Fort Bonifacio Dev't Corp. v.

Yllas Lending and apply the proceeds thereof against any unpaid
Corp., 567 SCRA 454 rentals, charges and/or damages.

Tirreno began to default in its lease payments in 1999.

By July 2000, Tirreno was already in arrears by
The Case P5,027,337.91. FBDC and Tirreno entered into a
This is a petition for review on certiorari[1] of the Orders settlement agreement on 8 August 2000. Despite the
issued on 7 March 2003[2] and 3 July 2003[3] by Branch execution of the settlement agreement, FBDC found
59 of the Regional Trial Court of Makati City (trial court) need to send Tirreno a written notice of termination
in Civil Case No. 01-1452. The trial courts orders dated 19 September 2000 due to Tirrenos alleged failure
dismissed Fort Bonifacio Development Corporations to settle its outstanding obligations. On 29 September
(FBDC) third party claim and denied FBDCs Motion to 2000, FBDC entered and occupied the leased premises.
Intervene and Admit Complaint in Intervention. FBDC also appropriated the equipment and properties
left by Tirreno pursuant to Section 22 of their Contract
The Facts of Lease as partial payment for Tirrenos outstanding
On 24 April 1998, FBDC executed a lease contract in obligations. Tirreno filed an action for forcible entry
favor of Tirreno, Inc. (Tirreno) over a unit at the against FBDC before the Municipal Trial Court of Taguig.
Entertainment Center Phase 1 of the Bonifacio Global Tirreno also filed a complaint for specific performance
City in Taguig, Metro Manila. The parties had the lease with a prayer for the issuance of a temporary restraining
contract notarized on the day of its execution. Tirreno order and/or a writ of preliminary injunction against
used the leased premises for Savoia Ristorante and La FBDC before the Regional Trial Court (RTC) of Pasig City.
Strega Bar. The RTC of Pasig City dismissed Tirrenos complaint for
forum-shopping.
Two provisions in the lease contract are pertinent to the
present case: Section 20, which is about the On 4 March 2002, Yllas Lending Corporation and Jose S.
consequences in case of default of the lessee, and Lauraya, in his official capacity as President,
Section 22, which is about the lien on the properties of (respondents) caused the sheriff of Branch 59 of the
the lease. The pertinent portion of Section 20 reads: trial court to serve an alias writ of seizure against FBDC.
On the same day, FBDC served on the sheriff an affidavit
Section 20. Default of the Lessee of title and third party claim. FBDC found out that on 27
September 2001, respondents filed a complaint for
20.1 The LESSEE shall be deemed to be in default within
Foreclosure of Chattel Mortgage with Replevin,
the meaning of this Contract in case:
docketed as Civil Case No. 01-1452, against Tirreno,
(i) The LESSEE fails to fully pay on time any rental, utility Eloisa Poblete Todaro (Eloisa), and Antonio D. Todaro
and service charge or other financial obligation of the (Antonio), in their personal and individual capacities,
LESSEE under this Contract; and in Eloisas official capacity as President. In their
complaint, respondents alleged that they lent a total of
xxx
P1.5 million to Tirreno, Eloisa, and Antonio. On 9
20.2 Without prejudice to any of the rights of the November 2000, Tirreno, Eloisa and Antonio executed a
LESSOR under this Contract, in case of default of the Deed of Chattel Mortgage in favor of respondents as
LESSEE, the lessor shall have the right to: security for the loan. The following properties are
covered by the Chattel Mortgage:
(i) Terminate this Contract immediately upon written
notice to the LESSEE, without need of any judicial action a. Furniture, Fixtures and Equipment of Savoia
or declaration; Ristorante and La Strega Bar, a restaurant owned and
managed by [Tirreno], inclusive of the leasehold right of
xxx [Tirreno] over its rented building where [the] same is
Section 22, on the other hand, reads: presently located.

Section 22. Lien on the Properties of the Lessee b. Goodwill over the aforesaid restaurant, including its
business name, business sign, logo, and any and all
Upon the termination of this Contract or the expiration interest therein.
of the Lease Period without the rentals, charges and/or
damages, if any, being fully paid or settled, the LESSOR c. Eighteen (18) items of paintings made by Florentine
shall have the right to retain possession of the Master, Gino Tili, which are fixtures in the above-named
properties of the LESSEE used or situated in the Leased restaurant.
Premises and the LESSEE hereby authorizes the LESSOR The details and descriptions of the above items are
to offset the prevailing value thereof as appraised by the specified in Annex A which is hereto attached and forms
LESSOR against any unpaid rentals, charges and/or as an integral part of this Chattel Mortgage instrument.
damages. If the LESSOR does not want to use said [4]
properties, it may instead sell the same to third parties
In the Deed of Chattel Mortgage, Tirreno, Eloisa, and appropriated the proceeds thereof to pay the unpaid
Antonio made the following warranties to respondents: lease rentals of [Tirreno].

1. WARRANTIES: The MORTGAGOR hereby declares and FBDC, likewise filed a Motion to Admit its Complaint-in-
warrants that: Intervention.

