PROVISIONAL REMEDY CASES

JDP
G.R. No. 197802, November 11, 2015

ZUNECA PHARMACEUTICAL, AKRAM ARAIN AND/OR VENUS ARAIN,

M.D. DBA ZUNECA PHARMACEUTICAL, Petitioners, v. NATRAPHARM, INC.,
Respondent.

RESOLUTION

VILLARAMA, JR., J.:

This is a petition for review1 under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the April 18, 2011 Decision2 and July 21, 2011 Resolution3
of the Court of Appeals (CA) in the petition for certiorari docketed as CA-G.R.
SP No. 103333 granting a permanent injunction in favor of respondent
Natrapharm, Inc. and against petitioner Zuneca Pharmaceutical.

The facts follow:

Respondent is an all-Filipino pharmaceutical company which manufactures and

sells a medicine bearing the generic name "CITICOLINE," which is indicated for
heart and stroke patients. The said medicine is marketed by respondent under
its registered trademark "ZYNAPSE," which respondent obtained from the
Intellectual Property Office (IPO) on September 24, 2007 under Certificate of
Trademark Registration No. 4-2007-005596. With its registration, the
trademark "ZYNAPSE" enjoys protection for a term of 10 years from September
24, 2007.

In addition, respondent obtained from the Bureau of Food and Drugs (BFAD) all
necessary permits and licenses to register, list and sell its "ZYNAPSE" medicine
in its various forms and dosages.

Allegedly unknown to respondent, since 2003 or even as early as 2001,

petitioners have been selling a medicine imported from Lahore, Pakistan bearing
the generic name "CARBAMAZEPINE," an anti-convulsant indicated for epilepsy,
under the brand name "ZYNAPS," which trademark is however not registered
with the IPO. "ZYNAPS" is pronounced exactly like "ZYNAPSE."

Respondent further alleged that petitioners are selling their product "ZYNAPS"
CARBAMAZEPINE in numerous drugstores in the country where its own product
"ZYNAPSE" CITICOLINE is also being sold.

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Moreover, respondent claimed that the drug CARBAMAZEPINE has one
documented serious and disfiguring side-effect called "Stevens-Johnson
Syndrome," and that the sale of the medicines "ZYNAPSE" and "ZYNAPS" in the
same drugstores will give rise to medicine switching.8

On October 30, 2007, respondent sent petitioners a cease-and-desist demand

letter, pointing out that:

a. "ZYNAPSE" is the registered trademark of [respondent], and that as such

owner, it has exclusive trademark right under the law to the use thereof
and prevent others from using identical or confusingly similar marks, and
that [petitioners] must stop the use of "ZYNAPS" for being nearly identical
to "ZYNAPSE"; and

b. Because there is confusing similarity between "ZYNAPSE" and "ZYNAPS,"

there is a danger of medicine switching, with the patient on "ZYNAPSE"
medication placed in a more injurious situation given the Steven-Johnson
Syndrome side effect of the "ZYNAPS" CARBAMAZEPINE.9

Petitioners refused to heed the above demand, claiming that they had prior use
of the name "ZYNAPS" since year 2003, having been issued by the BFAD a
Certificate of Product Registration (CPR) on April 15, 2003, which allowed them
to sell CARBAMAZEPINE under the brand name "ZYNAPS."10

On November 29, 2007, respondent filed a complaint against petitioners for

trademark infringement for violation of Republic Act (R.A.) No. 8293, or the
Intellectual Property Code of the Philippines (IPC), with prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction. To justify the
TRO/writ of preliminary injunction, respondent cited Section 122 11 of R.A. No.
8293, under which the registration of "ZYNAPSE" gives it the exclusive right to
use the said name as well as to exclude others from using the same.12 In
addition, respondent argued that under Sections 13813 and 147.114 of the IPC,
certificates of registration are prima facie evidence of the registrant's ownership
of the mark and of the registrant's exclusive right to use the same.15 Respondent
also invoked the case of Conrad and Company, Inc. v. Court of Appeals16 where
it was ruled that an invasion of a registered mark entitles the holder of a
certificate of registration thereof to injunctive relief.17

In their answer, petitioners argued that they enjoyed prior use in good faith of
the brand name "ZYNAPS," having submitted their application for CPR with the
BFAD on October 2, 2001, with the name "ZYNAPS" expressly indicated thereon.

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The CPR was issued to them on April 15, 2003.18 Moreover, petitioners averred
that under Section 15919 of the IPC their right to use the said mark is protected.

In its December 21, 2007 Order,21 the Regional Trial Court (RTC) denied
respondent's application for a TRO, ruling that even if respondent was able to
first register its mark "ZYNAPSE" with the IPO in 2007, it is nevertheless
defeated by the prior actual use by petitioners of "ZYNAPS" in 2003.

In its March 12, 2008 Order,22 the RTC denied the application for a writ of
preliminary injunction, reiterating the reasons stated in the order denying the
application for a TRO:

In this Court's objective evaluation, neither party is, at this point, entitled to
any injunctive solace. Plaintiff, while admittedly the holder of a registered
trademark under the IPC, may not invoke ascendancy or superiority of its CTR
[certificate of trademark registration] over the CPR [certificate of product
registration of the BFAD] of the defendants, as the latter certificate is, in the
Court's opinion, evidence of its "prior use". Parenthetically, the plaintiff would
have been entitled to an injunction as against any or all third persons in respect
of its registered mark under normal conditions, that is, in the event wherein
Section 159.1 would not be invoked by such third person. Such is the case
however in this litigation. Section 159 of the IPC explicitly curtails the
registrant's rights by providing for limitations on those rights as against a "prior
user" under Section 159.1 xxx.23

Via a petition for certiorari with an application for a TRO and/or a writ of
preliminary injunction, respondent questioned before the CA the RTC's denial of
the application for a writ of preliminary injunction.

On June 17, 2008, the CA issued a Resolution24 denying respondent's application

for TRO and/or preliminary injunction for lack of merit. The CA found no
compelling reason to grant the application for TRO and/or preliminary injunction
because there was no showing that respondent had a clear and existing right
that will be violated by petitioners. Respondent moved for reconsideration but
was denied by the CA in its July 31, 2008 Resolution.25cralawred

However, contrary to its earlier resolutions denying the application for a

TRO/preliminary injunction, the CA, in its April 18, 2011 Decision, upheld the
allegations of respondent that it is entitled to injunctive relief on the basis of its

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IPO registration and permanently enjoined petitioners from the commercial use
of "ZYNAPS." The fallo of the CA Decision reads:

WHEREFORE, premises considered, the Petition for Certiorari is GRANTED.

The assailed Omnibus Order dated 12 March 2008 of the Regional Trial Court,
Branch 93 of Quezon City in Civil Case No. Q-07-61561 is REVERSED and SET
ASIDE, and a new one is entered permanently ENJOINING defendants-
respondents, their employees, agents, representatives, dealers, retailers,
and/or assigns, and any and all persons acting in their behalf, from
manufacturing, importing, distributing, selling and/or advertising for sale, or
otherwise using in commerce, the anti-convulsant drug CARBAMAZEPINE
under the brand name and mark "ZYNAPS," or using any other name which is
similar or confusingly similar to petitioner's registered trademark "ZYNAPSE,"
including filing of application for permits, license, or certificate of product
registration with the Food and Drug Administration and other government
agencies.

SO ORDERED.26 (Underscoring and additional emphasis supplied)

Petitioners' motion for reconsideration was denied by the CA in its Resolution

dated July 21, 2011

Hence, this petition for review.

On December 2, 2011, the RTC rendered a Decision27 on the merits of the case.
It found petitioners liable to respondent for damages. Moreover, it enjoined the
petitioners from using "ZYNAPS" and ordered all materials related to it be
disposed outside the channel of commerce or destroyed without
compensation.28

Respondent moved to dismiss the present petition in view of the December 2,

2011 RTC Decision which functions as a full adjudication on the merits of the
main issue of trademark infringement. Respondent contended that the present
petition is moot and academic, it only involving an ancillary writ.29

Petitioners, on the other hand, opposed the motion to dismiss arguing that the
December 2, 2011 RTC Decision had not yet attained finality, thus, the present
petition had not yet been rendered moot
The two issues which need to be addressed are:

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1) Whether the decision on the merits rendered the issues in this case moot and
academic? And

2) Whether the CA may order a permanent injunction in deciding a petition

for certiorari against the denial of an application for a preliminary injunction
issued by the RTC?

We hold that the issues raised in the instant petition have been rendered moot
and academic given the RTC's December 2, 2011 Decision on the merits of the
case.

Rule 58 of the Rules of Court provides for both preliminary and permanent
injunction. Section 1, Rule 58 provides for the definition of preliminary
injunction:

SECTION 1. Preliminary injunction defined; classes. A preliminary injunction

is an order granted at any stage of an action or proceeding prior to the
judgment or final order, requiring a party or a court, agency or a person
to refrain from a particular act or acts. It may also require the performance
of a particular act or acts, in which case it shall be known as a preliminary
mandatory injunction. (Emphasis supplied)

On the other hand, Section 9 of the same Rule defines a permanent injunction
in this wise:

SEC. 9. When final injunction granted. If after the trial of the action it
appears that the applicant is entitled to have the act or acts complained of
permanently enjoined, the court shall grant a final injunction perpetually
restraining the party or person enjoined from the commission or continuance of
the act or acts or confirming the preliminary mandatory injunction. (Emphasis
supplied)

A writ of preliminary injunction is generally based solely on initial and incomplete

evidence.30 The evidence submitted during the hearing on an application for a
writ of preliminary injunction is not conclusive or complete for only a sampling
is needed to give the trial court an idea of the justification for the preliminary
injunction pending the decision of the case on the merits.31 As such, the findings
of fact and opinion of a court when issuing the writ of preliminary injunction are
interlocutory in nature and made even before the trial on the merits is
commenced or terminated.32

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By contrast a permanent injunction, based on Section 9, Rule 58 of the Rules of
Court, forms part of the judgment on the merits and it can only be properly
ordered only on final judgment. A permanent injunction may thus be granted
after a trial or hearing on the merits of the case and a decree granting or refusing
an injunction should not be entered until after a hearing on the merits where a
verified answer containing denials is filed or where no answer is required, or a
rule to show cause is equivalent to an answer.33

As such a preliminary injunction, like any preliminary writ and any interlocutory
order, cannot survive the main case of which it is an incident; because an
ancillary writ of preliminary injunction loses its force and effect after the decision
in the main petition.34

In Casilan v. Ybaez,35 this Court stated:

As things stand now, this Court can no longer interfere with the preliminary
injunctions issued by the Leyte court in its cases Nos. 2985 and 2990, because
such preliminary writs have already been vacated, being superseded and
replaced by the permanent injunction ordered in the decision on the merits
rendered on 21 March 1962. And as to the permanent injunction, no action
can be taken thereon without reviewing the judgment on the merits,
such injunction being but a consequence of the pronouncement that the credits
of Tiongson and Montilla are entitled to priority over that of Casilan. Since the
court below had the power and right to determine such question of
preference, its judgment is not without, nor in excess of, jurisdiction;
and even assuming that its findings are not correct, they would, at most,
constitute errors of law, and not abuses of discretion, correctible by
certiorari . The obvious remedy for petitioner Casilan was a timely
appeal from the judgment on the merits to the Court of Appeals, the amount
involved being less than P200,000. But the judgment has become final and
unappealable and can not be set aside through certiorari proceedings.
(Emphasis supplied)

Here, this Court is being asked to determine whether the CA erred by issuing a
permanent injunction in a case which questioned the propriety of the denial of
an ancillary writ. But with the RTC's December 2, 2011 Decision on the case for
"Injunction, Trademark Infringement, Damages and Destruction," the issues
raised in the instant petition have been rendered moot and academic. We note
that the case brought to the CA on a petition for certiorari merely involved the
RTC's denial of respondent's application for a writ of preliminary injunction, a
mere ancillary writ. Since a decision on the merits has already been rendered

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and which includes in its disposition a permanent injunction, the proper remedy
is an appeal36 from the decision in the main case.

WHEREFORE, in light of all the foregoing, the petition is hereby DENIED for
being moot and academic. SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin,* Leonen,** and Jardeleza, JJ., concur.

G.R. No. 171624 December 6, 2010

BF HOMES, INC. and the PHILIPPINE WATERWORKS AND CONSTRUCTION CORP.,

Petitioners, vs.MANILA ELECTRIC COMPANY, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision1 dated October 27, 2005 of the Court of Appeals in CA-G.R. SP No. 82826,
nullifying and setting aside (1) the Order2 dated November 21, 2003 of the Regional Trial
Court (RTC), Branch 202 of Las Pias City, in Civil Case No. 03-0151, thereby dissolving
the writ of injunction against respondent Manila Electric Company (MERALCO); and (2) the
Resolution3 dated February 7, 2006 of the Court of Appeals denying the Motion for
Reconsideration of petitioners BF Homes, Inc. (BF Homes) and Philippine Waterworks and
Construction Corporation (PWCC).

MERALCO is a corporation duly organized and existing under Philippine laws engaged in
the distribution and sale of electric power in Metro Manila. On the other hand, BF Homes
and PWCC are owners and operators of waterworks systems delivering water to over
12,000 households and commercial buildings in BF Homes subdivisions in Paraaque City,
Las Pias City, Caloocan City, and Quezon City. The water distributed in the waterworks
systems owned and operated by BF Homes and PWCC is drawn from deep wells using
pumps run by electricity supplied by MERALCO.

On June 23, 2003, BF Homes and PWCC filed a Petition [With Prayer for the Issuance of
Writ of Preliminary Injunction and for the Immediate Issuance of Restraining Order] against
MERALCO before the RTC, docketed as Civil Case No. 03-0151.

In their Petition before the RTC, BF Homes and PWCC invoked their right to refund based
on the ruling of this Court in Republic v. Manila Electric Company4:

7. It is of judicial notice that on November 15, 2002, in G.R. No. 141314,

entitled Republic of the Philippines vs. Manila Electric Company, and G.R. No.
141369, entitled Lawyers Against Monopoly and Poverty (LAMP) et al. vs.

