the
basis of false or insufficient allegations, it should at once be corrected.

Considering, therefore, that, in this case, Petitioner has not fully satisfied the legal obligation to show
the specific acts constitutive of the alleged fraud committed by respondent, the trial court acted in
excess of its jurisdiction when it issued the writ of preliminary attachment against the properties of
respondent.

Torres vs Satsatin
G.R. No. 166759               November 25, 2009

FACTS: On October 25, 2002, the petitioners filed a complaint for a sum of money and damages against
herein respondents.

On October 30 2002, they filed an Ex-Parte Motition for the Issuance of a writ of preliminary attachment
alleging that the respondents are about to depart from the Philippines that there is no other sufficient
security for the claim sought to be enforced; and that they are willing to post a bond fixed by the court
to answer for all costs which may be adjudged to the respondents and all damages which respondents
may sustain by reason of the attachment prayed for.

On October 30, 2002, the trial court issued an Order directing the petitioners to post a bond in the
amount of P7,000,000.00 before the court issues the writ of attachment.

On November 15, 2002, petitioners filed a Motion for Deputation of Sheriff, informing the court that
they have already filed an attachment bond. They also prayed that a sheriff be deputized to serve the
writ of attachment that would be issued by the court.
In the Order dated November 15, 2002, the RTC granted the above motion and deputized the sheriff,
together with police security assistance, to serve the writ of attachment.

Thereafter, the RTC issued a Writ of Attachment dated November 15, 2002, directing the sheriff to
attach the estate, real or personal, of the respondents.

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

On November 21, 2002 or two days after the writ was implemented, summons, together with a copy of
the complaint, was served upon the respondents.

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

ISSUE1: W/N the bond was properly issued

HELD1: NO. The CA correctly found that there was grave abuse of discretion amounting to lack of or in
excess of jurisdiction on the part of the trial court in approving the bond posted by petitioners despite
the fact that not all the requisites for its approval were complied with. In accepting a surety bond, it is
necessary that all the requisites for its approval are met; otherwise, the bond should be rejected.

Every bond should be accompanied by a clearance from the Supreme Court showing that the company
concerned is qualified to transact business which is valid only for thirty (30) days from the date of
its issuance. However, it is apparent that the Certification issued by the Office of the Court Administrator
(OCA) at the time the bond was issued would clearly show that the bonds offered by Western Guaranty
Corporation may be accepted only in the RTCs of the cities of Makati, Pasay, and Pasig. Therefore, the
surety bond issued by the bonding company should not have been accepted by the RTC of Dasmariñas,
Branch 90, since the certification secured by the bonding company from the OCA at the time of the
issuance of the bond certified that it may only be accepted in the above-mentioned cities.

ISSUE2: W/N writ was properly implemented

HELD2: NO. In Cuartero v. Court of Appeals, this Court held that the grant of the provisional remedy of
attachment involves three stages: first, the court issues the order granting the application; second, the
writ of attachment issues pursuant to the order granting the writ; and third, the writ is implemented.
For the initial two stages, it is not necessary that jurisdiction over the person of the defendant be first
obtained. However, once the implementation of the writ commences, the court must have acquired
jurisdiction over the defendant, for without such jurisdiction, the court has no power and authority to
act in any manner against the defendant. Any order issuing from the Court will not bind the defendant
At the time the trial court issued the writ of attachment on November 15, 2002, it can validly to do so
since the motion for its issuance can be filed “at the commencement of the action or at any time before
entry of judgment.” However, at the time the writ was implemented, the trial court has not acquired
jurisdiction over the persons of the respondent since no summons was yet served upon them. The
proper officer should have previously or simultaneously with the implementation of the writ of
attachment, served a copy of the summons upon the respondents in order for the trial court to have
acquired jurisdiction upon them and for the writ to have binding effect. Consequently, even if the writ of
attachment was validly issued, it was improperly or irregularly enforced and, therefore, cannot bind and
affect the respondents.

Luzon Dev. Bank. Krishman

Facts:

Petitioners Luzon Development Bank, Tomas Clemente, and Oscar Ramirez (hereafter petitioners) are
the respondents in the complaint for Collection of Sum of Money and Damages filed by respondent
Erlinda Khrishnan (hereafter respondent Erlinda) on February 7, 2001.