a. The MORTGAGOR is the absolute owner of the above In Opposition to the third-party claim and the motion to
named properties subject of this mortgage, free from all intervene, [respondents] posit that the basis of [FBDCs]
liens and encumbrances. third party claim being anchored on the aforesaid
Contract [of] Lease is baseless. [Respondents] contend
b. There exist no transaction or documents affecting the
that the stipulation of the contract of lease partakes of a
same previously presented for, and/or pending
pledge which is void under Article 2088 of the Civil Code
transaction.[5]
for being pactum commissorium.
Despite FBDCs service upon him of an affidavit of title
xxx
and third party claim, the sheriff proceeded with the
seizure of certain items from FBDCs premises. The By reason of the failure of [Tirreno] to pay its lease
sheriffs partial return indicated the seizure of the rental and fees due in the amount of P5,027,337.91,
following items from FBDC: after having notified [Tirreno] of the termination of the
lease, x x x FBDC took possession of [Tirreno.s]
A. FIXTURES
properties found in the premises and sold those which
(2) Smaller Murano Chandeliers were not of use to it. Meanwhile, [respondents], as
mortgagee of said properties, filed an action for
(1) Main Murano Chandelier foreclosure of the chattel mortgage with replevin and
B. EQUIPMENT caused the seizure of the same properties which [FBDC]
took and appropriated in payment of [Tirrenos] unpaid
(13) Uni-Air Split Type 2HP Air Cond. lease rentals.[7]
(2) Uni-Air Split Type 1HP Air Cond. The Ruling of the Trial Court
(3) Uni-Air Window Type 2HP Air Cond. In its order dated 7 March 2003, the trial court stated
(56) Chairs that the present case raises the questions of who has a
better right over the properties of Tirreno and whether
(1) Table FBDC has a right to intervene in respondents complaint
for foreclosure of chattel mortgage.
(2) boxes Kitchen equipments [sic][6]
In deciding against FBDC, the trial court declared that
Section 22 of the lease contract between FBDC and
The sheriff delivered the seized properties to Tirreno is void under Article 2088 of the Civil Code.[8]
respondents. FBDC questioned the propriety of the The trial court stated that Section 22 of the lease
seizure and delivery of the properties to respondents contract pledges the properties found in the leased
without an indemnity bond before the trial court. FBDC premises as security for the payment of the unpaid
argued that when respondents and Tirreno entered into rentals. Moreover, Section 22 provides for the automatic
the chattel mortgage agreement on 9 November 2000, appropriation of the properties owned by Tirreno in the
Tirreno no longer owned the mortgaged properties as event of its default in the payment of monthly rentals to
FBDC already enforced its lien on 29 September 2000. FBDC. Since Section 22 is void, it cannot vest title of
ownership over the seized properties. Therefore, FBDC
In ruling on FBDCs motion for leave to intervene and to
cannot assert that its right is superior to respondents,
admit complaint in intervention, the trial court stated
who are the mortgagees of the disputed properties.
the facts as follows:
The trial court quoted from Bayer Phils. v. Agana[9] to
Before this Court are two pending incidents, to wit: 1)
justify its ruling that FBDC should have filed a separate
[FBDCs] Third-Party Claim over the properties of
complaint against respondents instead of filing a motion
[Tirreno] which were seized and delivered by the sheriff
to intervene. The trial court quoted from Bayer as
of this Court to [respondents]; and 2) FBDCs Motion to
follows:
Intervene and to Admit Complaint in Intervention.
In other words, construing Section 17 of Rule 39 of the
Third party claimant, FBDC, anchors its claim over the
Revised Rules of Court (now Section 16 of the 1997
subject properties on Sections 20.2(i) and 22 of the
Rules on Civil Procedure), the rights of third-party
Contract of Lease executed by [FBDC] with Tirreno.
claimants over certain properties levied upon by the
Pursuant to said Contract of Lease, FBDC took
sheriff to satisfy the judgment may not be taken up in
possession of the leased premises and proceeded to sell
the case where such claims are presented but in a
to third parties the properties found therein and
separate and independent action instituted by the
claimants.[10]
 stipulation in a pledge contract. FBDC, on the other
hand, states that Section 22 is merely a dacion en pago.
The dispositive portion of the trial courts decision reads:
Articles 2085 and 2093 of the Civil Code enumerate the
WHEREFORE, premises considered, [FBDCs] Third Party
requisites essential to a contract of pledge: (1) the
Claim is hereby DISMISSED. Likewise, the Motion to
pledge is constituted to secure the fulfillment of a
Intervene and Admit Complaint in Intervention is
principal obligation; (2) the pledgor is the absolute
DENIED.[11]
owner of the thing pledged; (3) the persons constituting
FBDC filed a motion for reconsideration on 9 May 2003. the pledge have the free disposal of their property or
The trial court denied FBDCs motion for reconsideration have legal authorization for the purpose; and (4) the
in an order dated 3 July 2003. FBDC filed the present thing pledged is placed in the possession of the creditor,
petition before this Court to review pure questions of or of a third person by common agreement. Article 2088
law. of the Civil Code prohibits the creditor from
appropriating or disposing the things pledged, and any
contrary stipulation is void.
The Issues On the other hand, Article 1245 of the Civil Code defines
FBDC alleges that the trial court erred in the following: dacion en pago, or dation in payment, as the alienation
of property to the creditor in satisfaction of a debt in
1. Dismissing FBDCs third party claim upon the trial money. Dacion en pago is governed by the law on sales.
courts erroneous interpretation that FBDC has no right Philippine National Bank v. Pineda[13] held that dation
of ownership over the subject properties because in payment requires delivery and transmission of
Section 22 of the contract of lease is void for being a ownership of a thing owned by the debtor to the
pledge and a pactum commissorium; creditor as an accepted equivalent of the performance
2. Denying FBDC intervention on the ground that its of the obligation. There is no dation in payment when
proper remedy as third party claimant over the subject there is no transfer of ownership in the creditors favor,
properties is to file a separate action; and as when the possession of the thing is merely given to
the creditor by way of security.
3. Depriving FBDC of its properties without due
process of law when the trial court erroneously Section 22, as worded, gives FBDC a means to collect
dismissed FBDCs third party claim, denied FBDCs payment from Tirreno in case of termination of the
intervention, and did not require the posting of an lease contract or the expiration of the lease period and
indemnity bond for FBDCs protection.[12] there are unpaid rentals, charges, or damages. The
existence of a contract of pledge, however, does not
arise just because FBDC has means of collecting past
due rent from Tirreno other than direct payment. The
The Ruling of the Court
trial court concluded that Section 22 constitutes a
The petition has merit. pledge because of the presence of the first three
requisites of a pledge: Tirrenos properties in the leased
Taking of Lessees Properties without Judicial
premises secure Tirrenos lease payments; Tirreno is the
Intervention
absolute owner of the said properties; and the persons
representing Tirreno have legal authority to constitute
the pledge. However, the fourth requisite, that the thing
We reproduce Section 22 of the Lease Contract below pledged is placed in the possession of the creditor, is
for easy reference: absent. There is non-compliance with the fourth
Section 22. Lien on the Properties of the Lessee requisite even if Tirrenos personal properties are found
in FBDCs real property. Tirrenos personal properties are
Upon the termination of this Contract or the expiration in FBDCs real property because of the Contract of Lease,
of the Lease Period without the rentals, charges and/or which gives Tirreno possession of the personal
damages, if any, being fully paid or settled, the LESSOR properties. Since Section 22 is not a contract of pledge,
shall have the right to retain possession of the there is no pactum commissorium.
properties of the LESSEE used or situated in the Leased
Premises and the LESSEE hereby authorizes the LESSOR FBDC admits that it took Tirrenos properties from the
to offset the prevailing value thereof as appraised by the leased premises without judicial intervention after
LESSOR against any unpaid rentals, charges and/or terminating the Contract of Lease in accordance with
damages. If the LESSOR does not want to use said Section 20.2. FBDC further justifies its action by stating
properties, it may instead sell the same to third parties that Section 22 is a forfeiture clause in the Contract of
and apply the proceeds thereof against any unpaid Lease and that Section 22 gives FBDC a remedy against
rentals, charges and/or damages. Tirrenos failure to comply with its obligations. FBDC
claims that Section 22 authorizes FBDC to take whatever
Respondents, as well as the trial court, contend that properties that Tirreno left to pay off Tirrenos
Section 22 constitutes a pactum commissorium, a void obligations.
 Respondents posit that the right to intervene, although
permissible, is not an absolute right. Respondents agree
We agree with FBDC.
with the trial courts ruling that FBDCs proper remedy is
A lease contract may be terminated without judicial not intervention but the filing of a separate action.
intervention. Consing v. Jamandre upheld the validity of Moreover, respondents allege that FBDC was accorded
a contractually-stipulated termination clause: by the trial court of the opportunity to defend its claim
of ownership in court through pleadings and hearings
This stipulation is in the nature of a resolutory set for the purpose. FBDC, on the other hand, insists
condition, for upon the exercise by the [lessor] of his that a third party claimant may vindicate his rights over
right to take possession of the leased property, the properties taken in an action for replevin by intervening
contract is deemed terminated. This kind of contractual in the replevin action itself.
stipulation is not illegal, there being nothing in the law
proscribing such kind of agreement. We agree with FBDC.