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Manila Electric Compnay (MERALCO), (both cases shall hereafter be referred
to as "MERALCO Refund cases," for brevity), the Supreme Court ordered
MERALCO to refund its customers, which shall be credited against the
customers future consumption, the excess average amount of P0.167 per
kilowatt hour starting with the customers billing cycles beginning February
1998. The dispositive portion of the Supreme Court Decision in the MERALCO
Refund cases reads:

WHEREFORE, in view of the foregoing, the instant petitions are GRANTED

and the decision of the Court of Appeals in C.A. G.R. SP No. 46888 is
REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment
in the amount of P0.017 kilowatthour, effective with respect to MERALCOs
billing cycles beginning February 1994. Further, in accordance with the
decision of the ERB dated February 16, 1998, the excess average amount of
P0.167 per kilowatt hour starting with the applicants billing cycles beginning
February 1998 is ordered to be refunded to MERALCOs customers or
correspondingly credited in their favor for future consumption.

x x x x.

8. The Motion for Reconsideration filed by MERALCO in the MERALCO

Refund cases was DENIED WITH FINALITY (the uppercase letters were used
by the Supreme Court) in the Resolution of the Supreme Court dated April 9,
2003.

9. The amount that MERALCO was mandated to refund to [BF Homes and
PWCC] pursuant to the MERALCO Refund cases is in the amount of
P11,834,570.91.5

BF Homes and PWCC then alleged in their RTC Petition that:

10. On May 20, 2003, without giving any notice whatsoever, MERALCO
disconnected electric supply to [BF Homes and PWCCs] sixteen (16) water
pumps located in BF Homes in Paraaque, Caloocan, and Quezon City, which
thus disrupted water supply in those areas.

11. On June 4, 2003, [BF Homes and PWCC] received by facsimile

transmission a letter from MERALCO, x x x, in which MERALCO demanded
to [BF Homes and PWCC] the payment of electric bills amounting to
P4,717,768.15.

12. [MERALCO] replied in a letter dated June 11, 2003, x x x, requesting

MERALCO to apply the P4,717,768.15 electric bill against the
P11,834,570.91 that MERALCO was ordered to refund to [BF Homes and
PWCC] pursuant to the MERALCO Refund cases. x x x

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13. Displaying the arrogance that has become its distinction, MERALCO, in
its letter dated June 16, 2003, x x x, denied [BF Homes and PWCCs] request
alleging that it has not yet come up with the schedule for the refund of large
amounts, such as those of [BF Homes and PWCC].

14. Even while MERALCO was serving its reply-letter to [BF Homes and
PWCC], MERALCO, again, without giving any notice, cut off power supply to
[BF Homes and PWCCs] five (5) water pumps located in BF Homes
Paraaque and BF Resort Village, in Pamplona, Las Pias City.

15. In its letter dated June 4, 2003 (Annex A), MERALCO threatened to cut
off electric power connections to all of [BF Homes and PWCCs] water pumps
if [BF Homes and PWCC] failed to pay their bills demanded by MERALCO by
June 20, 2003.6

BF Homes and PWCC thus cited the following causes of action for their RTC
Petition:

16. In refusing to apply [MERALCOs] electric bills against the amounts that it
was ordered to refund to [BF Homes and PWCC] pursuant to the MERALCO
Refund cases and in making the implementation of the refund ordered by the
Supreme Court dependent upon its own will and caprice, MERALCO acted
with utmost bad faith.

17. [BF Homes and PWCC] are clearly entitled to the remedies under the law
to compel MERALCO to consider [BF Homes and PWCCs] electric bills fully
paid by the amounts which MERALCO was ordered to refund to [BF Homes
and PWCC] pursuant to the MERALCO Refund cases, to enjoin MERALCO
to reconnect electric power to all of [BF Homes and PWCCs] water pumps,
and to order MERALCO to desist from further cutting off power connection to
[BF Homes and PWCCs] water pumps.

18. MERALCOs unjust and oppressive acts have cast dishonor upon [BF
Homes and PWCCs] good name and besmirched their reputation for which
[BF Homes and PWCC] should be indemnified by way of moral damages in
the amount of not less than P1,000,000.00.

19. As an example for the public good, to dissuade others from emulating
MERALCOs unjust, oppressive and mercenary conduct, MERALCO should
be directed to pay [BF Homes and PWCC] exemplary damages of at least
P1,000,000.00.

20. MERALCOs oppressive and inequitable conduct forced [BF Homes and
PWCC] to engage the services of counsel to defend their rights and thereby

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 incur litigation expenses in the amount of at least P500,000.00 for which [BF
Homes and PWCC] should be indemnified.7

BF Homes and PWCC additionally prayed that the RTC issue a writ of
preliminary injunction and restraining order considering that:

21. As indicated in its letter dated June 4, 2003 (Annex A), unless seasonably
restrained, MERALCO will cut off electric power connections to all of [BF
Homes and PWCCs] water pumps on June 20, 2003.

22. Part of the reliefs herein prayed for is to restrain MERALCO from cutting
off electric power connections to [BF Homes and PWCCs] water pumps.

23. Unless MERALCOS announced intention to cut off electric power

connections to [BF Homes and PWCCs] water pumps is restrained, [BF
Homes and PWCC] will suffer great and irreparable injury because they would
not [be] able to supply water to their customers.

24. [BF Homes and PWCC] therefore pray that a writ for preliminary injunction
be issued upon posting of a bond in an amount as will be determined by this
Honorable Court.

25. [BF Homes and PWCC] further pray that, in the meantime and immediately
upon the filing of the above captioned Petition, a restraining order be issued
before the matter of preliminary injunction can be heard.8

On August 15, 2003, MERALCO filed before the RTC its Answer with Counterclaims and
Opposition to the Application for Writ of Preliminary Injunction 9 of BF Homes and PWCC.

According to MERALCO:

2.2. Both petitioners BF Homes, Incorporated and Philippine Waterworks

Corporation are admittedly the registered customers of [MERALCO] by virtue
of the service contracts executed between them under which the latter
undertook to supply electric energy to the former for a fee. The following
twenty-three (23) Service Identification Nos. (SINs) are registered under the
name of BF Homes, Incorporated: x x x. While the following twenty-one (21)
Service Identification Nos. (SINs) are registered under the name of Philippine
Waterworks Construction Corporation: x x x

xxxx

2.4. The service contracts as well as the terms and conditions of

[MERALCOs] service as approved by BOE [Board of Energy], now ERC

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 [Energy Regulatory Commission], provide in relevant parts, that [BF Homes
and PWCC] agree as follows:

DISCONTINUANCE OF SERVICE:

The Company reserves the right to discontinue service in case the customer is in arrears in
the payment of bills or for failure to pay the adjusted bills in those cases where the meter
stopped or failed to register the correct amount of energy consumed, or for failure to comply
with any of these terms and conditions, or in case of or to prevent fraud upon the Company.
Before disconnection is made in the case of, or to prevent fraud, the Company may adjust
the bill of said customer accordingly and if the adjusted bill is not paid, the Company may
disconnect the same." (Emphasis supplied)

2.5. This contractual right of [MERALCO] to discontinue electric service for

default in the payment of its regular bills is sanctioned and approved by the
rules and regulations of ERB (now the ERC). This right is necessary and
reasonable means to properly protect and enable [MERALCO] to perform and
discharge its legal and contractual obligation under its legislative franchise
and the law. Cutting off service for non-payment by the customers of the
regular monthly electric bills is the only practical way a public utility, such as
[MERALCO], can ensure and maintain efficient service in accordance with the
terms and conditions of its legislative franchise and the law.

xxxx

2.14. Instead of paying their unpaid electric bills and before [MERALCO] could
effect its legal and contractual right to disconnect [BF Homes and PWCCs]
electric services, [BF Homes and PWCC] filed the instant petition to avoid
payment of [MERALCOs] valid and legal claim for regular monthly electric
bills.

2.15. [BF Homes and PWCCs] unpaid regular bills totaled P6,551,969.55
covering the May and June 2003 electric bills. x x x

xxxx

2.17. [BF Homes and PWCC] knew that [MERALCO] is already in the process
of implementing the decision of the Supreme Court as to the refund case. But
this refund has to be implemented in accordance with the guidelines and
schedule to be approved by the ERC. Thus [BF Homes and PWCCs] filing of
the instant petition is merely to evade payment of their unpaid electric bills to
[MERALCO].10

Hence, MERALCO sought the dismissal of the RTC Petition of BF Homes and PWCC on
the following grounds:

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3.1 The Honorable Court has no jurisdiction to award the relief prayed for by [BF Homes
and PWCC] because:

a) The petition is in effect preempting or defeating the power of the ERC to

implement the decision of the Supreme Court.

b) [MERALCO] is a utility company whose business activity is wholly regulated

by the ERC. The latter, being the regulatory agency of the government having
the authority over the respondent, is the one tasked to approve the guidelines,
schedules and details of the refund.

c) The decision of the Supreme Court, dated November 15, 2002, clearly
states that respondent is directed to make the refund to its customers in
accordance with the decision of the ERC (formerly ERB) dated February 16,
1998. Hence, [MERALCO] has to wait for the schedule and details of the
refund to be approved by the ERC before it can comply with the Supreme
Court decision.

3.2. [MERALCO] has the right to disconnect the electric service to [BF Homes and PWCC]
in that:

a) The service contracts between [MERALCO] and [BF Homes and PWCC]
expressly authorize the former to discontinue and disconnect electric services
of the latter for their failure to pay the regular electric bills rendered.

b) It is [MERALCOs] legal duty as a public utility to furnish its service to the

general public without arbitrary discrimination and, consequently, [MERALCO]
is obligated to discontinue and disconnect electric services to [BF Homes and
PWCC] for their refusal or failure to pay the electric energy actually used by
them.11

For its compulsory counterclaims, MERALCO prayed that the RTC orders BF Homes and
PWCC to pay MERALCO P6,551,969.55 as actual damages (representing the unpaid
electric bills of BF Homes and PWCC for May and June 2003), P1,500,000.00 as exemplary
damages, P1,500,000.00 as moral damages, and P1,000,000.00 as attorneys fees.

Lastly, MERALCO opposed the application for writ of preliminary injunction of BF Homes
and PWCC because:

[MERALCO] HAS THE LEGAL AND CONTRACTUAL RIGHT TO DEMAND

PAYMENT OF THE ELECTRIC BILLS AND, IN CASE OF NON-PAYMENT,
TO DISCONTINUE THE ELECTRIC SERVICES OF [BF HOMES and PWCC]

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 II

[BF HOMES and PWCC] HAVE NO CLEAR RIGHT WHICH WARRANTS

PROTECTION BY INJUNCTIVE PROCESS

After hearing,12 the RTC issued an Order on November 21, 2003 granting the application of
BF Homes and PWCC for the issuance of a writ of preliminary injunction. The RTC found
that the records showed that all requisites for the issuance of said writ were sufficiently
satisfied by BF Homes and PWCC. The RTC stated in its Order:

Albeit, this Court respects the right of a public utility company like MERALCO, being a
grantee of a legislative franchise under Republic Act No. 9029, to collect overdue payments
from its subscribers or customers for their respective consumption of electric energy, such
right must, however, succumb to the paramount substantial and constitutional rights of the
public to the usage and enjoyment of waters in their community. Thus, there is an urgent
need for the issuance of a writ of preliminary injunction in order to prevent social unrest in
the community for having been deprived of the use and enjoyment of waters flowing through
[BF Homes and PWCCs] water pumps.13

The RTC decreed in the end:

WHEREFORE, in the light of the foregoing, [BF Homes and PWCCs] prayer for the
issuance of a writ of preliminary injunction is hereby GRANTED. Respondent Manila Electric
Company is permanently restrained from proceeding with its announced intention to cut-off
electric power connection to [BF Homes and PWCCs] water pumps unless otherwise
ordered by this Court. Further, [BF Homes and PWCC] are hereby ordered to post a bond
in the amount of P500,000 to answer for whatever injury or damage that may be caused by
reason of the preliminary injunction.14

The Motion for Reconsideration of MERALCO of the aforementioned Order was denied by
the RTC in another Order issued on January 9, 2004.15 The RTC reiterated its earlier finding
that all the requisites for the proper issuance of an injunction had been fully complied with
by BF Homes and PWCC, thus:

Records indubitably show that all the requisites for the proper issuance of an injunction have
been fully complied with in the instant case.

It should be noted that a disconnection of power supply would obviously cause irreparable
injury because the pumps that supply water to the BF community will be without electricity,
thereby rendering said community without water. Water is a basic and endemic necessity
of life. This is why its enjoyment and use has been constitutionally safeguarded and
protected. Likewise, a community without water might create social unrest, which situation
this Court has the mandate to prevent. There is an urgent and paramount necessity for the
issuance of the injunctive writ to prevent serious damage to the guaranteed rights of [BF
Homes and PWCC] and the residents of the community to use and enjoy water. 16

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The RTC resolved the issue on jurisdiction raised by MERALCO, as follows:

As to the jurisdictional issue raised by respondent MERALCO, it can be gleaned from a re-
evaluation and re-assessment of the records that this Court has jurisdiction to delve into the
case. This Court gave both parties the opportunity to be heard as they introduced evidence
on the propriety of the issuance of the injunctive writ. It is well-settled that no grave abuse
of discretion could be attributed to its issuance where a party was not deprived of its day in
court as it was heard and had exhaustively presented all its arguments and defenses.
(National Mines and Allied Workers Union vs. Valero, 132 SCRA 578, 1984.) 17

Aggrieved, MERALCO filed with the Court of Appeals a Petition for Certiorari under Rule 65
of the Rules of Court, docketed as CA-G.R. SP No. 82826. MERALCO sought the reversal
of the RTC Orders dated November 21, 2003 and January 9, 2004 granting a writ of
preliminary injunction in favor of BF Homes and PWCC. MERALCO asserted that the RTC
had no jurisdiction over the application of BF Homes and PWCC for issuance of such a writ.

In its Decision dated October 27, 2005, the Court of Appeals agreed with MERALCO that
the RTC had no jurisdiction to issue a writ of preliminary injunction in Civil Case No. 03-
0151, as said trial court had no jurisdiction over the subject matter of the case to begin with.
It ratiocinated in this wise:

For one, it cannot be gainsaid that the ERC has original and exclusive jurisdiction over the
case. Explicitly, Section 43(u) of Republic Act No. 9136, otherwise known as the "Electric
Power Industry Reform Act," (RA 9136), states that the ERC shall have the original and
exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by
the ERC in the exercise of its powers, functions and responsibilities and over all cases
involving disputes between and among participants or players in the energy sector. Section
4(o) of Rule 3 of the Implementing Rules and Regulations of RA 9136 likewise provides that
the ERC shall also be empowered to issue such other rules that are essential in the
discharge of its functions as an independent quasi-judicial body.