Respondent Erlinda claimed that she is a client of respondent bank wherein she maintained several
accounts including time deposits. On several occasions, when respondent Erlinda presented her Time
Deposits Certificates amounting to P28,597,472.70 for payment because they have... become due,
petitioners refused to honor them for the reason that they were fraudulent. Respondent Erlinda likewise
applied for a Preliminary Writ of Attachment which the RTC granted on February 27, 2001.

By virtue of the writ, petitioner bank's accounts in BPI Family Bank, Calamba, Laguna in the amount of
P28,597,472.70 and its account amounting to P49,000,000.00 in the Central Bank were garnished.

On March 9, 2001, petitioners filed an urgent ex-parte Motion to Recall Quash and/or Lift Attachment or
Garnishment (in excess of amounts in the writ).

On August 15, 2001, petitioners filed an Omnibus Motion seeking the substitution of their garnished
account with government securities and the immediate resolution of their motion to discharge
attachment and setting the motion for hearing

On September 8, 2003, the RTC issued an order lifting the attachment

The said Order was questioned by respondent Erlinda by way of Petition for Certiorari before the 7th
Division which rendered a decision on November 15, 2006, the dispositive portion of which reads as
follows:... the PETITION FOR CERTIORARI is GRANTED.

On May 09, 2008, respondent judge issued an Order directing respondent Erlinda to file a new
attachment bond in the amount of P35,000,000.00 and petitioners to file a counterbond within ten days
from notice of the filing and approval of the bond of respondent Erlinda.

Respondent Erlinda filed her attachment bond on June 25, 2009 in the amount of P35,000,000.00
through Visayan Surety and Insurance Corporation which was approved by respondent on July 7, 2009.
Meanwhile, on July 3, 2009, petitioners filed an Omnibus Motion praying that a hearing be held to
determine the sufficiency of the attachment bond and they be allowed to deposit Certificates of Title of
real property, and the issuance of the writ of attachment be held in... abeyance.

On January 28, 2010, petitioners filed a motion to admit bank property in lieu of counterbond

On September 24, 2010, respondent judge denied petitioners' motion in the assailed Order.

On June 27, 2011, respondent judge issued an Order reinstating the Writ of Attachment dated March 1,
2001 for failure of petitioners to file the required counterbond.

petitioners filed this petition for certiorari

In a Decision dated March 27, 2012, the CA dismissed petitioners' certiorari petition and affirmed the
Orders of the RTC reinstating the Writ of Attachment for failure of petitioners to file the required
counter-bond. The CA ruled that the RTC judge committed no grave... abuse of discretion in denying
petitioners' motion to admit bank property in lieu of counter-bond

Issues:

whether the CA erred in affirming the RTC's decision which denied petitioners' motion praying that bank
property be deposited in lieu of cash or a counter-bond.

Ruling:

We rule in the negative.

once the writ of attachment has been issued, the only remedy of the petitioners in lifting the same is
through a cash deposit or the filing of the counter-bond. Thus, the Court holds that petitioner's
argument that it has the option... to deposit real property instead of depositing cash or filing a counter-
bond to discharge the attachment or stay the implementation thereof is unmeritorious.

In fact, in Security Pacific Assurance Corporation v. Tria-Infante, we held that one of the ways to secure
the discharge of an attachment is for the party whose property has been attached or a person appearing
on his behalf, to post a counterbond... or make the requisite cash deposit in an amount equal to that
fixed by the court in the order of attachment.

Apropos, the trial court aptly ruled that while it is true that the word deposit cannot only be confined or
construed to refer to cash, a broader interpretation thereof is not justified in the present case for the
reason that a party seeking a stay of the attachment under Section 5 is required to make a deposit in an
amount equal to the bond fixed by the court in the order of attachment or to the value of the property
to be attached. The proximate relation of the word "deposit" and "amount" is unmistakable in Section 5
of Rule 57. Plainly, in... construing said words, it can be safely concluded that Section 5 requires the
deposit of money as the word "amount" commonly refers to or is regularly associated with a sum of
money.