xxx Both the trial court and respondents relied on our ruling
in Bayer Phils. v. Agana[16] to justify their opposition to
Judicial permission to cancel the agreement was not, FBDCs intervention and to insist on FBDCs filing of a
therefore necessary because of the express stipulation separate action. In Bayer, we declared that the rights of
in the contract of [lease] that the [lessor], in case of third party claimants over certain properties levied upon
failure of the [lessee] to comply with the terms and by the sheriff to satisfy the judgment may not be taken
conditions thereof, can take-over the possession of the up in the case where such claims are presented, but in a
leased premises, thereby cancelling the contract of sub- separate and independent action instituted by the
lease. Resort to judicial action is necessary only in the claimants. However, both respondents and the trial
absence of a special provision granting the power of court overlooked the circumstances behind the ruling in
cancellation.[14] Bayer, which makes the Bayer ruling inapplicable to the
A lease contract may contain a forfeiture clause. present case. The third party in Bayer filed his claim
Country Bankers Insurance Corp. v. Court of Appeals during execution; in the present case, FBDC filed for
upheld the validity of a forfeiture clause as follows: intervention during the trial.

A provision which calls for the forfeiture of the The timing of the filing of the third party claim is
remaining deposit still in the possession of the lessor, important because the timing determines the remedies
without prejudice to any other obligation still owing, in that a third party is allowed to file. A third party
the event of the termination or cancellation of the claimant under Section 16 of Rule 39 (Execution,
agreement by reason of the lessees violation of any of Satisfaction and Effect of Judgments)[17] of the 1997
the terms and conditions of the agreement is a penal Rules of Civil Procedure may vindicate his claim to the
clause that may be validly entered into. A penal clause is property in a separate action, because intervention is no
an accessory obligation which the parties attach to a longer allowed as judgment has already been rendered.
principal obligation for the purpose of insuring the A third party claimant under Section 14 of Rule 57
performance thereof by imposing on the debtor a (Preliminary Attachment)[18] of the 1997 Rules of Civil
special prestation (generally consisting in the payment Procedure, on the other hand, may vindicate his claim
of a sum of money) in case the obligation is not fulfilled to the property by intervention because he has a legal
or is irregularly or inadequately fulfilled.[15] interest in the matter in litigation.[19]

In Country Bankers, we allowed the forfeiture of the We allow FBDCs intervention in the present case
lessees advance deposit of lease payment. Such a because FBDC satisfied the requirements of Section 1,
deposit may also be construed as a guarantee of Rule 19 (Intervention) of the 1997 Rules of Civil
payment, and thus answerable for any unpaid rent or Procedure, which reads as follows:
charges still outstanding at any termination of the lease. Section 1. Who may intervene. A person who has a legal
In the same manner, we allow FBDCs forfeiture of interest in the matter in litigation, or in the success of
Tirrenos properties in the leased premises. By either of the parties, or an interest against both, or is so
agreement between FBDC and Tirreno, the properties situated as to be adversely affected by a distribution or
are answerable for any unpaid rent or charges at any other disposition of property in the custody of the court
termination of the lease. Such agreement is not contrary or of an officer thereof may, with leave of court, be
to law, morals, good customs, or public policy. Forfeiture allowed to intervene in the action. The court shall
of the properties is the only security that FBDC may consider whether or not the intervention will unduly
apply in case of Tirrenos default in its obligations. delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenors
rights may be fully protected in a separate proceeding.
Intervention versus Separate Action Although intervention is not mandatory, nothing in the
Rules proscribes intervention. The trial courts objection
against FBDCs intervention has been set aside by our subject of this case in view of respondents failure to file
ruling that Section 22 of the lease contract is not a bond. The bond in Section 14 of Rule 57 (proceedings
pactum commissorium. where property is claimed by third person) is different
from the bond in Section 3 of the same rule (affidavit
Indeed, contrary to respondents contentions, we ruled
and bond). Under Section 14 of Rule 57, the purpose of
in BA Finance Corporation v. Court of Appeals that
the bond is to indemnify the sheriff against any claim by
where the mortgagees right to the possession of the
the intervenor to the property seized or for damages
specific property is evident, the action need only be
arising from such seizure, which the sheriff was making
maintained against the possessor of the property.
and for which the sheriff was directly responsible to the
However, where the mortgagees right to possession is
third party. Section 3, Rule 57, on the other hand, refers
put to great doubt, as when a contending party might
to the attachment bond to assure the return of
contest the legal bases for mortgagees cause of action
defendants personal property or the payment of
or an adverse and independent claim of ownership or
damages to the defendant if the plaintiffs action to
right of possession is raised by the contending party, it
recover possession of the same property fails, in order
could become essential to have other persons involved
to protect the plaintiffs right of possession of said
and accordingly impleaded for a complete
property, or prevent the defendant from destroying the
determination and resolution of the controversy. Thus:
same during the pendency of the suit.