For another, the respondent judge, instead of presiding over the case, should have
dismissed the same and yielded jurisdiction to the ERC pursuant to the doctrine of primary
jurisdiction. It is plain error on the part of the respondent judge to determine, preliminary or
otherwise, a controversy involving a question which is within the jurisdiction of an
administrative tribunal, especially so where the question demands the exercise of sound
administrative discretion.

Needless to state, the doctrine of primary jurisdiction applies where the administrative
agency, as in the case of ERC, exercises its quasi-judicial and adjudicatory function. Thus,
in cases involving specialized disputes, the practice has been to refer the same to an
administrative agency of special competence pursuant to the doctrine of primary jurisdiction.
The courts will not determine a controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and services of the administrative

14 | P a g e
tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is
essential to comply with the premises of the regulatory statute administered.

Verily, the cause of action of [BF Homes and PWCC] against [MERALCO] originates from
the Meralco Refund Decision as it involves the perceived right of the former to compel the
latter to set-off or apply their refund to their present electric bill. The issue delves into the
right of the private respondents to collect their refund without submitting to the approved
schedule of the ERC, and in effect give unto themselves preferential right over other equally
situated consumers of [MERALCO]. Perforce, the ERC, as can be gleaned from the afore-
stated legal provisions, has primary, original and exclusive jurisdiction over the said
controversy.

Indeed, the respondent judge glaringly erred in enjoining the right of [MERALCO] to
disconnect its services to [BF Homes and PWCC] on the premise that the court has
jurisdiction to apply the provisions on compensation or set-off in this case. Although
[MERALCO] recognizes the right of [BF Homes and PWCC] to the refund as provided in the
Meralco Refund Decision, it is the ERC which has the authority to implement the same
according to its approved schedule, it being a dispute arising from the exercise of its
jurisdiction.

Moreover, it bears to stress that the Meralco Refund Decision was brought into fore by the
Decision dated 16 February 1998 of the ERC (then Energy Regulatory Board) granting
refund to [MERALCOs] consumers. Being the agency of origin, the ERC has the jurisdiction
to execute the same. Besides, as stated, it is empowered to promulgate rules that are
essential in the discharge of its functions as an independent quasi-judicial body.18

The dispositive portion of the judgment of the appellate court reads:

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the
assailed Orders REVERSED and SET ASIDE. Accordingly, the writ of injunction against
[MERALCO] is hereby DISSOLVED. No costs.19

In a Resolution dated February 7, 2006, the Court of Appeals denied the Motion for
Reconsideration of BF Homes and PWCC for failing to raise new and persuasive and
meritorious arguments.

Now, BF Homes and PWCC come before this Court via the instant Petition, raising the
following assignment of errors:

1. The Court of Appeals ERRED in saying that the respondent judge

committed grave abuse of discretion by issuing the disputed writ of injunction
pending the merits of the case including the issue of subject matter
jurisdiction.

2. The Court of Appeals ERRED in saying that the ERC under the doctrine of
primary jurisdiction has the original and EXCLUSIVE jurisdiction to take

15 | P a g e
 cognizance of a petition for injunction to prevent electrical disconnection to a
customer entitled to a refund.

3. The Court of Appeals ERRED in NOT SAYING that the ERC as a quasi-
judicial body under RA 9136 has no power to issue any injunctive relief or
remedy to prevent disconnection.

4. The Court of Appeals ERRED in not resolving the issue as to the violation
of MERALCO of a standing injunction order while the case remains
undecided.20

At the core of the Petition is the issue of whether jurisdiction over the subject matter of Civil
Case No. 03-0151 lies with the RTC or the Energy Regulatory Commission (ERC). If it is
with the RTC, then the said trial court also has jurisdiction to issue the writ of preliminary
injunction against MERALCO. If it is with the ERC, then the RTC also has no jurisdiction to
act on any incidents in Civil Case No. 03-0151, including the application for issuance of a
writ of preliminary injunction of BF Homes and PWCC therein.

BF Homes and PWCC argued that due to the threat of MERALCO to disconnect electric
services, BF Homes and PWCC had no other recourse but to seek an injunctive remedy
from the RTC under its general jurisdiction. The merits of Civil Case No. 03-0151 was not
yet in issue, only the propriety of issuing a writ of preliminary injunction to prevent an
irreparable injury. Even granting that the RTC has no jurisdiction over the subject matter of
Civil Case No. 03-0151, the ERC by enabling law has no injunctive power to prevent the
disconnection by MERALCO of electric services to BF Homes and PWCC.

The Petition has no merit.

Settled is the rule that jurisdiction is conferred only by the Constitution or the law.21 Republic
v. Court of Appeals22 also enunciated that only a statute can confer jurisdiction on courts
and administrative agencies.

Related to the foregoing and equally well-settled is the rule that the nature of an action and
the subject matter thereof, as well as which court or agency of the government has
jurisdiction over the same, are determined by the material allegations of the complaint in
relation to the law involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. A prayer or demand for relief is
not part of the petition of the cause of action; nor does it enlarge the cause of action stated
or change the legal effect of what is alleged. In determining which body has jurisdiction over
a case, the better policy is to consider not only the status or relationship of the parties but
also the nature of the action that is the subject of their controversy.23

In Manila Electric Company v. Energy Regulatory Board, 24 the Court traced the legislative
history of the regulatory agencies which preceded the ERC, presenting a summary of these

16 | P a g e
agencies, the statutes or issuances that created them, and the extent of the jurisdiction
conferred upon them, viz:

1. The first regulatory body, the Board of Rate Regulation (BRR), was created
by virtue of Act No. 1779. Its regulatory mandate under Section 5 of the law
was limited to fixing or regulating rates of every public service corporation.

2. In 1913, Act No. 2307 created the Board of Public Utility Commissioners
(BPUC) to take over the functions of the BRR. By express provision of Act No.
2307, the BPUC was vested with jurisdiction, supervision and control over all
public utilities and their properties and franchises.

3. On November 7, 1936, Commonwealth Act (C.A.) No. 146, or the Public

Service Act (PSA), was passed creating the Public Service Commission
(PSC) to replace the BPUC. Like the BPUC, the PSC was expressly granted
jurisdiction, supervision and control over public services, with the concomitant
authority of calling on the public force to exercise its power, to wit:

"SEC. 13. Except as otherwise provided herein, the Commission shall have general
supervision and regulation of, jurisdiction and control over, all public utilities, and also over
their property, property rights, equipment, facilities and franchises so far as may be
necessary for the purpose of carrying out the provisions of this Act, and in the exercise of
its authority it shall have the necessary powers and the aid of the public force x x x."

Section 14 of C.A. No. 146 defines the term "public service" or "public utility" as including
"every individual, copartnership, association, corporation or joint-stock company, . . . that
now or hereafter may own, operate, manage or control within the Philippines, for hire or
compensation, any common carrier, x x x, electric light, heat, power, x x x, when owned,
operated and managed for public use or service within the Philippines x x x." Under the
succeeding Section 17(a), the PSC has the power even without prior hearing

(a) To investigate, upon its own initiative, or upon complaint in writing, any matter concerning
any public service as regards matters under its jurisdiction; to require any public service to
furnish safe, adequate and proper service as the public interest may require and warrant,
to enforce compliance with any standard, rule, regulation, order or other requirement of this
Act or of the Commission, x x x.

4. Then came Presidential Decree (P.D.) No. 1, reorganizing the national government and
implementing the Integrated Reorganization Plan. Under the reorganization plan,
jurisdiction, supervision and control over public services related to electric light, and power
heretofore vested in the PSC were transferred to the Board of Power and Waterworks
(BOPW).

17 | P a g e
Later, P.D. No. 1206 abolished the BOPW. Its powers and function relative to power utilities,
including its authority to grant provisional relief, were transferred to the newly-created Board
of Energy (BOE).

5. On May 8, 1987, then President Corazon C. Aquino issued E.O. No. 172 reconstituting
the BOE into the ERB, transferring the formers functions and powers under P.D. No. 1206
to the latter and consolidating in and entrusting on the ERB "all the regulatory and
adjudicatory functions covering the energy sector." Section 14 of E.O. No. 172 states that
"(T)he applicable provisions of [C.A.] No. 146, as amended, otherwise known as the Public
Service Act; x x x and [P.D.] No. 1206, as amended, creating the Department of Energy,
shall continue to have full force and effect, except insofar as inconsistent with this Order." 25

Thereafter, on June 8, 2001, Republic Act No. 9136, known as the Electric Power Industry
Reform Act of 2001 (EPIRA), was enacted, providing a framework for restructuring the
electric power industry. One of the avowed purposes of the EPIRA is to establish a strong
and purely independent regulatory body. The Energy Regulatory Board (ERB) was
abolished and its powers and functions not inconsistent with the provision of the EPIRA
were expressly transferred to the ERC.26

The powers and functions of the ERB not inconsistent with the EPIRA were transferred to
the ERC by virtue of Sections 44 and 80 of the EPIRA, which read:

Sec. 44. Transfer of Powers and Functions. The powers and functions of the Energy
Regulatory Board not inconsistent with the provisions of this Act are hereby transferred to
the ERC. The foregoing transfer of powers and functions shall include all applicable funds
and appropriations, records, equipment, property and personnel as may be necessary.

Sec. 80. Applicability and Repealing Clause. The applicability provisions of

Commonwealth Act No. 146, as amended, otherwise known as the "Public Service Act."
Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree 269, as
amended, referred to as the National Electrification Decree; Republic Act 7638, otherwise
known as the "Department of Energy Act of 1992"; Executive Order 172, as amended,
creating the ERB; Republic Act 7832 otherwise known as the "Anti-Electricity and Electric
Transmission Lines/Materials Pilferage Act of 1994"; shall continue to have full force and
effect except insofar as they are inconsistent with this Act.

The provisions with respect to electric power of Section 11(c) of Republic Act 7916, as
amended, and Section 5(f) of Republic Act 7227, are hereby repealed or modified
accordingly.

Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions thereof,
inconsistent with this Act are hereby repealed or modified accordingly.

In addition to the foregoing, the EPIRA also conferred new powers upon the ERC under
Section 43, among which are:

18 | P a g e
SEC. 43. Functions of the ERC. The ERC shall promote competition, encourage market
development, ensure customer choice and penalize abuse of market power in the
restructured electricity industry. In appropriate cases, the ERC is authorized to issue cease
and desist order after due notice and hearing. Towards this end, it shall be responsible for
the following key functions in the restructured industry:

xxxx

(f) In the public interest, establish and enforce a methodology for setting transmission and
distribution wheeling rates and retail rates for the captive market of a distribution utility,
taking into account all relevant considerations, including the efficiency or inefficiency of the
regulated entities. The rates must be such as to allow the recovery of just and reasonable
costs and a reasonable return on rate base (RORB) to enable the entity to operate viably.
The ERC may adopt alternative forms of internationally-accepted rate-setting methodology
as it may deem appropriate. The rate-setting methodology so adopted and applied must
ensure a reasonable price of electricity. The rates prescribed shall be non-discriminatory.
To achieve this objective and to ensure the complete removal of cross subsidies, the cap
on the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832,
is hereby amended and shall be replaced by caps which shall be determined by the ERC
based on load density, sales mix, cost of service, delivery voltage and other technical
considerations it may promulgate. The ERC shall determine such form of rate-setting
methodology, which shall promote efficiency. x x x.

xxxx

(u) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates,
fees, fines and penalties imposed by the ERC in the exercise of the abovementioned
powers, functions and responsibilities and over all cases involving disputes between and
among participants or players in the energy sector.

All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees
shall be published at least twice for two successive weeks in two (2) newspapers of
nationwide circulation.

A careful review of the material allegations of BF Homes and PWCC in their Petition before
the RTC reveals that the very subject matter thereof is the off-setting of the amount of refund
they are supposed to receive from MERALCO against the electric bills they are to pay to
the same company. This is squarely within the primary jurisdiction of the ERC.

The right of BF Homes and PWCC to refund, on which their claim for off-setting depends,
originated from the MERALCO Refund cases. In said cases, the Court (1) authorized
MERALCO to adopt a rate adjustment in the amount of P0.017 per kilowatthour, effective
with respect to its billing cycles beginning February 1994; and (2) ordered MERALCO to
refund to its customers or credit in said customers favor for future consumption P0.167 per

19 | P a g e
kilowatthour, starting with the customers billing cycles that begin February 1998, in
accordance with the ERB Decision dated February 16, 1998.

It bears to stress that in the MERALCO Refund cases, this Court only affirmed the February
16, 1998 Decision of the ERB (predecessor of the ERC) fixing the just and reasonable rate
for the electric services of MERALCO and granting refund to MERALCO consumers of the
amount they overpaid. Said Decision was rendered by the ERB in the exercise of its
jurisdiction to determine and fix the just and reasonable rate of power utilities such as
MERALCO.

Presently, the ERC has original and exclusive jurisdiction under Rule 43(u) of the EPIRA
over all cases contesting rates, fees, fines, and penalties imposed by the ERC in the
exercise of its powers, functions and responsibilities, and over all cases involving disputes
between and among participants or players in the energy sector. Section 4(o) of the EPIRA
Implementing Rules and Regulation provides that the ERC "shall also be empowered to
issue such other rules that are essential in the discharge of its functions as in independent
quasi-judicial body."

Indubitably, the ERC is the regulatory agency of the government having the authority and
supervision over MERALCO. Thus, the task to approve the guidelines, schedules, and
details of the refund by MERALCO to its consumers, to implement the judgment of this Court
in the MERALCO Refund cases, also falls upon the ERC. By filing their Petition before the
RTC, BF Homes and PWCC intend to collect their refund without submitting to the approved
schedule of the ERC, and in effect, enjoy preferential right over the other equally situated
MERALCO consumers.