Norther Luzon Island Co. v. Garcia

The Facts
On September 23, 2005, petitioner Northern Islands Co., Inc. (petitioner) filed a Complaint with
application for a writ of preliminary attachment, before the RTC against respondents, docketed as Civil
Case No. Q-05-53699 (Main Case), which was subsequently amended on October 25, 2005. It alleged
that: (a) from March to July 2004, petitioner caused the delivery to respondents of various appliances in
the aggregate amount of P8,040,825.17; (b) the goods were transported, shipped, and delivered by
Sulpicio Lines, Inc., and were accepted in good order and condition by respondents’ representatives; (c) 
the parties agreed that the goods delivered were payable within 120 days, and that the unpaid amounts
would earn interest at a rate of eighteen percent (18%) per annum; (d) however, the value of the goods
were not paid by respondents despite repeated demands; and (e) respondents fraudulently asserted
that petitioner had no proof that they  had indeed received the quantity of the subject goods.

In connection with the application for a writ of preliminary attachment, petitioner posted a bond,
through Visayan Surety and Insurance Corporation, in the amount of 8,040,825.17.  On November 7,
2005, the RTC issued the writ sought for.

Instead of filing an answer, respondents filed on November 11, 2001, an Urgent Motion for Extension of
Time to File Proper Pleading and Motion for Discovery (Production and Inspection), asking the RTC to
allow them to photocopy and personally examine the original invoices, delivery cargo receipts, and bills
of lading attached to the Amended Complaint, claiming that they could not “come up with an intelligent
answer” without being presented with the originals of such documents.

Thereafter, or on January 11, 2006, respondents filed a Motion to Discharge Excess Attachment, alleging
that the attachment previously ordered by the RTC exceeded by P9,232,564.56 given that the estimated
value of the attached properties, including the garnished bank accounts, as assessed by their appraiser,
Gaudioso W. Lapaz (Lapaz), amounted to P17,273,409.73, while the attachment bond is only in the
amount of P8,040,825.17.

In an Order dated February 28, 2006, the RTC denied the November 11, 2001 Motion, and, instead,
directed respondents to file their answer, which the latter complied with through the filing of their
Answer Ad Cautelam Ex Abudante with Compulsory Counterclaim on April 3, 2006. Despite this,
respondents again filed a Motion for Leave of Court to File Motion for Discovery (Production and
Inspection) on April 7, 2006.20

The RTC Ruling

In an Order dated June 21, 2006, the RTC, among others, denied the Motion to Discharge Excess
Attachment, finding that the appraisal made by Lapaz was not reflective of the true valuation of the
properties, adding too that the bond posted by petitioner stands as sufficient security for whatever
damages respondents may sustain by reason of the attachment.

On the other hand, the RTC granted the Motion for Discovery in accordance with Rule 27 of the Rules of
Court, despite petitioner’s claim that it did not have the originals of the documents being sought.

However, no production or inspection was conducted on July 10, 2006 as the RTC directed since
respondents received the copy of the above order only on July 11, 2006.
On July 25, 2006, respondents filed a Motion for Partial Reconsideration of the Order dated June 21,
2006, specifically assailing the denial of their Motion to Discharge Excess Attachment. In this relation,
they prayed that the RTC refer to a commissioner, pursuant to Rule 32 of the Rules of Court, the factual
determination of the total aggregate amount of respondents’ attached properties so as to ascertain if
the attachment was excessive.  Also, they prayed that the order for production and inspection be
modified and that petitioner be ordered to produce the original documents anew for their inspection
and copying.

The foregoing motion was, however, denied by the RTC in an Order dated August 23, 2006 for lack of
merit. Thus, respondents elevated the matter to the CA via petition for certiorari and
mandamus, docketed as CA-G.R. SP No. 97448 (Certiorari Case).

In the interim, the RTC rendered a Decision dated September 21, 2011 in the Main Case. Essentially, it
dismissed petitioner’s Amended Complaint due to the absence of any evidence to prove that
respondents had agreed to the pricing of the subject goods.

The RTC’s September 21, 2011 Decision was later appealed by petitioner before the CA on October 27,
2011. Finding that the Notice of Appeal was seasonably filed, with the payment of the appropriate
docket fees, the RTC, in an Order dated January 25, 2012, ordered the elevation of the entire records of
the Main Case to the CA. The appeal was then raffled to the CA’s Eighth Division, and docketed as CA-
G.R. CV No. 98237. On the other hand, records do not show that respondents filed any appeal.