Because of the absence of the indemnity bond in the

A chattel mortgagee, unlike a pledgee, need not be in, present case, FBDC may also hold the sheriff for
nor entitled to, the possession of the property, unless damages for the taking or keeping of the properties
and until the mortgagor defaults and the mortgagee seized from FBDC.
thereupon seeks to foreclose thereon. Since the
WHEREFORE, we GRANT the petition. We SET ASIDE the
mortgagees right of possession is conditioned upon the
Orders dated 7 March 2003 and 3 July 2003 of Branch
actual default which itself may be controverted, the
59 of the Regional Trial Court of Makati City in Civil Case
inclusion of other parties, like the debtor or the
No. 01-1452 dismissing Fort Bonifacio Development
mortgagor himself, may be required in order to allow a
Corporations Third Party Claim and denying Fort
full and conclusive determination of the case. When the
Bonifacio Development Corporations Motion to
mortgagee seeks a replevin in order to effect the
Intervene and Admit Complaint in Intervention. We
eventual foreclosure of the mortgage, it is not only the
REINSTATE Fort Bonifacio Development Corporations
existence of, but also the mortgagors default on, the
Third Party Claim and GRANT its Motion to Intervene
chattel mortgage that, among other things, can properly
and Admit Complaint in Intervention. Fort Bonifacio
uphold the right to replevy the property. The burden to
Development Corporation may hold the Sheriff liable for
establish a valid justification for that action lies with the
the seizure and delivery of the properties subject of this
plaintiff [-mortgagee]. An adverse possessor, who is not
case because of the lack of an indemnity bond.
the mortgagor, cannot just be deprived of his
possession, let alone be bound by the terms of the SO ORDERED.
chattel mortgage contract, simply because the
mortgagee brings up an action for replevin.[20]
(Emphasis added)

FBDC exercised its lien to Tirrenos properties even

before respondents and Tirreno executed their Deed of
Chattel Mortgage. FBDC is adversely affected by the
disposition of the properties seized by the sheriff.
Moreover, FBDCs intervention in the present case will
result in a complete adjudication of the issues brought
about by Tirrenos creation of multiple liens on the same
properties and subsequent default in its obligations.

Sheriffs Indemnity Bond

FBDC laments the failure of the trial court to require

respondents to file an indemnity bond for FBDCs
protection. The trial court, on the other hand, did not
mention the indemnity bond in its Orders dated 7
March 2003 and 3 July 2003.