Administrative agencies, like the ERC, are tribunals of limited jurisdiction and, as such,
could wield only such as are specifically granted to them by the enabling statutes. In relation
thereto is the doctrine of primary jurisdiction involving matters that demand the special
competence of administrative agencies even if the question involved is also judicial in
nature. Courts cannot and will not resolve a controversy involving a question within the
jurisdiction of an administrative tribunal, especially when the question demands the sound
exercise of administrative discretion requiring special knowledge, experience and services
of the administrative tribunal to determine technical and intricate matters of fact. The court
cannot arrogate into itself the authority to resolve a controversy, the jurisdiction of which is
initially lodged with the administrative body of special competence.27

Since the RTC had no jurisdiction over the Petition of BF Homes and PWCC in Civil Case
No. 03-0151, then it was also devoid of any authority to act on the application of BF Homes
and PWCC for the issuance of a writ of preliminary injunction contained in the same Petition.
The ancillary and provisional remedy of preliminary injunction cannot exist except only as
an incident of an independent action or proceeding.28

20 | P a g e
Incidentally, BF Homes and PWCC seemed to have lost sight of Section 8 of Executive
Order No. 172 which explicitly vested on the ERB, as an incident of its principal function,
the authority to grant provisional relief, thus:

Section 8. Authority to Grant Provisional Relief. The Board may, upon the filing of an
application, petition or complaint or at any stage thereafter and without prior hearing, on the
basis of supporting papers duly verified or authenticated, grant provisional relief on motion
of a party in the case or on its own initiative, without prejudice to a final decision after
hearing, should the Board find that the pleadings, together with such affidavits, documents
and other evidence which may be submitted in support of the motion, substantially support
the provisional order: Provided, That the Board shall immediately schedule and conduct a
hearing thereon within thirty (30) days thereafter, upon publication and notice to all affected
parties.

The aforequoted provision is still applicable to the ERC as it succeeded the ERB, by virtue
of Section 80 of the EPIRA. A writ of preliminary injunction is one such provisional relief
which a party in a case before the ERC may move for.

Lastly, the Court herein already declared that the RTC not only lacked the jurisdiction to
issue the writ of preliminary injunction against MERALCO, but that the RTC actually had no
jurisdiction at all over the subject matter of the Petition of BF Homes and PWCC in Civil
Case No. 03-0151. Therefore, in addition to the dissolution of the writ of preliminary
injunction issued by the RTC, the Court also deems it appropriate to already order the
dismissal of the Petition of BF Homes and PWCC in Civil Case No. 03-0151 for lack of
jurisdiction of the RTC over the subject matter of the same. Although only the matter of the
writ of preliminary injunction was brought before this Court in the instant Petition, the Court
is already taking cognizance of the issue on the jurisdiction of the RTC over the subject
matter of the Petition. The Court may motu proprio consider the issue of jurisdiction. The
Court has discretion to determine whether the RTC validly acquired jurisdiction over Civil
Case No. 03-0151 since, to reiterate, jurisdiction over the subject matter is conferred only
by law. Jurisdiction over the subject matter cannot be acquired through, or waived by, any
act or omission of the parties. Neither would the active participation of the parties nor
estoppel operate to confer jurisdiction on the RTC where the latter has none over a cause
of action.29 Indeed, when a court has no jurisdiction over the subject matter, the only power
it has is to dismiss the action.30

WHEREFORE, the instant Petition for Review is DENIED. The Decision dated October 27,
2005 of the Court of Appeals in CA-G.R. SP No. 82826 is AFFIRMED with the
MODIFICATION that the Regional Trial Court, Branch 202 of Las Pias City, is ORDERED
to dismiss the Petition [With Prayer for the Issuance of Writ of Preliminary Injunction and for
the Immediate Issuance of Restraining Order] of BF Homes, Inc. and Philippine Waterworks
and Construction Corporation in Civil Case No. 03-0151. Costs against BF Homes, Inc. and
Philippine Waterworks and Construction Corporation.

SO ORDERED.

21 | P a g e
G.R. No. 203240

NORTHERN ISLANDS, CO., INC., Petitioner, vs. SPOUSES DENNIS and CHERYLIN*
GARCIA, doing business under the name and style "Ecolamp Multi Resources,",
Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated January 19, 2012
and the Resolution3 dated August 24, 2012 of the Court of Appeals (CA) in CA-G.R. SP No.
97448, ordering the Regional Trial Court of Quezon City, Branch 215 (RTC) to appoint a
commissioner to determine the value of the attached properties of respondents Spouses
Dennis and Cherylin Garcia (respondents), and to discharge any excessive attachment
found thereby.

The Facts

On September 23, 2005, petitioner Northern Islands Co., Inc. (petitioner) filed a Complaint4
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 amended5
on October 25, 2005.6 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.l 7; 7
(b) the goods were transported, shipped, and delivered by Sulpicio Lines, Inc., and were
accepted in good order and condition by respondents' representatives; 8 (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;9 (d) however, the value
of the goods were not paid by respondents despite repeated demands; 10 and (e)
respondents fraudulently asserted that petitioner had no proof that they had indeed received
the quantity of the subject goods.11

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 P8,040,825.l 7.
On November 7, 2005, the RTC issued the writ sought for.12

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)13 (November 11, 2001 Motion), 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.14

22 | P a g e
Thereafter, or on January 11, 2006, respondents filed a Motion to Discharge Excess
Attachment,15 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 Pl 7,273,409.73, while the attachment bond is only in the amount of
P8,040,825.17.16

In an Order17 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
Counterclaim18 on April 3, 2006. Despite this, respondents again filed a Motion for Leave of
Court to File Motion for Discovery (Production and Inspection)19 (Motion for Discovery) on
April 7, 2006.20

The RTC Ruling

In an Order21 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. 22

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.23

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. 24

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. 25

The foregoing motion was, however, denied by the RTC in an Order 26 dated August 23,
2006 for lack of merit. Thus, respondents elevated the matter to the CA via petition for
certiorari and mandamus,27 docketed as CA-G.R. SP No. 97448 (Certiorari Case).

In the interim, the RTC rendered a Decision28 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. 29

The RTC's September 21, 2011 Decision was later appealed 30 by petitioner before the CA
on October 27, 2011. Finding that the Notice of Appeal was seasonably filed, with the

23 | P a g e
payment of the appropriate docket fees, the RTC, in an Order 31 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-GR. CV No. 98237. On the other
hand, records do not show that respondents filed any appeal.32

The CA Ruling in the Certiorari Case

Meanwhile, the CA, in a Decision33 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. 34

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. 36

Aggrieved, petitioner filed a Motion for Partial Reconsideration 37 on February 13, 2012 but
was, however, denied in a Resolution38 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 Order39 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.

24 | P a g e
With the RTC's loss of jurisdiction over the Main Case necessarily comes its loss of
jurisdiction all over 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.isi 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.41 (Emphases supplied)

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.

SO ORDERED.

25 | P a g e
G.R. No. 133303 February 17, 2005

BERNARDO VALDEVIESO, petitioner, vs. CANDELARIO DAMALERIO

AND AUREA C. DAMALERIO, respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review under Rule 45 of the Rules of Court,
seeking to set aside the 25 September 1997 Decision and the 10 February
1998 Resolution of the Court of Appeals in CA-G.R. SP No. 43082 entitled,
"Candelario Damalerio and Aurea Damalerio v. Honorable Antonio S. Alano,
et al."1

There is no dispute as to the following facts:

On 05 December 1995, Bernardo Valdevieso (petitioner) bought from spouses

Lorenzo and Elenita Uy a parcel of land consisting of 10,000 square meters,
more or less, located at Bo. Tambler, General Santos City, and covered by
Transfer Certificate of Title (TCT) No. T-30586.2

The deed of sale was not registered, nor was the title of the land transferred to
petitioner.3

On 07 December 1995, the said property was immediately declared by

petitioner for taxation purposes as Tax Declaration No. l6205 with the City
Assessors Office.4

It came to pass that on 19 April 1996, spouses Candelario and Aurea

Damalerio (respondents) filed with the Regional Trial Court (RTC) of General
Santos City, a complaint for a sum of money against spouses Lorenzo and
Elenita Uy docketed as Civil Case No. 5748 with application for the issuance
of a Writ of Preliminary Attachment.5

On 23 April 1996, the trial court issued a Writ of Preliminary Attachment by

virtue of which the property, then still in the name of Lorenzo Uy but which had
already been sold to petitioner, was levied. The levy was duly recorded in the
Register of Deeds of General Santos City and annotated upon TCT No. T-
30586.6

26 | P a g e
On 06 June 1996, TCT No. T-30586 in the name of Lorenzo Uy was cancelled
and, in lieu thereof, TCT No. T-74439 was issued in the name of petitioner.7
This new TCT carried with it the attachment in favor of respondents.

On 14 August 1996, petitioner filed a third-party claim in Civil Case No. 5748
to discharge or annul the attachment levied on the property covered by TCT
No. T-74439 on the ground that the said property belongs to him and no longer
to Lorenzo and Elenita Uy.8

In a resolution dated 21 October 1996, the trial court ruled for the petitioner. 9
Citing Manliguez v. Court of Appeals10 and Santos v. Bayhon,11 it held that the
levy of the property by virtue of attachment is lawful only when the levied
property indubitably belongs to the defendant. Applying the rulings in the cited
cases, it opined that although defendant Lorenzo Uy remained the registered
owner of the property attached, yet the fact was that he was no longer the
owner thereof as it was already sold earlier to petitioner, hence, the writ of
attachment was unlawful.1awphi1.nt

Respondents sought reconsideration thereof which was denied by the trial

court in a resolution dated 03 January 1997.12

From the unfavorable resolution of the trial court in the third-party claim,
respondents appealed to the Court of Appeals. The appellate court reversed
the resolution and by judgment promulgated on 25 September 1997, it
declared that an attachment or levy of execution, though posterior to the sale,
but if registered before the sale is registered, takes precedence over the sale.13
The writ of attachment in favor of the respondents, being recorded ahead of
the sale to petitioner, will therefore take precedence.

Petitioner moved for reconsideration but this was denied by the Court of
Appeals in its Resolution of 10 February 1998.14

Hence, this Petition for Review on Certiorari.

The sole issue in this case is whether or not a registered writ of attachment on
the land is a superior lien over that of an earlier unregistered deed of sale.

Petitioner maintains that he has a superior right over the questioned property
because when the same was attached on 23 April 1996, this property was no
longer owned by spouses Uy against whom attachment was issued as it was
already sold to petitioner on 05 December 1995. The ownership thereof was
27 | P a g e
already transferred to petitioner pursuant to Article 147715 in relation to Article
149816 of the Civil Code.

Dismissing the allegation that he slept on his rights by not immediately

registering at least an adverse claim based on his deed of sale, petitioner avers
that he promptly worked out for the transfer of registration in his name. The
slight delay in the registration, he claims was not due to his fault but attributable
to the process involved in the registration of property such as the issuance of
the Department of Agrarian Reform clearance which was effected only after
compliance with several requirements.1awphi1.nt

Considering the peculiar facts and circumstances obtaining in this case,

petitioner submits it would be in accord with justice and equity to declare him
as having a superior right to the disputed property than the respondents.

Respondents maintain the contrary view. They aver that registration of a deed
of sale is the operative act which binds the land and creates a lien thereon.
Before the registration of the deed, the property is not bound insofar as third
persons are concerned. Since the writ of attachment in favor of respondents
was registered earlier than the deed of sale to petitioner, respondents were of
the belief that their registered writ of attachment on the subject property enjoys
preference and priority over petitioners earlier unregistered deed of sale over
the same property. They also contend that Articles 1477 and 1498 of the Civil
Code as cited by petitioner are not applicable to the case because said
provisions apply only as between the parties to the deed of sale. These
provisions do not apply to, nor bind, third parties, like respondents, because
what affects or binds third parties is the registration of the instrument in the
Register of Deeds. Furthermore, respondents argue that petitioner cannot
invoke equity in his favor unless the following conditions are met: (a) the
absence of specific provision of a law on the matter; and (b) if the person who
invokes it is not guilty of delay. Both conditions have not been met, however,
since there is a law on the subject matter, i.e., Section 51 of Presidential
Decree No. 1529, and that petitioner allegedly slept on his rights by not
immediately registering an adverse claim based on his deed of sale.

We agree with the respondents.

The law applicable to the facts of this case is Section 51 of P.D. No. 1529. Said
Section provides:

28 | P a g e
Sec. 51. Conveyance and other dealings by registered owner. - An owner of
registered land may convey, mortgage, lease, charge, or otherwise deal with
the same in accordance with existing laws. He may use such forms of deeds,
mortgages, leases or other voluntary instruments as are sufficient in law. But
no deed, mortgage, lease, or other voluntary instrument, except a will
purporting to convey or affect registered land, shall take effect as a
conveyance or bind the land, but shall operate only as a contract between the
parties and as evidence of authority to the Register of Deeds to make
registration.

The act of registration shall be the operative act to convey or affect the land
insofar as third persons are concerned, and in all cases under this Decree, the
registration shall be made in the office of the Register of Deeds for the province
or city where the land lies.

It is to be noted that though the subject land was deeded to petitioner as early
as 05 December 1995, it was not until 06 June 1996 that the conveyance was
registered, and, during that interregnum, the land was subjected to a levy on
attachment. It should also be observed that, at the time of the attachment of
the property on 23 April 1996, the spouses Uy were still the registered owners
of said property. Under the cited law, the execution of the deed of sale in favor
of petitioner was not enough as a succeeding step had to be taken, which was
the registration of the sale from the spouses Uy to him. Insofar as third persons
are concerned, what validly transfers or conveys a persons interest in real
property is the registration of the deed. Thus, when petitioner bought the
property on 05 December 1995, it was, at that point, no more than a private
transaction between him and the spouses Uy. It needed to be registered before
it could bind third parties, including respondents. When the registration finally
took place on 06 June 1996, it was already too late because, by then, the levy
in favor of respondents, pursuant to the preliminary attachment ordered by the
General Santos City RTC, had already been annotated on the title.