The CA Ruling in the Certiorari  Case

Meanwhile, the CA, in a Decision dated January 19, 2012, partly granted the certiorari petition of
respondents, ordering the RTC to appoint a commissioner as provided under Rule 32 of the Rules of
Court as well as the subsequent discharge of any excess attachment if so found therein, and, on the
other hand, denying respondents’ Motion for Discovery.

It held that: (a) on the issue of attachment, trial by commissioners under Rule 32 of the Rules of Court
was proper so that the parties may finally settle their conflicting valuations; 35 and (b) on the matter of
discovery, petitioner could not be compelled to produce the originals sought by respondents for
inspection since they were not in the former’s possession.

Aggrieved, petitioner filed a Motion for Partial Reconsideration 37 on February 13, 2012 but was,
however, denied in a Resolution dated August 24, 2012, hence, the present petition.

The Issues Before the Court

The issues presented for the Court’s resolution are: (a) whether the RTC had lost jurisdiction over the
matter of the preliminary attachment after petitioner appealed the decision in the Main Case, and
thereafter ordered the transmittal of the records to the CA; and (b) whether the CA erred in ordering the
appointment of a commissioner and the subsequent discharge of any excess attachment found by said
commissioner.
The Court’s Ruling

The petition is meritorious.

Section 9, Rule 41 of the Rules of Court provides that in appeals by notice of appeal, the court loses
jurisdiction over the case upon the perfection of the appeals filed in due time and the expiration of
the time to appeal of the other parties.

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

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

Note that in Sps. Olib v. Judge Pastoral,40 the Court, in view of the nature of a preliminary attachment,
definitively ruled that the attachment itself cannot be the subject of a separate action independent of
the principal action because the attachment was only an incident of such action, viz.:

Attachment is defined as a provisional remedy by which the property of an adverse party is taken into
legal custody, either at the commencement of an action or at any time thereafter, as a security for the
satisfaction of any judgment that may be recovered by the plaintiff or any proper party.

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

The consequence is that where the main action is appealed, the attachment which may have been
issued as an incident of that action, is also considered appealed and so also removed from the
jurisdiction of the court a quo.  The attachment itself cannot be the subject of a separate action
independent of the principal action because the attachment was only an incident of such action.
That being said, it is now unnecessary to discuss the other issues raised herein. In fine, the petition is
granted and the assailed CA rulings are set aside.

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

Facts:

Sometime in June 1997, Watercraft hired respondent Alfred Raymond Wolfe (Wolfe), a British national
and resident of Subic Bay Freeport Zone, Zambales, as its Shipyard Manager.

During his employment, Wolfe stored the sailboat, Knotty Gull, within Watercraft’s boat storage
facilities, but never paid for the storage fees.

On March 7, 2002, Watercraft terminated the employment of Wolfe.

Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft's storage facilities after signing a
Boat Pull-Out Clearance dated June 29, 2002 where he allegedly acknowledged the outstanding
obligation of Sixteen Thousand Three Hundred and Twenty-Four and 82/100 US

Dollars (US$16,324.82) representing unpaid boat storage fees for the period of June 1997 to June 2002.
Despite repeated demands, he failed to pay the said amount.

Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint for Collection of Sum of Money with
Damages with an Application for the Issuance of a Writ of Preliminary Attachment.

In his Answer, Wolfe... denied owing Watercraft the amount of US$16,324.82 representing storage fees
for the sailboat. He explained that the sailboat was purchased in February 1998 as part of an...
agreement between him and Watercraft’s then General Manager, Barry Bailey, and its President, Ricky
Sandoval, for it to be repaired and used as training or fill-in project for the staff, and to be sold later on.
He added that pursuant to a central Listing Agreement for the sale... of the sailboat, he was appointed
as agent, placed in possession thereof and entitled to a ten percent (10%) sales commission. He insisted
that nowhere in the agreement was there a stipulation that berthing and storage fees will be charged
during the entire time that the... sailboat was in Watercraft's dockyard.