Pursuant to Section 14 of Rule 57, the sheriff is not

obligated to turn over to respondents the properties
 3. WON the trial court is should have required
respondents to file an indemnity bond for FBDC’s
FBDC vs. YLLAS LENDING CORP
protection
G.R. No. 158997 October 6, 2008
4. WON FBDC can terminate the lease contract without
FACTS: FORT BONIFACIO DEVELOPMENT CORP. ( FBDC) judicial intervention
executed a lease contract in favor of Tirreno, Inc. over a
HELD: Petition granted
unit at the Bonifacio Global City in Taguig, Metro
Manila. The parties had the lease contract notarized on 1.NO. Respondents, as well as the trial court, contend
the day of its execution. Tirreno used the leased that Section 22 constitutes a pactum commissorium, a
premises for Savoia Ristorante and La Strega Bar. void stipulation in a pledge contract. FBDC, on the other
hand, states that Section 22 is merely a dacion en pago.
Due to Tirreno’s alleged failure to settle its outstanding
obligations, FBDC entered and occupied the leased Section 22 of the Lease Contract between FBDC and
premises. FBDC also appropriated the equipment and Terrano states:
properties left by Tirreno pursuant to Section 22 of their
Section 22. Lien on the Properties of the Lessee
Contract of Lease as partial payment for Tirreno’s
outstanding obligations. Upon the termination of this Contract or the expiration
of the Lease Period without the rentals, charges and/or
In 2002, Yllas Lending Corporation caused the sheriff of
damages, if any, being fully paid or settled, the LESSOR
the trial court to serve an alias writ of seizure against
shall have the right to retain possession of the
FBDC. FBDC found out that in 2001, respondents filed a
properties of the LESSEE used or situated in the Leased
complaint for Foreclosure of Chattel Mortgage with
Premises and the LESSEE hereby authorizes the LESSOR
Replevin, against Tirreno, et al. In their complaint, Yllas
to offset the prevailing value thereof as appraised by the
alleged that they lent a sum of money to Tirreno et al
LESSOR against any unpaid rentals, charges and/or
and in 2000 executed a Deed of Chattel Mortgage in
damages. If the LESSOR does not want to use said
favor of Yllas as security for the loan. The Chattel
properties, it may instead sell the same to third parties
Mortgage covered properties of the Tirreno’s restaurant
and apply the proceeds thereof against any unpaid
and bar.
rentals, charges and/or damages.
On the same day, FBDC served on the sheriff an affidavit
Articles 2085 and 2093 of the Civil Code enumerate the
of title and third party claim.
requisites essential to a contract of pledge:
Despite FBDC’s service upon him of an affidavit of title
(1) the pledge is constituted to secure the fulfillment of
and third party claim, the sheriff proceeded with the
a principal obligation;
seizure of certain items from FBDC’s premises. The
sheriff delivered the seized properties to Yllas. (2) the pledgor is the absolute owner of the thing
pledged;
FBDC questioned the propriety of the seizure and
delivery of the properties to respondents without an (3) the persons constituting the pledge have the free
indemnity bond before the trial court, which decided disposal of their property or have legal authorization for
against FBDC. It stated that: the purpose; and
1. Section 22 of the lease contract between FBDC and (4) the thing pledged is placed in the possession of the
Tirreno is void under Article 2088 of the Civil Code. creditor, or of a third person by common agreement.
Article 2088 of the Civil Code prohibits the creditor from
2. FBDC should have filed a separate complaint against
appropriating or disposing the things pledged, and any
respondents instead of filing a motion to intervene. (The
contrary stipulation is void.
trial court quoted Bayer Phils. v. Agana )
Section 22, as worded, gives FBDC a means to collect
FBDC filed a MR, which was denied. Hence this petition
payment from Tirreno in case of termination of the
to review pure questions of law.
lease contract or the expiration of the lease period and
ISSUE: there are unpaid rentals, charges, or damages. The
existence of a contract of pledge, however, does not
1. WON FBDC has no right of ownership over the subject
arise just because FBDC has means of collecting past
properties because Section 22 of the contract of lease is
due rent from Tirreno other than direct payment.
void for being a pledge and a pactum commissorium;
The fourth requisite, that the thing pledged is placed in
2. WON the proper remedy of FBDC as third party
the possession of the creditor, is absent. There is non-
claimant over the subject properties is to file a separate
compliance with the fourth requisite even if Tirreno’s
action; and
personal properties are found in FBDC’s real property.
Tirreno’s personal properties are in FBDC’s real property
because of the Contract of Lease, which gives Tirreno
possession of the personal properties. Since Section 22
is not a contract of pledge, there is no pactum Section 3, Rule 57, on the other hand, refers to the
commissorium. attachment bond to assure the return of defendant’s
personal property or the payment of damages to the
On the other hand, Article 1245 of the Civil Code defines
defendant if the plaintiff’s action to recover possession
dacion en pago, or dation in payment, as the alienation
of the same property fails, in order to protect the
of property to the creditor in satisfaction of a debt in
plaintiff’s right of possession of said property, or prevent
money. Philippine National Bank v. Pineda held that
the defendant from destroying the same during the
dation in payment requires delivery and transmission of
pendency of the suit.
ownership of a thing owned by the debtor to the
creditor as an accepted equivalent of the performance Because of the absence of the indemnity bond in the
of the obligation. There is no dation in payment when present case, FBDC may also hold the sheriff for
there is no transfer of ownership in the creditor’s favor, damages for the taking or keeping of the properties
as when the possession of the thing is merely given to seized from FBDC.
the creditor by way of security.
4. YES. A lease contract may be terminated without
2. NO. The Bayer ruling is inapplicable to the present judicial intervention. Consing v. Jamandre upheld the
case. The third party in Bayer filed his claim during validity of a contractually-stipulated termination clause:
execution; in the present case, FBDC filed for
This stipulation is in the nature of a resolutory
intervention during the trial.
condition, for upon the exercise by the [lessor] of his
The timing of the filing of the third party claim is right to take possession of the leased property, the
important because the timing determines the remedies contract is deemed terminated. This kind of contractual
that a third party is allowed to file. A third party stipulation is not illegal, there being nothing in the law
claimant under Section 16 of Rule 39 (Execution, proscribing such kind of agreement.
Satisfaction and Effect of Judgments)17 of the 1997
xxx
Rules of Civil Procedure may vindicate his claim to the
property in a separate action, because intervention is no Judicial permission to cancel the agreement was not,
longer allowed as judgment has already been rendered. therefore necessary because of the express stipulation
We allow FBDC’s intervention in the present case in the contract of [lease] that the [lessor], in case of
because FBDC satisfied the requirements of Section 1, failure of the [lessee] to comply with the terms and
Rule 19 (Intervention) of the 1997 Rules of Civil conditions thereof, can take-over the possession of the
Procedure, which reads as follows: leased premises, thereby cancelling the contract of sub-
lease. Resort to judicial action is necessary only in the
Section 1. Who may intervene. — A person who has a
absence of a special provision granting the power of
legal interest in the matter in litigation, or in the success
cancellation.14
of either of the parties, or an interest against both, or is
so situated as to be adversely affected by a distribution A lease contract may contain a forfeiture clause. In the
or other disposition of property in the custody of the same manner, we allow FBDC’s forfeiture of Tirreno’s
court or of an officer thereof may, with leave of court, properties in the leased premises. By agreement
be allowed to intervene in the action. The court shall between FBDC and Tirreno, the properties are
consider whether or not the intervention will unduly answerable for any unpaid rent or charges at any
delay or prejudice the adjudication of the rights of the termination of the lease. Such agreement is not contrary
original parties, and whether or not the intervenor’s to law, morals, good customs, or public policy. Forfeiture
rights may be fully protected in a separate proceeding. of the properties is the only security that FBDC may
apply in case of Tirreno’s default in its obligations.
Although intervention is not mandatory, nothing in the
Rules proscribes intervention. NOTES:
3. YES. Pursuant to Section 14 of Rule 57, the sheriff is 1. A chattel mortgagee, unlike a pledgee, need not be in,
not obligated to turn over to respondents the properties nor entitled to, the possession of the property, unless
subject of this case in view of respondents’ failure to file and until the mortgagor defaults and the mortgagee
a bond. thereupon seeks to foreclose thereon. Since the
mortgagee’s right of possession is conditioned upon the
The bond in Section 14 of Rule 57 (proceedings where
actual default which itself may be controverted, the
property is claimed by third person) is different from the
inclusion of other parties, like the debtor or the
bond in Section 3 of the same rule (affidavit and bond).
mortgagor himself, may be required in order to allow a
Under Section 14 of Rule 57, the purpose of the bond is full and conclusive determination of the case. When the
to indemnify the sheriff against any claim by the mortgagee seeks a replevin in order to effect the
intervenor to the property seized or for damages arising eventual foreclosure of the mortgage, it is not only the
from such seizure, which the sheriff was making and for existence of, but also the mortgagor’s default on, the
which the sheriff was directly responsible to the third chattel mortgage that, among other things, can properly
party. uphold the right to replevy the property. The burden to
establish a valid justification for that action lies with the
plaintiff [-mortgagee]. An adverse possessor, who is not
the mortgagor, cannot just be deprived of his
possession, let alone be bound by the terms of the
chattel mortgage contract, simply because the
mortgagee brings up an action for replevin.