The settled rule is that levy on attachment, duly registered, takes preference
over a prior unregistered sale.17 This result is a necessary consequence of the
fact that the property involved was duly covered by the Torrens system which
works under the fundamental principle that registration is the operative act
which gives validity to the transfer or creates a lien upon the land.18

The preference created by the levy on attachment is not diminished even by

the subsequent registration of the prior sale. This is so because an attachment

29 | P a g e
is a proceeding in rem.19 It is against the particular property, enforceable
against the whole world. 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.20 Such a proceeding, in effect,
means that the property attached is an indebted thing and a virtual
condemnation of it to pay the owners debt.21 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, in the registry, the attachment in favor of respondents appeared in the

nature of a real lien when petitioner had his purchase recorded. The effect of
the notation of said lien was to subject and subordinate the right of petitioner,
as purchaser, to the lien. Petitioner acquired ownership of the land only from
the date of the recording of his title in the register, and the right of ownership
which he inscribed was not absolute but a limited right, subject to a prior
registered lien of respondents, a right which is preferred and superior to that
of petitioner.22

Anent petitioners reliance on the rulings laid down in Manliguez v. Court of

Appeals and Santos v. Bayhon, we find the same to be misplaced. These
cases did not deal at all with the dilemma at hand, i.e. the question of whether
or not a registered writ of attachment on land is superior to that of an earlier
unregistered deed of sale. In Santos, what was involved were machinery and
pieces of equipment which were executed upon pursuant to the favorable
ruling of the National Labor Relations Commission. A third party claimed that
the machinery were already sold to her, but it does not appear in the facts of
the case if such sale was ever registered.l^vvphi1.net Manliguez is similar to
Santos, except that the former involved buildings and improvements on a piece
of land. To stress, in both cited cases, the registration of the sale, if any, of the
subject properties was never in issue.1awphi1.nt

As to petitioners invocation of equity, we cannot, at this instance, yield to such

principle in the presence of a law clearly applicable to the case. We reiterate
that this Court, while aware of its equity jurisdiction, is first and foremost, a
court of law.23 While equity might tilt on the side of one party, the same cannot
be enforced so as to overrule positive provisions of law in favor of the other. 24
Equity cannot supplant or contravene the law.25 The rule must stand no matter
how harsh it may seem. Dura lex sed lex.

30 | P a g e
WHEREFORE, the appealed Decision of the Court of Appeals in CA-G.R. SP
No. 43082 dated 25 September 1997, and its Resolution dated 10 February
1998, are hereby AFFIRMED. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

G.R. No. L- 48756 September 11, 1982

K.O. GLASS CONSTRUCTION CO., INC., petitioner, vs. THE HONORABLE MANUEL
VALENZUELA, Judge of the Court of First Instance of Rizal, and ANTONIO D. PINZON,
respondents.

Guillermo E. Aragones for petitioner.

Ruben V. Lopez for respondent Antonio D. Pinzon.

CONCEPCION, JR., J.:

Petition for certiorari to annul and set aside the writ of preliminary attachment issued by the
respondent Judge in Civil Case No. 5902-P of the Court of First Instance of Rizal, entitled:
Antonio D. Pinzon plaintiff, versus K.O. Glass Construction Co., Inc., and Kenneth O. Glass,
defendants, and for the release of the amount of P37,190.00, which had been deposited
with the Clerk of Court, to the petitioner.

On October 6, 1977, an action was instituted in the Court of First Instance of Rizal by
Antonio D. Pinzon to recover from Kenneth O. Glass the sum of P37,190.00, alleged to be
the agreed rentals of his truck, as well as the value of spare parts which have not been
returned to him upon termination of the lease. In his verified complaint, the plaintiff asked
for an attachment against the property of the defendant consisting of collectibles and
payables with the Philippine Geothermal, Inc., on the grounds that the defendant is a
foreigner; that he has sufficient cause of action against the said defendant; and that there
is no sufficient security for his claim against the defendant in the event a judgment is
rendered in his favor. 1

Finding the petition to be sufficient in form and substance, the respondent Judge ordered
the issuance of a writ of attachment against the properties of the defendant upon the
plaintiff's filing of a bond in the amount of P37,190.00. 2

Thereupon, on November 22, 1977, the defendant Kenneth O. Glass moved to quash the
writ of attachment on the grounds that there is no cause of action against him since the
transactions or claims of the plaintiff were entered into by and between the plaintiff and the
K.O. Glass Construction Co., Inc., a corporation duly organized and existing under
31 | P a g e
Philippine laws; that there is no ground for the issuance of the writ of preliminary attachment
as defendant Kenneth O. Glass never intended to leave the Philippines, and even if he
does, plaintiff can not be prejudiced thereby because his claims are against a corporation
which has sufficient funds and property to satisfy his claim; and that the money being
garnished belongs to the K.O. Glass Corporation Co., Inc. and not to defendant Kenneth O.
Glass. 3

By reason thereof, Pinzon amended his complaint to include K.O. Glass Construction Co.,
Inc. as co-defendant of Kenneth O. Glass. 4

On January 26, 1978, the defendants therein filed a supplementary motion to discharge
and/or dissolve the writ of preliminary attachment upon the ground that the affidavit filed in
support of the motion for preliminary attachment was not sufficient or wanting in law for the
reason that: (1) the affidavit did not state that the amount of plaintiff's claim was above all
legal set-offs or counterclaims, as required by Sec. 3, Rule 57 of the Revised Rules of Court;
(2) the affidavit did not state that there is no other sufficient security for the claim sought to
be recovered by the action as also required by said Sec. 3; and (3) the affidavit did not
specify any of the grounds enumerated in Sec. 1 of Rule 57, 5 but, the respondent Judge
denied the motion and ordered the Philippine Geothermal, Inc. to deliver and deposit with
the Clerk of Court the amount of P37,190.00 immediately upon receipt of the order which
amount shall remain so deposited to await the judgment to be rendered in the case. 6

On June 19, 1978, the defendants therein filed a bond in the amount of P37,190.00 and
asked the court for the release of the same amount deposited with the Clerk of Court, 7 but,
the respondent Judge did not order the release of the money deposited. 8

Hence, the present recourse. As prayed for, the Court issued a temporary restraining order,
restraining the respondent Judge from further proceeding with the trial of the case. 9

We find merit in the petition. The respondent Judge gravely abused his discretion in issuing
the writ of preliminary attachment and in not ordering the release of the money which had
been deposited with the Clerk of Court for the following reasons:

First, there was no ground for the issuance of the writ of preliminary attachment. Section 1,
Rule 57 of the Revised Rules of Court, which enumerates the grounds for the issuance of
a writ of preliminary attachment, reads, as follows:

Sec. 1. Grounds upon which attachment may issue. A plaintiff or any

proper party may, at the commencement of the action or at any time
thereafter, have the property of the adverse party attached as security
for the satisfaction of any judgment that may be recovered in the
following cases:

32 | P a g e
 (a) In an action for the recovery of money or damages on a cause of
action arising from contract, express or implied, against a party who is
about to depart from the Philippines with intent to defraud his creditor;

(b) In an action for money or property embezzled or fraudulently

misapplied or converted to his own use by a public officer, or an officer
of a corporation, or an attorney, factor, broker, agent, or clerk, in the
course of his employment as such, or by any other person in a fiduciary
capacity, or for a willful violation of duty;

(c) In an action to recover the possession of personal property unjustly

detained, when the property, or any part thereof, has been concealed,
removed, or disposed of to prevent its being found or taken by the
applicant or an officer;

(d) In an action against the party who has been guilty of a fraud in
contracting the debt or incurring the obligation upon which the action is
brought, or in concealing or disposing of the property for the taking,
detention or conversion of which the action is brought;

(e) In an action against a party who has removed or disposed of his

property, or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on

whom summons may be served by publication.

In ordering the issuance of the controversial writ of preliminary attachment, the respondent
Judge said and We quote:

The plaintiff filed a complaint for a sum of money with prayer for Writ of
Preliminary Attachment dated September 14, 1977, alleging that the
defendant who is a foreigner may, at any time, depart from the
Philippines with intent to defraud his creditors including the plaintiff
herein; that there is no sufficient security for the claim sought to be
enforced by this action; that the amount due the plaintiff is as much as
the sum for which an order of attachment is sought to be granted; and
that defendant has sufficient leviable assets in the Philippines
consisting of collectibles and payables due from Philippine
Geothermal, Inc., which may be disposed of at any time, by defendant
if no Writ of Preliminary Attachment may be issued. Finding said motion
and petition to be sufficient in form and substance. 10

Pinzon however, did not allege that the defendant Kenneth O. Glass "is a foreigner (who)
may, at any time, depart from the Philippines with intent to defraud his creditors including

33 | P a g e
the plaintiff." He merely stated that the defendant Kenneth O. Glass is a foreigner. The
pertinent portion of the complaint reads, as follows:

15. Plaintiff hereby avers under oath that defendant is a foreigner and
that said defendant has a valid and just obligation to plaintiff in the total
sum of P32,290.00 arising out from his failure to pay (i) service charges
for the hauling of construction materials; (ii) rentals for the lease of
plaintiff's Isuzu Cargo truck, and (iii) total cost of the missing/destroyed
spare parts of said leased unit; hence, a sufficient cause of action exists
against said defendant. Plaintiff also avers under oath that there is no
sufficient security for his claim against the defendant in the event a
judgment be rendered in favor of the plaintiff. however, defendant has
sufficient assets in the Philippines in the form of collectible and
payables due from the Philippine Geothermal, Inc. with office address
at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which
properties, if not timely attached, may be disposed of by defendants
and would render ineffectual the reliefs prayed for by plaintiff in this
Complaint. 11

In his Amended Complaint, Pinzon alleged the following:

15. Plaintiff hereby avers under oath that defendant GLASS is an

American citizen who controls most, if not all, the affairs of defendant
CORPORATION. Defendants CORPORATION and GLASS have a
valid and just obligation to plaintiff in the total sum of P32,290.00 arising
out for their failure to pay (i) service charges for hauling of construction
materials, (ii) rentals for the lease of plaintiff's Isuzu Cargo truck, and
(iii) total cost of the missing/destroyed spare parts of said leased unit:
hence, a sufficient cause of action exist against said defendants.
Plaintiff also avers under oath that there is no sufficient security for his
claim against the defendants in the event a judgment be rendered in
favor of the plaintiff. however, defendant CORPORATION has
sufficient assets in the Philippines in the form of collectibles and
payables due from the Philippine Geothermal., Inc. with office address
at Citibank Center, Paseo de Roxas, Makati, Metro Manila, but which
properties, if not timely attached, may be disposed of by defendants
and would render ineffectual the reliefs prayed for by plaintiff in this
Complaint. 12

There being no showing, much less an allegation, that the defendants are about to depart
from the Philippines with intent to defraud their creditor, or that they are non-resident aliens,
the attachment of their properties is not justified.

Second, the affidavit submitted by Pinzon does not comply with the Rules. Under the Rules,
an affidavit for attachment must state that (a) sufficient cause of action exists, (b) the case
is one of those mentioned in Section I (a) of Rule 57; (c) there is no other sufficient security

34 | P a g e
'or the claim sought to be enforced by the action, and (d) the amount due to the applicant
for attachment or the value of the property the possession of which he is entitled to recover,
is as much as the sum for which the order is granted above all legal counterclaims. Section
3, Rule 57 of the Revised Rules of Court reads. as follows:

Section 3. Affidavit and bond required.An order of attachment shall

be granted only when it is made to appear by the affidavit of the
applicant, or of some person who personally knows the facts, that a
sufficient cause of action exists that the case is one of those mentioned
in Section 1 hereof; that there is no other sufficient security for the claim
sought to be enforced by the action, and that the amount due to the
applicant, or the value of the property the possession of which he is
entitled to recover, is as much as the sum for which the order is granted
above all legal counterclaims. The affidavit, and the bond required by
the next succeeding section, must be duly filed with the clerk or judge
of the court before the order issues.

In his affidavit, Pinzon stated the following:

I, ANTONIO D. PINZON Filipino, of legal age, married and with

residence and postal address at 1422 A. Mabini Street, Ermita, Manila,
subscribing under oath, depose and states that.

1. On October 6,1977,I filed with the Court of First Instance of Rizal,

Pasay City Branch, a case against Kenneth O. Glass entitled
'ANTONIO D. PINZON vs. KENNETH O. GLASS', docketed as Civil
Case No. 5902-P;

2. My Complaint against Kenneth O. Glass is based on several causes

of action, namely:

(i) On February 15, 1977, we mutually agreed that I undertake to haul

his construction materials from Manila to his construction project in
Bulalo, Bay, Laguna and vice-versa, for a consideration of P50.00 per
hour;

(ii) Also, on June 18, 1977, we entered into a separate agreement

whereby my Isuzu cargo truck will be leased to him for a consideration
of P4,000.00 a month payable on the 15th day of each month;

(iii) On September 7, 1977, after making use of my Isuzu truck, he

surrendered the same without paying the monthly rentals for the leased
Isuzu truck and the peso equivalent of the spare parts that were either
destroyed or misappropriated by him;

35 | P a g e
 3. As of today, October 11, 1977, Mr. Kenneth 0. Glass still owes me
the total sum of P32,290.00 representing his obligation arising from the
hauling of his construction materials, monthly rentals for the lease Isuzu
truck and the peso equivalent of the spare parts that were either
destroyed or misappropriated by him;

4. I am executing this Affidavit to attest to the truthfulness of the

foregoing and in compliance with the provisions of Rule 57 of the
Revised Rules of Court. 13

While Pinzon may have stated in his affidavit that a sufficient cause of action exists against
the defendant Kenneth O. Glass, he did not state therein that "the case is one of those
mentioned in Section 1 hereof; that there is no other sufficient security for the claim sought
to be enforced by the action; and that the amount due to the applicant is as much as the
sum for which the order granted above all legal counter-claims." It has been held that the
failure to allege in the affidavit the requisites prescribed for the issuance of a writ of
preliminary attachment, renders the writ of preliminary attachment issued against the
property of the defendant fatally defective, and the judge issuing it is deemed to have acted
in excess of his jurisdiction. 14

Finally, it appears that the petitioner has filed a counterbond in the amount of P37,190.00
to answer for any judgment that may be rendered against the defendant. Upon receipt of
the counter-bond the respondent Judge should have discharged the attachment pursuant
to Section 12, Rule 57 of the Revised Rules of Court which reads, as follows:

Section 12. Discharge of attachment upon giving counterbond.At any

time after an order of attachment has been granted, the party whose
property has been attached, or the person appearing on his behalf, may
upon reasonable notice to the applicant, apply to the judge who granted
the order, or to the judge of the court in which the action is pending, for
an order discharging the attachment wholly or in part on the security
given. The judge shall, after hearing, order the discharge of the
attachment if a cash deposit is made or a counterbond executed to the
attaching creditor is filed, on behalf of the adverse party, with the clerk
or judge of the court where the application is made, in an amount equal
to the value of the property attached as determined by the judge, to
secure the payment of any judgment that the attaching creditor may
recover in the action. Upon the filing of such counter-bond, copy thereof
shall forthwith be served on the attaching creditor or his lawyer. Upon
the discharge of an attachment in accordance with the provisions of
this section the property attached, or the proceeds of any sale thereof,
shall be delivered to the party making the deposit or giving the counter-
bond, or the person appearing on his behalf, the deposit or counter-
bond aforesaid standing in the place of the property so released.
Should such counter-bond for any reason be found to be, or become,
insufficient, and the party furnishing the same fail to file an additional

36 | P a g e
 counter-bond the attaching creditor may apply for a new order of
attachment.