He pointed out that the complaint was an offshoot of an illegal dismissal case he... filed against
Watercraft which had been decided in his favor by the Labor Arbiter.

Meanwhile, finding Watercraft's ex-parte application for writ of preliminary attachment sufficient in
form and in substance pursuant to Section 1 of Rule 57 of the Rules of Court, the RTC granted the same
in the Order dated July 15, 2005.

Pursuant to the Order dated July 15, 2005, the Writ of Attachment dated August 3, 2005 and the Notice
of Attachment dated August 5, 2005 were issued, and Wolfe's two vehicles, a gray Mercedes Benz with
plate number XGJ 819 and a maroon Toyota Corolla with plate number TFW 110,... were levied upon.

On August 12, 2005, Wolfe's accounts at the Bank of the Philippine Islands were also garnished.

On November 8, 2005, Wolfe filed a Motion to Discharge the Writ of Attachment, arguing that
Watercraft failed to show the existence of fraud and that the mere failure to pay or perform an
obligation does not amount to fraud. He also claimed that he is not a flight risk for the... following
reasons: (1) contrary to the claim that his Special Working Visa expired in April 2005, his Special Subic
Working Visa and Alien Certificate of Registration are valid until April 25, 2007 and May 11, 2006,
respectively; (2) he and his family have been residing in the Philippines since 1997; (3) he is an existing
stockholder and officer of Wolfe Marine Corporation which is registered with the Securities and
Exchange Commission, and a consultant of "Sudeco/Ayala" projects in Subic, a member of the
Multipartite Committee for the new port... development in Subic, and the Subic Chamber of Commerce;
and (4) he intends to finish prosecuting his pending labor case against Watercraft.

In an Order dated March 20, 2006, the RTC denied Wolfe's Motion to Discharge Writ of Attachment and
Motion for Preliminary Hearing for lack of merit.

Wolfe filed a petition for certiorari before the CA.

The CA granted Wolfe's petition in a Decision dated September 2007

The CA ruled that the act of issuing the writ of preliminary attachment ex-parte constitutes grave abuse
of discretion on the part of the RTC.

In the instant case, the Affidavit of Merit executed by Rosario E. Rañoa, Watercraft's Vice-President,
failed to show fraudulent intent on the part of Wolfe to defraud the company. It merely enumerated the
circumstances tending to show the alleged possibility of Wolfe's flight... from the country. And upon
Wolfe's filing of the Motion to Discharge the Writ, what the respondent Judge should have done was to
determine, through a hearing, whether the allegations of fraud were true.

As correctly noted by Wolfe, although Sec. 1 of Rule 57 allows a party to invoke fraud as a ground for the
issuance of a writ of attachment, the Rules require that in all averments of fraud, the circumstances
constituting fraud must be stated with particularity, pursuant to Rule 8, Section 5.

Wolfe's mere failure to pay the boat... storage fees does not necessarily amount to fraud, absent any
showing that such failure was due to [insidious] machinations and intent on his part to defraud
Watercraft of the amount due it.

As to the allegation that Wolfe is a flight risk, thereby warranting the issuance of the writ, the same lacks
merit.

Circumstances... should have convinced the trial court that Wolfe would not want to... leave the country
at will just because a suit for the collection of the alleged unpaid boat storage fees has been filed against
him by Watercraft.

Neither should the fact that Wolfe's Special Working Visa expired in April 2005 lead automatically to the
conclusion that he would leave the country. It is worth noting that all visas issued by the government to
foreigners staying in the Philippines have expiration periods.

These visas, however, may be renewed, subject to the requirements of the law. In Wolfe's case, he
indeed renewed his visa

Issues:

WHETHER THE EX-PARTE ISSUANCE OF THE PRELIMINARY ATTACHMENT BY THE TRIAL COURT IN FAVOR
OF THE PETITIONER IS VALID.
WHETHER THE ALLEGATIONS IN THE AFFIDAVIT OF MERIT CONCERNING FRAUD ARE SUFFICIENT TO
WARRANT THE ISSUANCE OF A PRELIMINARY WRIT OF ATTACHMENT BY THE TRIAL COURT IN FAVOR OF
THE PETITIONER.

Ruling:

The petition lacks merit.