FBDC exercised its lien to Tirreno’s properties even

before respondents and Tirreno executed their Deed of
Chattel Mortgage. FBDC is adversely affected by the
disposition of the properties seized by the sheriff.
Moreover, FBDC’s intervention in the present case will
result in a complete adjudication of the issues brought
about by Tirreno’s creation of multiple liens on the same
properties and subsequent default in its obligations.
Ching v. Court of Appeals, 423 SCRA 356 writ of preliminary attachment. The trial court decreed
that the grounds alleged in the application and that of
This petition for review, under Rule 45 of the Revised
its supporting affidavit are all conclusions of fact and of
Rules of Court, assails the Decision[1] of the Court of
law which do not warrant the issuance of the writ
Appeals (CA) dated November 27, 1995 in CA-G.R. SP
prayed for.[14] On motion for reconsideration, however,
No. 33585, as well as the Resolution[2] on April 2, 1996
the trial court, in an Order dated September 14, 1981,
denying the petitioners motion for reconsideration. The
reconsidered its previous order and granted the ABCs
impugned decision granted the private respondents
application for a writ of preliminary attachment on a
petition for certiorari and set aside the Orders of the
bond of P12,700,000. The order, in relevant part, stated:
trial court dated December 15, 1993[3] and February
17, 1994[4] nullifying the attachment of 100,000 shares With respect to the second ground relied upon for the
of stocks of the Citycorp Investment Philippines under grant of the writ of preliminary attachment ex-parte,
the name of petitioner Alfredo Ching. which is the alleged disposal of properties by the
defendants with intent to defraud creditors as provided
The following facts are undisputed:
in Sec. 1(e) of Rule 57 of the Rules of Court, the
On September 26, 1978, the Philippine Blooming Mills affidavits can only barely justify the issuance of said writ
Company, Inc. (PBMCI) obtained a loan of P9,000,000.00 as against the defendant Alfredo Ching who has
from the Allied Banking Corporation (ABC). By virtue of allegedly bound himself jointly and severally to pay
this loan, the PBMCI, through its Executive Vice- plaintiff the defendant corporations obligation to the
President Alfredo Ching, executed a promissory note for plaintiff as a surety thereof.
the said amount promising to pay on December 22,
WHEREFORE, let a writ of preliminary attachment issue
1978 at an interest rate of 14% per annum.[5] As added
as against the defendant Alfredo Ching requiring the
security for the said loan, on September 28, 1978,
sheriff of this Court to attach all the properties of said
Alfredo Ching, together with Emilio Taedo and Chung
Alfredo Ching not exceeding P12,612,972.82 in value,
Kiat Hua, executed a continuing guaranty with the ABC
which are within the jurisdiction of this Court and not
binding themselves to jointly and severally guarantee
exempt from execution upon, the filing by plaintiff of a
the payment of all the PBMCI obligations owing the ABC
bond duly approved by this Court in the sum of Twelve
to the extent of P38,000,000.00.[6] The loan was
Million Seven Hundred Thousand Pesos
subsequently renewed on various dates, the last
(P12,700,000.00) executed in favor of the defendant
renewal having been made on December 4, 1980.[7]
Alfredo Ching to secure the payment by plaintiff to him
Earlier, on December 28, 1979, the ABC extended of all the costs which may be adjudged in his favor and
another loan to the PBMCI in the amount of all damages he may sustain by reason of the attachment
P13,000,000.00 payable in eighteen months at 16% if the court shall finally adjudge that the plaintiff was
interest per annum. As in the previous loan, the PBMCI, not entitled thereto.
through Alfredo Ching, executed a promissory note to
SO ORDERED.[15]
evidence the loan maturing on June 29, 1981.[8] This
was renewed once for a period of one month.[9] Upon the ABCs posting of the requisite bond, the trial
court issued a writ of preliminary attachment.
The PBMCI defaulted in the payment of all its loans.
Subsequently, summonses were served on the
Hence, on August 21, 1981, the ABC filed a complaint
defendants,[16] save Chung Kiat Hua who could not be
for sum of money with prayer for a writ of preliminary
found.
attachment against the PBMCI to collect the
P12,612,972.88 exclusive of interests, penalties and Meanwhile, on April 1, 1982, the PBMCI and Alfredo
other bank charges. Impleaded as co-defendants in the Ching jointly filed a petition for suspension of payments
complaint were Alfredo Ching, Emilio Taedo and Chung with the Securities and Exchange Commission (SEC),
Kiat Hua in their capacity as sureties of the PBMCI. docketed as SEC Case No. 2250, at the same time
seeking the PBMCIs rehabilitation.[17]
The case was docketed as Civil Case No. 142729 in the
Regional Trial Court of Manila, Branch XVIII.[10] In its On July 9, 1982, the SEC issued an Order placing the
application for a writ of preliminary attachment, the PBMCIs business, including its assets and liabilities,
ABC averred that the defendants are guilty of fraud in under rehabilitation receivership, and ordered that all
incurring the obligations upon which the present action actions for claims listed in Schedule A of the petition
is brought[11] in that they falsely represented pending before any court or tribunal are hereby
themselves to be in a financial position to pay their suspended in whatever stage the same may be until
obligation upon maturity thereof.[12] Its supporting further orders from the Commission.[18] The ABC was
affidavit stated, inter alia, that the [d]efendants have among the PBMCIs creditors named in the said
removed or disposed of their properties, or [are] ABOUT schedule.
to do so, with intent to defraud their creditors.[13]
Subsequently, on January 31, 1983, the PBMCI and
On August 26, 1981, after an ex-parte hearing, the trial Alfredo Ching jointly filed a Motion to Dismiss and/or
court issued an Order denying the ABCs application for a motion to suspend the proceedings in Civil Case No.
142729 invoking the PBMCIs pending application for marriage out of conjugal funds after the Citycorp
suspension of payments (which Ching co-signed) and Investment Philippines was established in 1974.
over which the SEC had already assumed jurisdiction. Furthermore, the indebtedness covered by the
[19] On February 4, 1983, the ABC filed its Opposition continuing guaranty/comprehensive suretyship contract
thereto.[20] executed by petitioner Alfredo Ching for the account of
PBMCI did not redound to the benefit of the conjugal
In the meantime, on July 26, 1983, the deputy sheriff of
partnership. She, likewise, alleged that being the wife of
the trial court levied on attachment the 100,000
Alfredo Ching, she was a third-party claimant entitled to
common shares of Citycorp stocks in the name of