The filing of the counter-bond will serve the purpose of preserving the defendant's property
and at the same time give the plaintiff security for any judgment that may be obtained
against the defendant. 15

WHEREFORE, the petition is GRANTED and the writ prayed for is issued. The orders
issued by the respondent Judge on October 11, 19719, January 26, 1978, and February 3,
1978 in Civil Case No. 5902-P of the Court of First Instance of Rizal, insofar as they relate
to the issuance of the writ of preliminary attachment, should be as they are hereby
ANNULLED and SET ASIDE and the respondents are hereby ordered to forthwith release
the garnished amount of P37,190.00 to the petitioner. The temporary restraining order,
heretofore issued, is hereby lifted and set aside. Costs against the private respondent
Antonio D. Pinzon. SO ORDERED.

Barredo (Chairman), Guerrero, Abad Santos, De Castro and Escolin, JJ., concur.

Aquino, J., concur in the result.

G.R. No. 175587 September 21, 2007

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner, vs. JOSEPH

ANTHONY M. ALEJANDRO, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review assails the May 31, 2006 Decision 1 of the Court of Appeals in CA-
G.R. CV No. 78200 affirming the August 30, 2000 Decision2 of the Regional Trial Court of
Makati, which granted respondent Joseph Anthony M. Alejandros claim for damages arising
from petitioner Philippine Commercial International Banks (PCIB) invalid garnishment of
respondents deposits.

On October 23, 1997, petitioner filed against respondent a complaint3 for sum of money
with prayer for the issuance of a writ of preliminary attachment. Said complaint alleged that
on September 10, 1997, respondent, a resident of Hong Kong, executed in favor of
petitioner a promissory note obligating himself to pay P249,828,588.90 plus interest. In view
of the fluctuations in the foreign exchange rates which resulted in the insufficiency of the
deposits assigned by respondent as security for the loan, petitioner requested the latter to
put up additional security for the loan. Respondent, however, sought a reconsideration of
said request pointing out petitioners alleged mishandling of his account due to its failure to
carry out his instruction to close his account as early as April 1997, when the prevailing rate

37 | P a g e
of exchange of the US Dollar to Japanese yen was US$1.00:JPY127.50. 4 It appears that
the amount of P249,828,588.90 was the consolidated amount of a series of yen loans
granted by petitioner to respondent during the months of February and April 1997. 5

In praying for the issuance of a writ of preliminary attachment under Section 1 paragraphs
(e) and (f) of Rule 57 of the Rules of Court, petitioner alleged that (1) respondent fraudulently
withdrew his unassigned deposits notwithstanding his verbal promise to PCIB Assistant
Vice President Corazon B. Nepomuceno not to withdraw the same prior to their assignment
as security for the loan; and (2) that respondent is not a resident of the Philippines. The
application for the issuance of a writ was supported with the affidavit of Nepomuceno. 6

On October 24, 1997, the trial court granted the application and issued the writ ex parte 7
after petitioner posted a bond in the amount of P18,798,734.69, issued by Prudential
Guarantee & Assurance Inc., under Bond No. HO-46764-97. On the same date, the bank
deposits of respondent with Rizal Commercial Banking Corporation (RCBC) were
garnished. On October 27, 1997, respondent, through counsel, filed a manifestation
informing the court that he is voluntarily submitting to its jurisdiction.8

Subsequently, respondent filed a motion to quash 9 the writ contending that the withdrawal
of his unassigned deposits was not fraudulent as it was approved by petitioner. He also
alleged that petitioner knew that he maintains a permanent residence at Calle Victoria,
Ciudad Regina, Batasan Hills, Quezon City, and an office address in Makati City at the Law
Firm Romulo Mabanta Buenaventura Sayoc & De los Angeles, 10 where he is a partner. In
both addresses, petitioner regularly communicated with him through its representatives.
Respondent added that he is the managing partner of the Hong Kong branch of said Law
Firm; that his stay in Hong Kong is only temporary; and that he frequently travels back to
the Philippines.

On December 24, 1997, the trial court issued an order quashing the writ and holding that
the withdrawal of respondents unassigned deposits was not intended to defraud petitioner.
It also found that the representatives of petitioner personally transacted with respondent
through his home address in Quezon City and/or his office in Makati City. It thus concluded
that petitioner misrepresented and suppressed the facts regarding respondents residence
considering that it has personal and official knowledge that for purposes of service of
summons, respondents residence and office addresses are located in the Philippines. The
dispositive portion of the courts decision is as follows:

WHEREFORE, the URGENT MOTION TO QUASH, being meritorious, is hereby

GRANTED, and the ORDER of 24 October 1997 is hereby RECONSIDERED and SET
ASIDE and the WRIT OF attachment of the same is hereby DISCHARGED.

SO ORDERED.11

With the denial12 of petitioners motion for reconsideration, it elevated the case to the Court
of Appeals (CA-G.R. SP No. 50748) via a petition for certiorari. On May 10, 1999, the
petition was dismissed for failure to prove that the trial court abused its discretion in issuing

38 | P a g e
the aforesaid order.13 Petitioner filed a motion for reconsideration but was denied on
October 28, 1999.14 On petition with this Court, the case was dismissed for late filing in a
minute resolution (G.R. No. 140605) dated January 19, 2000.15 Petitioner filed a motion for
reconsideration but was likewise denied with finality on March 6, 2000.16

Meanwhile, on May 20, 1998, respondent filed a claim for damages in the amount of P25
Million17 on the attachment bond (posted by Prudential Guarantee & Assurance, Inc., under
JCL(4) No. 01081, Bond No. HO-46764-97) on account of the wrongful garnishment of his
deposits. He presented evidence showing that his P150,000.00 RCBC check payable to his
counsel as attorneys fees, was dishonored by reason of the garnishment of his deposits.
He also testified that he is a graduate of the Ateneo de Manila University in 1982 with a
double degree of Economics and Management Engineering and of the University of the
Philippines in 1987 with the degree of Bachelor of Laws. Respondent likewise presented
witnesses to prove that he is a well known lawyer in the business community both in the
Philippines and in Hong Kong.18 For its part, the lone witness presented by petitioner was
Nepomuceno who claimed that she acted in good faith in alleging that respondent is a
resident of Hong Kong.19

On August 30, 2000, the trial court awarded damages to respondent in the amount of P25
Million without specifying the basis thereof, thus:

WHEREFORE, premises above considered, and defendant having duly established his
claim in the amount of P25,000,000.00, judgment is hereby rendered ordering Prudential
Guarantee & [Assurance] Co., which is solidarily liable with plaintiff to pay defendant the full
amount of bond under Prudential Guarantee & Assurance, Inc. JCL(4) No. 01081, [Bond
No. HO-46764-97], dated 24 October 1997 in the amount of P18,798,734.69. And,
considering that the amount of the bond is insufficient to fully satisfy the award for damages,
plaintiff is hereby ordered to pay defendant the amount of P6,201,265.31.

SO ORDERED.20

The trial court denied petitioners motion for reconsideration on October 24, 2000. 21

Petitioner elevated the case to the Court of Appeals which affirmed the findings of the trial
court. It held that in claiming that respondent was not a resident of the Philippines, petitioner
cannot be said to have been in good faith considering that its knowledge of respondents
Philippine residence and office address goes into the very issue of the trial courts
jurisdiction which would have been defective had respondent not voluntarily appeared
before it.

The Court of Appeals, however, reduced the amount of damages awarded to petitioner and
specified their basis. The dispositive portion of the decision of the Court of Appeals states:

WHEREFORE, the appeal is PARTIALLY GRANTED and the decision appealed from is
hereby MODIFIED. The award of damages in the amount of P25,000,000.00 is deleted. In
lieu thereof, Prudential Guarantee & [Assurance, Inc.], which is solidarily liable with

39 | P a g e
appellant [herein petitioner], is ORDERED to pay appellee [herein respondent]
P2,000,000.00 as nominal damages; P5,000,000.00 as moral damages; and P1,000,000.00
as attorneys fees, to be satisfied against the attachment bond under Prudential Guarantee
& Assurance, Inc. JCL (4) No. 01081.

SO ORDERED.22

Both parties moved for reconsideration. On November 21, 2006, the Court of Appeals
denied petitioners motion for reconsideration but granted that of respondents by ordering
petitioner to pay additional P5Million as exemplary damages.23

Hence, the instant petition.

At the outset, it must be noted that the ruling of the trial court that petitioner is not entitled
to a writ of attachment because respondent is a resident of the Philippines and that his act
of withdrawing his deposits with petitioner was without intent to defraud, can no longer be
passed upon by this Court. More importantly, the conclusions of the court that petitioner
bank misrepresented that respondent was residing out of the Philippines and suppressed
the fact that respondent has a permanent residence in Metro Manila where he may be
served with summons, are now beyond the power of this Court to review having been the
subject of a final and executory order. Said findings were sustained by the Court of Appeals
in CA-G.R. SP No. 50784 and by this Court in G.R. No. 140605. The rule on conclusiveness
of judgment, which obtains under the premises, precludes the relitigation of a particular fact
or issue in another action between the same parties even if based on a different claim or
cause of action. The judgment in the prior action operates as estoppel as to those matters
in issue or points controverted, upon the determination of which the finding or judgment was
rendered. The previous judgment is conclusive in the second case, as to those matters
actually and directly controverted and determined.24 Hence, the issues of misrepresentation
by petitioner and the residence of respondent for purposes of service of summons can no
longer be questioned by petitioner in this case.

The core issue for resolution is whether petitioner bank is liable for damages for the
improper issuance of the writ of attachment against respondent.

We rule in the affirmative.

Notwithstanding the final judgment that petitioner is guilty of misrepresentation and

suppression of a material fact, the latter contends that it acted in good faith. Petitioner also
contends that even if respondent is considered a resident of the Philippines, attachment is
still proper under Section 1, paragraph (f), Rule 57 of the Rules of Court since he
(respondent) is a resident who is temporarily out of the Philippines upon whom service of
summons may be effected by publication.

Petitioners contentions are without merit.

40 | P a g e
While the final order of the trial court which quashed the writ did not categorically use the
word "bad faith" in characterizing the representations of petitioner, the tenor of said order
evidently considers the latter to have acted in bad faith by resorting to a deliberate strategy
to mislead the court. Thus

In the hearings of the motion, and oral arguments of counsels before the Court, it appears
that plaintiff BANK through its contracting officers Vice President Corazon B. Nepomuceno
and Executive Vice President Jose Ramon F. Revilla, personally transacted with defendant
mainly through defendants permanent residence in METRO-MANILA, either in defendants
home address in Quezon City or his main business address at the Romulo Mabanta
Buenaventura Sayoc & Delos Angeles in MAKATI and while at times follow ups were made
through defendants temporary home and business addresses in Hongkong. It is therefore
clear that plaintiff could not deny their personal and official knowledge that defendants
permanent and official residence for purposes of service of summons is in the Philippines.
In fact, this finding is further confirmed by the letter of Mr. JOHN GOKONGWEI, JR.
Chairman, Executive Committee of plaintiff BANK, in his letter dated 6 October 1997 on the
subject loan to defendant of the same law firm was addressed to the ROMULO LAW FIRM
in MAKATI.

[Anent the] second ground of attachment x x x [t]he Court finds that the amount withdrawn
was not part of defendants peso deposits assigned with the bank to secure the loan and as
proof that the withdrawal was not intended to defraud plaintiff as creditor is that plaintiff
approved and allowed said withdrawals. It is even noted that when the Court granted the
prayer for attachment it was mainly on the first ground under Section 1(f) of Rule 57 of the
1997 Rules of Civil Procedure, that defendant resides out of the Philippines.

On the above findings, it is obvious that plaintiff already knew from the beginning the
deficiency of its second ground for attachment [i.e.,] disposing properties with intent to
defraud his creditors, and therefore plaintiff had to resort to this misrepresentation that
defendant was residing out of the Philippines and suppressed the fact that defendants
permanent residence is in METRO MANILA where he could be served with summons.

On the above findings, and mainly on the misrepresentations made by plaintiff on the
grounds for the issuance of the attachment in the verified complaint, the Court concludes
that defendant has duly proven its grounds in the MOTION and that plaintiff is not entitled
to the attachment.25

Petitioner is therefore barred by the principle of conclusiveness of judgment from again

invoking good faith in the application for the issuance of the writ. Similarly, in the case of
Hanil Development Co., Ltd. v. Court of Appeals,26 the Court debunked the claim of good
faith by a party who maliciously sought the issuance of a writ of attachment, the bad faith of
said party having been previously determined in a final decision which voided the assailed
writ. Thus

Apropos the Application for Judgment on the Attachment Bond, Escobar claims in its petition
that the award of attorneys fees and injunction bond premium in favor of Hanil is [contrary]

41 | P a g e
to law and jurisprudence. It contends that no malice or bad faith may be imputed to it in
procuring the writ.

Escobars protestation is now too late in the day. The question of the illegality of the
attachment and Escobars bad faith in obtaining it has long been settled in one of the earlier
incidents of this case. The Court of Appeals, in its decision rendered on February 3, 1983
in C.A.-G.R. No. SP-14512, voided the challenged writ, having been issued with grave
abuse of discretion. Escobars bad faith in procuring the writ cannot be doubted. Its Petition
for the Issuance of Preliminary Attachment made such damning allegations that: Hanil was
already able to secure a complete release of its final collection from the MPWH; it has
moved out some of its heavy equipments for unknown destination, and it may leave the
country anytime. Worse, its Ex Parte Motion to Resolve Petition alleged that "after personal
verification by (Escobar) of (Hanils) equipment in Cagayan de Oro City, it appears that the
equipments were no longer existing from their compound." All these allegations of Escobar
were found to be totally baseless and untrue.