The Court agrees with the CA that Watercraft failed to state with particularity the circumstances
constituting fraud, as required by Section 5, Rule 8 of the Rules of Court, and that Wolfe's mere... failure
to pay the boat storage fees does not necessarily amount to fraud, absent any showing that such failure
was due to insidious machinations and intent on his part to defraud Watercraft of the amount due it.

In Liberty Insurance Corporation v. Court of Appeals, the Court explained that to constitute a ground for
attachment in Section 1(d), Rule 57 of the Rules of Court, it must be shown that the debtor in
contracting the debt or incurring the... obligation intended to defraud the creditor. A debt is
fraudulently contracted if at the time of contracting it, the debtor has a preconceived plan or intention
not to pay. "The fraud must relate to the execution of the agreement and must have been the reason
which induced the... other party into giving consent which he would not have otherwise given."

Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach of the senses,
usually kept secret, very unlikely to be confessed, and therefore, can only be proved by unguarded
expressions, conduct and circumstances. Thus, the... applicant for a writ of preliminary attachment must
sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be
inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation.

The particulars of such circumstances necessarily include the time, persons, places and specific acts of
fraud committed. An affidavit which does not contain concrete and specific grounds is inadequate to
sustain the issuance of such writ. In fact, mere... general averments render the writ defective and the
court that ordered its issuance acted with grave abuse of discretion amounting to excess of jurisdiction.

In this case, Watercraft's Affidavit of Preliminary Attachment does not contain specific allegations of
other factual circumstances to show that Wolfe, at the time of contracting the obligation, had a
preconceived plan or intention not to pay. Neither can it be inferred from... such affidavit the particulars
of why he was guilty of fraud in the performance of such obligation. To be specific, Watercraft's
following allegation is unsupported by any particular averment of circumstances that will show why or
how such inference or conclusion was arrived at,... to wit: “For failing to pay for the use [of] facilities and
services - in the form of boat storage facilities - duly enjoyed by him and for failing and refusing to fulfill
his promise to pay for the said boat storage fees, the Defendant is clearly guilty of fraud x x... x." It is not
an allegation of essential facts constituting Watercraft's causes of action, but a mere conclusion of law.

With respect to Section 1 (a), Rule 57, the other ground invoked by Watercraft for the issuance of the
writ of preliminary attachment, the Court finds no compelling reason to depart from the CA's exhaustive
ruling to the effect that such writ is... unnecessary because Wolfe is not a flight risk

Meanwhile, Watercraft's reliance on Chuidian v. Sandiganbayan is displaced. It is well settled that:...

when the preliminary attachment is issued upon a ground which is at the same time the applicant's
cause of action... the defendant is not allowed to file a motion to dissolve the attachment under Section
13 of Rule 57 by offering to show the falsity of the factual averments in the plaintiffs application and
affidavits on... which the writ was based - and consequently that the writ based thereon 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.

the foregoing rule is not applicable in this case because when Wolfe filed a motion to dissolve the writ of
preliminary attachment, he did not offer to show the falsity of the factual averments in Watercraft's
application and affidavit on which the writ was... based. Instead, he sought the discharge of the writ on
the ground that Watercraft failed to particularly allege any circumstance amounting to fraud. No trial on
the merits of the action at a mere hearing of such motion will be had since only the sufficiency of the
factual... averments in the application and affidavit of merit will be examined in order to find out
whether or not Wolfe was guilty of fraud in contracting the debt or incurring the obligation upon which
the action is brought, or in the performance thereof.

Furthermore, the other ground upon which the writ of preliminary attachment was issued by the RTC is
not at the same time the applicant's cause of action. Assuming arguendo that the RTC was correct in
issuing such writ on the ground that Watercraft's complaint involves an... action for the recovery of a
specified amount of money or damages against a party, like Wolfe, who is about to depart from the
Philippines with intent to defraud his creditors, the Court stresses that the circumstances cited in
support thereof are... merely allegations in support of its application for such writ. Such circumstances,
however, are neither the core of Watercraft's complaint for collection of sum of money and damages,
nor one of its three (3) causes of action therein.