Even assuming that the trial court did not make a categorical pronouncement of
misrepresentation and suppression of material facts on the part of petitioner, the factual
backdrop of this case does not support petitioners claim of good faith. The facts and
circumstances omitted are highly material and relevant to the grant or denial of writ of
attachment applied for.

Finally, there is no merit in petitioners contention that respondent can be considered a

resident who is temporarily out of the Philippines upon whom service of summons may be
effected by publication, and therefore qualifies as among those against whom a writ of
attachment may be issued under Section 1, paragraph (f), Rule 57 of the Rules of Court
which provides:

(f) In an action against a party x x x on whom summons may be served by publication.

In so arguing, petitioner attempts to give the impression that although it erroneously invoked
the ground that respondent does not reside in the Philippines, it should not be made to pay
damages because it is in fact entitled to a writ of attachment had it invoked the proper
ground under Rule 57. However, even on this alternative ground, petitioner is still not entitled
to the issuance of a writ of attachment.

The circumstances under which a writ of preliminary attachment may be issued are set forth
in Section 1, Rule 57 of the Rules of Court, to wit:

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

(a) In an action for the recovery of a specified amount of money or damages,

other than moral and exemplary, on a cause of action arising from law,

42 | P a g e
 contract, quasi-contract, delict or quasi-delict against a party who is about to
depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied

or converted to his own use by a public officer, or an officer of a corporation
or an attorney, factor, broker, agent, or clerk, in the course of his employment
as such, or by any other person in a fiduciary capacity, or for a willful violation
of duty;

(c) In an action to recover the possession of personal property unjustly or

fraudulently taken, detained, or converted, when the property, or any part
thereof, has been concealed, removed, or disposed of to prevent its being
found or taken by the applicant or an authorized person;

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

(e) In an action against a party who has removed or disposed of his property,
or is about to do so, with intent to defraud his creditors;

(f) In an action against a party who resides out of the Philippines, or on whom
summons may be served by publication.

The purposes of preliminary attachment are: (1) to seize the property of the debtor in
advance of final judgment and to hold it for purposes of satisfying said judgment, as in the
grounds stated in paragraphs (a) to (e) of Section 1, Rule 57 of the Rules of Court; or (2) 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, as in paragraph (f) of the same provision.27

Corollarily, in actions in personam, such as the instant case for collection of sum of money, 28
summons must be served by personal or substituted service, otherwise the court will not
acquire jurisdiction over the defendant. In case the defendant does not reside and is not
found in the Philippines (and hence personal and substituted service cannot be effected),
the remedy of the plaintiff in order for the court to acquire jurisdiction to try the case is to
convert the action into a proceeding in rem or quasi in rem by attaching the property of the
defendant.29 Thus, in order to acquire jurisdiction in actions in personam where defendant
resides out of and is not found in the Philippines, it becomes a matter of course for the court
to convert the action into a proceeding in rem or quasi in rem by attaching the defendants
property. The service of summons in this case (which may be by publication coupled with
the sending by registered mail of the copy of the summons and the court order to the last
known address of the defendant), is no longer for the purpose of acquiring jurisdiction but
for compliance with the requirements of due process.30

43 | P a g e
However, where the defendant is a resident who is temporarily out of the Philippines,
attachment of his/her property in an action in personam, is not always necessary in order
for the court to acquire jurisdiction to hear the case.

Section 16, Rule 14 of the Rules of Court reads:

Sec. 16. Residents temporarily out of the Philippines. When an action is commenced
against a defendant who ordinarily resides within the Philippines, but who is temporarily out
of it, service may, by leave of court, be also effected out of the Philippines, as under the
preceding section.

The preceding section referred to in the above provision is Section 15 which provides for
extraterritorial service (a) personal service out of the Philippines, (b) publication coupled
with the sending by registered mail of the copy of the summons and the court order to the
last known address of the defendant; or (c) in any other manner which the court may deem
sufficient.

In Montalban v. Maximo,31 however, the Court held that substituted service of summons
(under the present Section 7, Rule 14 of the Rules of Court) is the normal mode of service
of summons that will confer jurisdiction on the court over the person of residents temporarily
out of the Philippines. Meaning, service of summons may be effected by (a) leaving copies
of the summons at the defendants residence with some person of suitable discretion
residing therein, or (b) by leaving copies at the defendants office or regular place of
business with some competent person in charge thereof. 32 Hence, the court may acquire
jurisdiction over an action in personam by mere substituted service without need of
attaching the property of the defendant.

The rationale in providing for substituted service as the normal mode of service for residents
temporarily out of the Philippines, was expounded in Montalban v. Maximo,33 in this wise:

A man temporarily absent from this country leaves a definite place of residence, a dwelling
where he lives, a local base, so to speak, to which any inquiry about him may be directed
and where he is bound to return. Where one temporarily absents himself, he leaves his
affairs in the hands of one who may be reasonably expected to act in his place and stead;
to do all that is necessary to protect his interests; and to communicate with him from time
to time any incident of importance that may affect him or his business or his affairs. It is
usual for such a man to leave at his home or with his business associates information as to
where he may be contacted in the event a question that affects him crops up.

Thus, in actions in personam against residents temporarily out of the Philippines, the court
need not always attach the defendants property in order to have authority to try the case.
Where the plaintiff seeks to attach the defendants property and to resort to the concomitant
service of summons by publication, the same must be with prior leave, precisely because,
if the sole purpose of the attachment is for the court to acquire jurisdiction, the latter must
determine whether from the allegations in the complaint, substituted service (to persons of
suitable discretion at the defendants residence or to a competent person in charge of his

44 | P a g e
office or regular place of business) will suffice, or whether there is a need to attach the
property of the defendant and resort to service of summons by publication in order for the
court to acquire jurisdiction over the case and to comply with the requirements of due
process.

In the instant case, it must be stressed that the writ was issued by the trial court mainly on
the representation of petitioner that respondent is not a resident of the Philippines. 34
Obviously, the trial courts issuance of the writ was for the sole purpose of acquiring
jurisdiction to hear and decide the case. Had the allegations in the complaint disclosed that
respondent has a residence in Quezon City and an office in Makati City, the trial court, if
only for the purpose of acquiring jurisdiction, could have served summons by substituted
service on the said addresses, instead of attaching the property of the defendant. The rules
on the application of a writ of attachment must be strictly construed in favor of the defendant.
For attachment is harsh, extraordinary, and summary in nature; it is a rigorous remedy which
exposes the debtor to humiliation and annoyance. 35 It should be resorted to only when
necessary and as a last remedy.

It is clear from the foregoing that even on the allegation that respondent is a resident
temporarily out of the Philippines, petitioner is still not entitled to a writ of attachment
because the trial court could acquire jurisdiction over the case by substituted service instead
of attaching the property of the defendant. The misrepresentation of petitioner that
respondent does not reside in the Philippines and its omission of his local addresses was
thus a deliberate move to ensure that the application for the writ will be granted.

In light of the foregoing, the Court of Appeals properly sustained the finding of the trial court
that petitioner is liable for damages for the wrongful issuance of a writ of attachment against
respondent.

Anent the actual damages, the Court of Appeals is correct in not awarding the same
inasmuch as the respondent failed to establish the amount garnished by petitioner. It is a
well settled rule that one who has been injured by a wrongful attachment can recover
damages for the actual loss resulting therefrom. But for such losses to be recoverable, they
must constitute actual damages duly established by competent proofs, which are, however,
wanting in the present case.36

Nevertheless, nominal damages may be awarded to a plaintiff whose right has been violated
or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not
for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose
of indemnification for a loss but for the recognition and vindication of a right. Indeed, nominal
damages are damages in name only and not in fact.37 They are recoverable where some
injury has been done but the pecuniary value of the damage is not shown by evidence and
are thus subject to the discretion of the court according to the circumstances of the case. 38

In this case, the award of nominal damages is proper considering that the right of
respondent to use his money has been violated by its garnishment. The amount of nominal
damages must, however, be reduced from P2 million to P50,000.00 considering the short

45 | P a g e
period of 2 months during which the writ was in effect as well as the lack of evidence as to
the amount garnished.1wphi1

Likewise, the award of attorneys fees is proper when a party is compelled to incur expenses
to lift a wrongfully issued writ of attachment. The basis of the award thereof is also the
amount of money garnished, and the length of time respondents have been deprived of the
use of their money by reason of the wrongful attachment. 39 It may also be based upon (1)
the amount and the character of the services rendered; (2) the labor, time and trouble
involved; (3) the nature and importance of the litigation and business in which the services
were rendered; (4) the responsibility imposed; (5) the amount of money and the value of the
property affected by the controversy or involved in the employment; (6) the skill and the
experience called for in the performance of the services; (7) the professional character and
the social standing of the attorney; (8) the results secured, it being a recognized rule that
an attorney may properly charge a much larger fee when it is contingent than when it is
not.40

All the aforementioned weighed, and considering the short period of time it took to have the
writ lifted, the favorable decisions of the courts below, the absence of evidence as to the
professional character and the social standing of the attorney handling the case and the
amount garnished, the award of attorneys fees should be fixed not at P1 Million, but only
at P200,000.00.

The courts below correctly awarded moral damages on account of petitioners

misrepresentation and bad faith; however, we find the award in the amount of P5 Million
excessive. Moral damages are to be fixed upon the discretion of the court taking into
consideration the educational, social and financial standing of the parties. 41 Moral damages
are not intended to enrich a complainant at the expense of a defendant. 42 They are awarded
only to enable the injured party to obtain means, diversion or amusements that will serve to
obviate the moral suffering he has undergone, by reason of petitioners culpable action.
Moral damages must be commensurate with the loss or injury suffered. Hence, the award
of moral damages is reduced to P500,000.00.

Considering petitioners bad faith in securing the writ of attachment, we sustain the award
of exemplary damages by way of example or correction for public good. This should deter
parties in litigations from resorting to baseless and preposterous allegations to obtain writs
of attachments. While as a general rule, the liability on the attachment bond is limited to
actual (or in some cases, temperate or nominal) damages, exemplary damages may be
recovered where the attachment was established to be maliciously sued out. 43
Nevertheless, the award of exemplary damages in this case should be reduced from P5M
to P500,000.00.

Finally, contrary to the claim of petitioner, the instant case for damages by reason of the
invalid issuance of the writ, survives the dismissal of the main case for sum of money.
Suffice it to state that the claim for damages arising from such wrongful attachment may
arise and be decided separately from the merits of the main action.44

46 | P a g e
WHEREFORE, the petition is PARTIALLY GRANTED. The May 31, 2006 Decision of the
Court of Appeals in CA-G.R. CV No. 78200 is AFFIRMED with MODIFICATIONS. As
modified, petitioner Philippine Commercial International Bank is ordered to pay respondent
Joseph Anthony M. Alejandro the following amounts: P50,000.00 as nominal damages,
P200,000.00 as attorneys fees; and P500,000.00 as moral damages, and P500,000.00 as
exemplary damages, to be satisfied against the attachment bond issued by Prudential
Guarantee & Assurance Inc.,45 under JCL (4) No. 01081, Bond No. HO-46764-97.

No pronouncement as to costs. SO ORDERED.

G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner, vs. THE COURT OF APPEALS,
QUEENSLAND HOTEL or MOTEL or QUEENSLAND TOURIST INN, and TEODORICO
ADARNA, respondents.

Breva & Breva Law Offices for petitioner.

Goc-Ong & Associates for private respondents.

NARVASA, J.:p

Subject of the appellate proceedings at bar is the decision of the Court of Appeals in CA-
G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and Adarna v. Davao Light & Power
Co., Inc.," promulgated on May 4, 1990. 1 That decision nullified and set aside the writ of
preliminary attachment issued by the Regional Trial Court of Davao City 2 in Civil Case No.
19513-89 on application of the plaintiff (Davao Light & Power Co.), before the service of
summons on the defendants (herein respondents Queensland Co., Inc. and Adarna).

Following is the chronology of the undisputed material facts culled from the Appellate
Tribunal's judgment of May 4, 1990.

1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao Light) filed a
verified complaint for recovery of a sum of money and damages against Queensland Hotel,
etc. and Teodorico Adarna (docketed as Civil Case No. 19513-89). The complaint contained
an ex parte application for a writ of preliminary attachment.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by raffle, issued
an Order granting the ex parte application and fixing the attachment bond at P4,600,513.37.

47 | P a g e
3. On May 11, 1989 the attachment bond having been submitted by Davao Light, the writ of
attachment issued.

4. On May 12, 1989, the summons and a copy of the complaint, as well as the writ of
attachment and a copy of the attachment bond, were served on defendants Queensland
and Adarna; and pursuant to the writ, the sheriff seized properties belonging to the latter.

5. On September 6, 1989, defendants Queensland and Adarna filed a motion to discharge

the attachment for lack of jurisdiction to issue the same because at the time the order of
attachment was promulgated (May 3, 1989) and the attachment writ issued (May 11, 1989),
the Trial Court had not yet acquired jurisdiction over the cause and over the persons of the
defendants.

6. On September 14, 1989, Davao Light filed an opposition to the motion to discharge
attachment.

7. On September 19, 1989, the Trial Court issued an Order denying the motion to discharge.

This Order of September 19, 1989 was successfully challenged by Queensland and Adarna
in a special civil action of certiorari instituted by them in the Court of Appeals. The Order
was, as aforestated, annulled by the Court of Appeals in its Decision of May 4, 1990. The
Appellate Court's decision closed with the following disposition:

. . . the Orders dated May 3, 1989 granting the issuance of a writ of

preliminary attachment, dated September 19, 1989 denying the motion
to discharge attachment; dated November 7, 1989 denying petitioner's
motion for reconsideration; as well as all other orders emanating
therefrom, specially the Writ of Attachment dated May 11, 1989 and
Notice of Levy on Preliminary Attachment dated May 11, 1989, are
hereby declared null and void and the attachment hereby ordered
DISCHARGED.

The Appellate Tribunal declared that

. . . While it is true that a prayer for the issuance of a writ of preliminary

attachment may be included m the complaint, as is usually done, it is
likewise true that the Court does not acquire jurisdiction over the person
of the defendant until he is duly summoned or voluntarily appears, and
adding the phrase that it be issued "ex parte" does not confer said
jurisdiction before actual summons had been made, nor retroact
jurisdiction upon summons being made. . . .