Phil. Airconditioning Center v. RCG Lines

Facts:

On various dates between March 5, 1990, and August 29, 1990, petitioner Phil-Air sold to respondent
RCJ Lines four Carrier Paris 240 air-conditioning units for buses (units).

RCJ Lines paid P400,000.00, leaving a balance of P840,000.00.

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

Phil-Air allegedly performed regular maintenance checks on the units pursuant to the one-year warranty
on parts and labor. After some months from installation, Phil-Air supposedly boosted the capacity of the
units by upgrading them to the Carrier Paris 280 model. It also purportedly repaired the control switch
panel of one of the units for an additional cost of P60,000.00.

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

All the post-dated checks were dishonored when Phil-Air subsequently presented them for payment.

Phil-Air sent a demand letter to Rolando Abadilla, Sr. on April 7, 1992, asking him to fund the post-dated
checks.
On July 17, 1996, Phil-Air demanded payment from Rolando Abadilla, Jr., for the total amount of
P734,994.00... plus interest

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

In its answer with compulsory counterclaim, RCJ Lines admitted that it purchased the units in the total
amount of PI,240,000.00 and that it had only paid P400,000.00. It refused to pay the balance because
Phil-Air allegedly breached its... warranty.

RCJ Lines averred that the units did not sufficiently cool the buses despite repeated repairs.

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

The RTC granted the application for the issuance of a writ of preliminary attachment after Phil-Air
posted an attachment bond in the amount of P1,656,000.00. Two buses of RCJ Lines were attached
pursuant to the writ dated December 18, 1998. The writ was executed on April 21, 1999. The
attachment, however, was later lifted when the RTC granted RCJ Lines' urgent motion to discharge the
writ of attachment. RCJ Lines posted a counter-bond in the same... amount as the attachment bond.

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

The CA affirmed the RTC decision in toto.

Issues:

Whether Phil-Air should reimburse RCJ Lines for the counter- bond premium and its alleged unrealized
profits;

Whether RCJ Lines proved its alleged unrealized profits arising from the enforcement of the preliminary
writ of attachment; and

Ruling:

Phil-Air is not directly liable... for the counter-bond premium and RCJ Lines' alleged unrealized profits.

Granting that RCJ Lines suffered losses, the judgment award should have been first executed on the
attachment bond. Only if the attachment bond... is insufficient to cover the judgment award can Phil-Air
be held liable.

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

The enforcement of the writ notwithstanding, the party whose property is attached is afforded relief to
have the attachment lifted.
There are various modes of discharging an attachment under Rule 57, viz.: (1) by depositing cash or
posting a counter-bond under Section 12;[52] (2) by proving that the attachment bond was improperly
or irregularly issued or enforced, or that the... bond is insufficient under Section 13; (3) by showing that
the attachment is excessive under Section 13; and (4) by claiming that the property is exempt from
execution under Section 2.

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

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

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

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

To be clear, the discharge of the attachment by depositing cash or posting a counter-bond under Section
12 should not be confused with the discharge sanctioned under Section 13. Section 13 speaks of
discharge on the ground that the writ was improperly or irregularly issued or... enforced, or that the
attachment bond is insufficient, or that the attachment is excessive.

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

These differences notwithstanding, the discharge of the preliminary attachment either through Section
12 or Section 13 has no effect on and does not discharge the attachment bond. The dissolution of the
preliminary attachment does not result in the dissolution of the... attachment bond.

The dissolution of the preliminary attachment upon security given [Section 12], or a showing of its
irregular or improper issuance [Section 13], does not of course operate to discharge the sureties on
plaintiffs own attachment bond. The reason is... simple. That bond is executed to the adverse party,. . .
conditioned that the ... (applicant) will pay all the costs which may be adjudged to the adverse party and
all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the
applicant... was not entitled thereto." Hence, until that determination is made, as to the applicant's
entitlement to the attachment, his bond must stand and cannot be withdrawn.

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

We reverse the CA and RTC rulings.

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

Thus, Phil-Air cannot be held directly liable for the costs adjudged to and the damages sustained by RCJ
Lines because of the attachment. Section 4 of Rule 57 positively lays down the rule that the attachment
bond will pay "all the costs which may be adjudged to the... adverse party and all damages which he
may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not
entitled thereto."

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

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