It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings

in attachment," the "critical time which must be identified is . . . when the trial
court acquires authority under law to act coercively against the defendant or

48 | P a g e
 his property . . .;" and that "the critical time is the of the vesting of jurisdiction
in the court over the person of the defendant in the main case."

Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao Light seeks
in the present appellate proceedings.

The question is whether or not a writ of preliminary attachment may issue ex parte against
a defendant before acquisition of jurisdiction of the latter's person by service of summons
or his voluntary submission to the Court's authority.

The Court rules that the question must be answered in the affirmative and that consequently,
the petition for review will have to be granted.

It is incorrect to theorize that after an action or proceeding has been commenced and
jurisdiction over the person of the plaintiff has been vested in the court, but before the
acquisition of jurisdiction over the person of the defendant (either by service of summons or
his voluntary submission to the court's authority), nothing can be validly done by the plaintiff
or the court. It is wrong to assume that the validity of acts done during this period should be
defendant on, or held in suspension until, the actual obtention of jurisdiction over the
defendant's person. The obtention by the court of jurisdiction over the person of the
defendant is one thing; quite another is the acquisition of jurisdiction over the person of the
plaintiff or over the subject-matter or nature of the action, or the res or object hereof.

An action or proceeding is commenced by the filing of the complaint or other initiatory

pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the
action or proceeding is invoked or called into activity; 5 and it is thus that the court acquires
jurisdiction over said subject matter or nature of the action. 6 And it is by that self-same act
of the plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) by
which he signifies his submission to the court's power and authority that jurisdiction is
acquired by the court over his person. 7 On the other hand, jurisdiction over the person of
the defendant is obtained, as above stated, by the service of summons or other coercive
process upon him or by his voluntary submission to the authority of the court. 8

The events that follow the filing of the complaint as a matter of routine are well known. After
the complaint is filed, summons issues to the defendant, the summons is then transmitted
to the sheriff, and finally, service of the summons is effected on the defendant in any of the
ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of
time between the day of the filing of the complaint and the day of service of summons of the
defendant. During this period, different acts may be done by the plaintiff or by the Court,
which are unquestionable validity and propriety. Among these, for example, are the
appointment of a guardian ad litem, 9 the grant of authority to the plaintiff to prosecute the
suit as a pauper litigant, 10 the amendment of the complaint by the plaintiff as a matter of
right without leave of court, 11 authorization by the Court of service of summons by
publication, 12 the dismissal of the action by the plaintiff on mere notice. 13

49 | P a g e
This, too, is true with regard to the provisional remedies of preliminary attachment,
preliminary injunction, receivership or replevin. 14 They may be validly and properly applied
for and granted even before the defendant is summoned or is heard from.

A preliminary attachment may be defined, paraphrasing the Rules of Court, as the

provisional remedy in virtue of which a plaintiff or other party may, at the commencement of
the action or at any time thereafter, have the property of the adverse party taken into the
custody of the court as security for the satisfaction of any judgment that may be recovered.
15 It is a remedy which is purely statutory in respect of which the law requires a strict
construction of the provisions granting it. 16 Withal no principle, statutory or jurisprudential,
prohibits its issuance by any court before acquisition of jurisdiction over the person of the
defendant.

Rule 57 in fact speaks of the grant of the remedy "at the commencement of the action or at
any time thereafter." 17 The phase, "at the commencement of the action," obviously refers
to the date of the filing of the complaint which, as above pointed out, is the date that
marks "the commencement of the action;" 18 and the reference plainly is to a time before
summons is served on the defendant, or even before summons issues. What the rule is
saying quite clearly is that after an action is properly commenced by the filing of the
complaint and the payment of all requisite docket and other fees the plaintiff may apply
for and obtain a writ of preliminary attachment upon fulfillment of the pertinent requisites laid
down by law, and that he may do so at any time, either before or after service of summons
on the defendant. And this indeed, has been the immemorial practice sanctioned by the
courts: for the plaintiff or other proper party to incorporate the application for attachment in
the complaint or other appropriate pleading (counter-claim, cross-claim, third-party claim)
and for the Trial Court to issue the writ ex-parte at the commencement of the action if it finds
the application otherwise sufficient in form and substance.

In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or application for
preliminary attachment is not generally necessary unless otherwise directed by the Trial
Court in its discretion. 20 And in Filinvest Credit Corporation v. Relova, 21 the Court
declared that "(n)othing in the Rules of Court makes notice and hearing indispensable and
mandatory requisites for the issuance of a writ of attachment." The only pre-requisite is that
the Court be satisfied, upon consideration of "the affidavit of the applicant or of some other
person who personally knows the facts, that a sufficient cause of action exists, that the case
is one of those mentioned in Section 1 . . . (Rule 57), that there is no other sufficient security
for the claim sought to be enforced by the action, and that the amount due to the applicant,
or the value of the property the possession of which he is entitled to recover, is as much as
the sum for which the order (of attachment) is granted above all legal counterclaims." 22 If
the court be so satisfied, the "order of attachment shall be granted," 23 and the writ shall
issue upon the applicant's posting of "a bond executed to the adverse party in an amount
to be fixed by the judge, not exceeding the plaintiffs claim, conditioned that the latter will
pay all the costs which may be adjudged to the adverse party and all damages which he
may sustain by reason of the attachment, if the court shall finally adjudge that the applicant
was not entitled thereto." 24

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In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18,
1989, 25 this Court had occasion to emphasize the postulate that no hearing is required on
an application for preliminary attachment, with notice to the defendant, for the reason that
this "would defeat the objective of the remedy . . . (since the) time which such a hearing
would take, could be enough to enable the defendant to abscond or dispose of his property
before a writ of attachment issues." As observed by a former member of this Court, 26 such
a procedure would warn absconding debtors-defendants of the commencement of the suit
against them and the probable seizure of their properties, and thus give them the advantage
of time to hide their assets, leaving the creditor-plaintiff holding the proverbial empty bag; it
would place the creditor-applicant in danger of losing any security for a favorable judgment
and thus give him only an illusory victory.

Withal, ample modes of recourse against a preliminary attachment are secured by law to
the defendant. The relative ease with which a preliminary attachment may be obtained is
matched and paralleled by the relative facility with which the attachment may legitimately
be prevented or frustrated. These modes of recourse against preliminary attachments
granted by Rule 57 were discussed at some length by the separate opinion in Mindanao
Savings & Loans Asso. Inc. v. CA., supra.

That separate opinion stressed that there are two (2) ways of discharging an attachment:
first, by the posting of a counterbond; and second, by a showing of its improper or irregular
issuance.

1.0. The submission of a counterbond is an efficacious mode of lifting an attachment already

enforced against property, or even of preventing its enforcement altogether.

1.1. When property has already been seized under attachment, the attachment may be
discharged upon counterbond in accordance with Section 12 of Rule 57.

Sec. 12. Discharge of attachment upon giving counterbond. At any

time after an order of attachment has been granted, the party whose
property has been attached or the person appearing in his behalf, may,
upon reasonable notice to the applicant, apply to the judge who granted
the order, or to the judge of the court in which the action is pending, for
an order discharging the attachment wholly or in part on the security
given . . . in an amount equal to the value of the property attached as
determined by the judge to secure the payment of any judgment that
the attaching creditor may recover in the action. . . .

1.2. But even before actual levy on property, seizure under attachment may be prevented
also upon counterbond. The defendant need not wait until his property is seized before
seeking the discharge of the attachment by a counterbond. This is made possible by Section
5 of Rule 57.

Sec. 5. Manner of attaching property. The officer executing the order

shall without delay attach, to await judgment and execution in the

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 action, all the properties of the party against whom the order is issued
in the province, not exempt from execution, or so much thereof as may
be sufficient to satisfy the applicant's demand, unless the former makes
a deposit with the clerk or judge of the court from which the order
issued, or gives a counter-bond executed to the applicant, in an amount
sufficient to satisfy such demand besides costs, or in an amount equal
to the value of the property which is about to be attached, to secure
payment to the applicant of any judgment which he may recover in the
action. . . . (Emphasis supplied)

2.0. Aside from the filing of a counterbond, a preliminary attachment may also be lifted or
discharged on the ground that it has been irregularly or improperly issued, in accordance
with Section 13 of Rule 57. Like the first, this second mode of lifting an attachment may be
resorted to even before any property has been levied on. Indeed, it may be availed of after
property has been released from a levy on attachment, as is made clear by said Section 13,
viz.:

Sec. 13. Discharge of attachment for improper or irregular issuance.

The party whose property has been attached may also, at any time
either BEFORE or AFTER the release of the attached property, or
before any attachment shall have been actually levied, upon
reasonable notice to the attaching creditor, apply to the judge who
granted the order, or to the judge of the court in which the action is
pending, for an order to discharge the attachment on the ground that
the same was improperly or irregularly issued. If the motion be made
on affidavits on the part of the party whose property has been attached,
but not otherwise, the attaching creditor may oppose the same by
counter-affidavits or other evidence in addition to that on which the
attachment was made. . . . (Emphasis supplied)

This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987), The
attachment debtor cannot be deemed to have waived any defect in the issuance of the
attachment writ by simply availing himself of one way of discharging the attachment writ,
instead of the other. Moreover, the filing of a counterbond is a speedier way of discharging
the attachment writ maliciously sought out by the attaching creditor instead of the other way,
which, in most instances . . . would require presentation of evidence in a fullblown trial on
the merits, and cannot easily be settled in a pending incident of the case." 27

It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings
& Loans Asso. Inc. v. C.A., supra., 28 to wit:

(a) When an attachment may not be dissolved by a showing of its

irregular or improper issuance:

. . . (W)hen the preliminary attachment is issued upon a ground which

is at the same time the applicant's cause of action; e.g., "an action for

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 money or property embezzled or fraudulently misapplied or converted
to his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment
as such, or by any other person in a fiduciary capacity, or for a willful
violation of duty." (Sec. 1 [b], Rule 57), or "an action against a party
who has been guilty of fraud m contracting the debt or incurring the
obligation upon which the action is brought" (Sec. 1 [d], Rule 57), 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 (SEE Benitez v. I.A.C., 154 SCRA 41)
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. Therefore, when the
writ of attachment is of this nature, the only way it can be dissolved is
by a counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886).

(b) Effect of the dissolution of a preliminary attachment on the plaintiffs attachment bond:

. . . The dissolution of the preliminary attachment upon security given,

or a showing of its irregular or improper issuance, does not of course
operate to discharge the sureties on plaintiff's 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" (SEC. 4, Rule 57). Hence, until that
determination is made, as to the applicant's entitlement to the
attachment, his bond must stand and cannot be with-drawn.

With respect to the other provisional remedies, i.e., preliminary injunction (Rule 58),
receivership (Rule 59), replevin or delivery of personal property (Rule 60), the rule is the
same: they may also issue ex parte. 29

It goes without saying that whatever be the acts done by the Court prior to the acquisition
of jurisdiction over the person of defendant, as above indicated issuance of summons,
order of attachment and writ of attachment (and/or appointments of guardian ad litem, or
grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of
the complaint by the plaintiff as a matter of right without leave of court 30 and however
valid and proper they might otherwise be, these do not and cannot bind and affect the
defendant until and unless jurisdiction over his person is eventually obtained by the court,
either by service on him of summons or other coercive process or his voluntary submission
to the court's authority. Hence, when the sheriff or other proper officer commences
implementation of the writ of attachment, it is essential that he serve on the defendant not

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only a copy of the applicant's affidavit and attachment bond, and of the order of attachment,
as explicity required by Section 5 of Rule 57, but also the summons addressed to said
defendant as well as a copy of the complaint and order for appointment of guardian ad litem,
if any, as also explicity directed by Section 3, Rule 14 of the Rules of Court. Service of all
such documents is indispensable not only for the acquisition of jurisdiction over the person
of the defendant, but also upon considerations of fairness, to apprise the defendant of the
complaint against him, of the issuance of a writ of preliminary attachment and the grounds
therefor and thus accord him the opportunity to prevent attachment of his property by the
posting of a counterbond in an amount equal to the plaintiff's claim in the complaint pursuant
to Section 5 (or Section 12), Rule 57, or dissolving it by causing dismissal of the complaint
itself on any of the grounds set forth in Rule 16, or demonstrating the insufficiency of the
applicant's affidavit or bond in accordance with Section 13, Rule 57.

It was on account of the failure to comply with this fundamental requirement of service of
summons and the other documents above indicated that writs of attachment issued by the
Trial Court ex parte were struck down by this Court's Third Division in two (2) cases, namely:
Sievert v. Court of Appeals, 31 and BAC Manufacturing and Sales Corporation v. Court of
Appeals, et al. 32 In contrast to the case at bar where the summons and a copy of the
complaint, as well as the order and writ of attachment and the attachment bond were served
on the defendant in Sievert, levy on attachment was attempted notwithstanding that only
the petition for issuance of the writ of preliminary attachment was served on the defendant,
without any prior or accompanying summons and copy of the complaint; and in BAC
Manufacturing and Sales Corporation, neither the summons nor the order granting the
preliminary attachment or the writ of attachment itself was served on the defendant "before
or at the time the levy was made."

For the guidance of all concerned, the Court reiterates and reaffirms the proposition that
writs of attachment may properly issue ex parte provided that the Court is satisfied that the
relevant requisites therefor have been fulfilled by the applicant, although it may, in its
discretion, require prior hearing on the application with notice to the defendant; but that levy
on property pursuant to the writ thus issued may not be validly effected unless preceded, or
contemporaneously accompanied, by service on the defendant of summons, a copy of the
complaint (and of the appointment of guardian ad litem, if any), the application for
attachment (if not incorporated in but submitted separately from the complaint), the order of
attachment, and the plaintiff's attachment bond.

WHEREFORE, the petition is GRANTED; the challenged decision of the Court of Appeals
is hereby REVERSED, and the order and writ of attachment issued by Hon. Milagros C.
Nartatez, Presiding Judge of Branch 8, Regional Trial Court of Davao City in Civil Case No.
19513-89 against Queensland Hotel or Motel or Queensland Tourist Inn and Teodorico
Adarna are hereby REINSTATED. Costs against private respondents.

SO ORDERED.

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