file a motion for the release of the properties.[32] She
Alfredo Ching.[21]
attached therewith a copy of her marriage contract with
Thereafter, in an Order dated September 16, 1983, the Alfredo Ching.[33]
trial court partially granted the aforementioned motion
The ABC filed a comment on the motion to quash
by suspending the proceedings only with respect to the
preliminary attachment and/or motion to expunge
PBMCI. It denied Chings motion to dismiss the
records, contending that:
complaint/or suspend the proceedings and pointed out
that P.D. No. 1758 only concerns the activities of 2.1 The supposed movant, Encarnacion T. Ching, is not a
corporations, partnerships and associations and was party to this present case; thus, she has no personality
never intended to regulate and/or control activities of to file any motion before this Honorable Court;
individuals. Thus, it directed the individual defendants
2.2 Said supposed movant did not file any Motion for
to file their answers.[22]
Intervention pursuant to Section 2, Rule 12 of the Rules
Instead of filing an answer, Ching filed on January 14, of Court;
1984 a Motion to Suspend Proceedings on the same
2.3 Said Motion cannot even be construed to be in the
ground of the pendency of SEC Case No. 2250. This
nature of a Third-Party Claim conformably with Sec. 14,
motion met the opposition from the ABC.[23]
Rule 57 of the Rules of Court.
On January 20, 1984, Taedo filed his Answer with
3. Furthermore, assuming in gracia argumenti that the
counterclaim and cross-claim.[24] Ching eventually filed
supposed movant has the required personality, her
his Answer on July 12, 1984.[25]
Motion cannot be acted upon by this Honorable Court
On October 25, 1984, long after submitting their as the above-entitled case is still in the archives and the
answers, Ching filed an Omnibus Motion,[26] again proceedings thereon still remains suspended. And there
praying for the dismissal of the complaint or suspension is no previous Motion to revive the same.[34]
of the proceedings on the ground of the July 9, 1982
The ABC also alleged that the motion was barred by
Injunctive Order issued in SEC Case No. 2250. He
prescription or by laches because the shares of stocks
averred that as a surety of the PBMCI, he must also
were in custodia legis.
necessarily benefit from the defenses of his principal.
The ABC opposed Chings omnibus motion. During the hearing of the motion, Encarnacion T. Ching
adduced in evidence her marriage contract to Alfredo
Emilio Y. Taedo, thereafter, filed his own Omnibus
Ching to prove that they were married on January 8,
Motion[27] praying for the dismissal of the complaint,
1960;[35] the articles of incorporation of Citycorp
arguing that the ABC had abandoned and waived its
Investment Philippines dated May 14, 1979;[36] and,
right to proceed against the continuing guaranty by its
the General Information Sheet of the corporation
act of resorting to preliminary attachment.
showing that petitioner Alfredo Ching was a member of
On December 17, 1986, the ABC filed a Motion to the Board of Directors of the said corporation and was
Reduce the amount of his preliminary attachment bond one of its top twenty stockholders.
from P12,700,000 to P6,350,000.[28] Alfredo Ching
On December 10, 1993, the Spouses Ching filed their
opposed the motion,[29] but on April 2, 1987, the court
Reply/Opposition to the motion to expunge records.
issued an Order setting the incident for further hearing
on May 28, 1987 at 8:30 a.m. for the parties to adduce Acting on the aforementioned motion, the trial court
evidence on the actual value of the properties of issued on December 15, 1993 an Order[37] lifting the
Alfredo Ching levied on by the sheriff.[30] writ of preliminary attachment on the shares of stocks
and ordering the sheriff to return the said stocks to the
On March 2, 1988, the trial court issued an Order
petitioners. The dispositive portion reads:
granting the motion of the ABC and rendered the
attachment bond of P6,350,000.[31] WHEREFORE, the instant Motion to Quash Preliminary
Attachment, dated November 9, 1993, is hereby
On November 16, 1993, Encarnacion T. Ching, assisted
granted. Let the writ of preliminary attachment subject
by her husband Alfredo Ching, filed a Motion to Set
matter of said motion, be quashed and lifted with
Aside the levy on attachment. She alleged inter alia that
respect to the attached 100,000 common shares of
the 100,000 shares of stocks levied on by the sheriff
stock of Citycorp Investment Philippines in the name of
were acquired by her and her husband during their
the defendant Alfredo Ching, the said shares of stock to The petitioner-spouses filed the instant petition for
be returned to him and his movant-spouse by Deputy review on certiorari, asserting that the RTC did not
Sheriff Apolonio A. Golfo who effected the levy thereon commit any grave abuse of discretion amounting to
on July 26, 1983, or by whoever may be presently in excess or lack of jurisdiction in issuing the assailed
possession thereof. orders in their favor; hence, the CA erred in reversing
the same. They aver that the source of funds in the
SO ORDERED.[38]
acquisition of the levied shares of stocks is not the
The plaintiff Allied Banking Corporation filed a motion controlling factor when invoking the presumption of the
for the reconsideration of the order but denied the conjugal nature of stocks under Art. 160,[42] and that
same on February 17, 1994. The petitioner bank such presumption subsists even if the property is
forthwith filed a petition for certiorari with the CA, registered only in the name of one of the spouses, in
docketed as CA-G.R. SP No. 33585, for the nullification this case, petitioner Alfredo Ching.[43] According to the
of the said order of the court, contending that: petitioners, the suretyship obligation was not contracted
in the pursuit of the petitioner-husbands profession or
1. The respondent Judge exceeded his authority thereby business.[44] And, contrary to the ruling of the CA,
acted without jurisdiction in taking cognizance of, and where conjugal assets are attached in a collection suit
granting a Motion filed by a complete stranger to the on an obligation contracted by the husband, the wife
case. should exhaust her motion to quash in the main case
2. The respondent Judge committed a grave abuse of and not file a separate suit.[45] Furthermore, the
discretion in lifting the writ of preliminary attachment petitioners contend that under Art. 125 of the Family
without any basis in fact and in law, and contrary to Code, the petitioner-husbands gratuitous suretyship is
established jurisprudence on the matter.[39] null and void ab initio,[46] and that the share of one of
the spouses in the conjugal partnership remains
On November 27, 1995, the CA rendered judgment inchoate until the dissolution and liquidation of the
granting the petition and setting aside the assailed partnership.[47]
orders of the trial court, thus:

WHEREFORE, premises considered, the petition is

GRANTED, hereby setting aside the questioned orders In its comment on the petition, the private respondent
(dated December 15, 1993 and February 17, 1994) for asserts that the CA correctly granted its petition for
being null and void. certiorari nullifying the assailed order. It contends that
the CA correctly relied on the ruling of this Court in
SO ORDERED.[40] Wong v. Intermediate Appellate Court. Citing Cobb-
The CA sustained the contention of the private Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals,
respondent and set aside the assailed orders. According the private respondent alleges that the continuing
to the CA, the RTC deprived the private respondent of guaranty and suretyship executed by petitioner Alfredo
its right to file a bond under Section 14, Rule 57 of the Ching in pursuit of his profession or business.
Rules of Court. The petitioner Encarnacion T. Ching was Furthermore, according to the private respondent, the
not a party in the trial court; hence, she had no right of right of the petitioner-wife to a share in the conjugal
action to have the levy annulled with a motion for that partnership property is merely inchoate before the
purpose. Her remedy in such case was to file a separate dissolution of the partnership; as such, she had no right
action against the private respondent to nullify the levy to file the said motion to quash the levy on attachment
on the 100,000 Citycorp shares of stocks. The court of the shares of stocks.
stated that even assuming that Encarnacion T. Ching had The issues for resolution are as follows: (a) whether the
the right to file the said motion, the same was barred by petitioner-wife has the right to file the motion to quash
laches. the levy on attachment on the 100,000 shares of stocks
Citing Wong v. Intermediate Appellate Court,[41] the CA in the Citycorp Investment Philippines; (b) whether or
ruled that the presumption in Article 160 of the New not the RTC committed a grave abuse of its discretion
Civil Code shall not apply where, as in this case, the amounting to excess or lack of jurisdiction in issuing the
petitioner-spouses failed to prove the source of the assailed orders.
money used to acquire the shares of stock. It held that On the first issue, we agree with the petitioners that the
the levied shares of stocks belonged to Alfredo Ching, as petitioner-wife had the right to file the said motion,
evidenced by the fact that the said shares were although she was not a party in Civil Case No. 142729.
registered in the corporate books of Citycorp solely [48]
under his name. Thus, according to the appellate court,
the RTC committed a grave abuse of its discretion In Ong v. Tating,[49] we held that the sheriff may attach
amounting to excess or lack of jurisdiction in issuing the only those properties of the defendant against whom a
assailed orders. The petitioners motion for writ of attachment has been issued by the court. When
reconsideration was denied by the CA in a Resolution the sheriff erroneously levies on attachment and seizes
dated April 2, 1996. the property of a third person in which the said
defendant holds no right or interest, the superior designed for the correction of errors of jurisdiction and
authority of the court which has authorized the not errors of judgment. When a court exercises its
execution may be invoked by the aggrieved third person jurisdiction, an error committed while so engaged does
in the same case. Upon application of the third person, not deprive it of its jurisdiction being exercised when
the court shall order a summary hearing for the purpose the error is committed.[52]
of determining whether the sheriff has acted rightly or
After a comprehensive review of the records of the RTC
wrongly in the performance of his duties in the
and of the CA, we find and so hold that the RTC did not
execution of the writ of attachment, more specifically if
commit any grave abuse of its discretion amounting to
he has indeed levied on attachment and taken hold of
excess or lack of jurisdiction in issuing the assailed
property not belonging to the plaintiff. If so, the court
orders.
may then order the sheriff to release the property from
the erroneous levy and to return the same to the third Article 160 of the New Civil Code provides that all the
person. In resolving the motion of the third party, the properties acquired during the marriage are presumed
court does not and cannot pass upon the question of to belong to the conjugal partnership, unless it be
the title to the property with any character of finality. It proved that it pertains exclusively to the husband, or to
can treat the matter only insofar as may be necessary to the wife. In Tan v. Court of Appeals,[53] we held that it is
decide if the sheriff has acted correctly or not. If the not even necessary to prove that the properties were
claimants proof does not persuade the court of the acquired with funds of the partnership. As long as the
validity of the title, or right of possession thereto, the properties were acquired by the parties during the
claim will be denied by the court. The aggrieved third marriage, they are presumed to be conjugal in nature. In
party may also avail himself of the remedy of terceria by fact, even when the manner in which the properties
executing an affidavit of his title or right of possession were acquired does not appear, the presumption will
over the property levied on attachment and serving the still apply, and the properties will still be considered
same to the office making the levy and the adverse conjugal. The presumption of the conjugal nature of the
party. Such party may also file an action to nullify the properties acquired during the marriage subsists in the
levy with damages resulting from the unlawful levy and absence of clear, satisfactory and convincing evidence to
seizure, which should be a totally separate and distinct overcome the same.[54]
action from the former case. The above-mentioned
remedies are cumulative and any one of them may be In this case, the evidence adduced by the petitioners in
resorted to by one third-party claimant without availing the RTC is that the 100,000 shares of stocks in the
of the other remedies.[50] Citycorp Investment Philippines were issued to and
registered in its corporate books in the name of the
In this case, the petitioner-wife filed her motion to set petitioner-husband when the said corporation was
aside the levy on attachment of the 100,000 shares of incorporated on May 14, 1979. This was done during the
stocks in the name of petitioner-husband claiming that subsistence of the marriage of the petitioner-spouses.
the said shares of stocks were conjugal in nature; hence, The shares of stocks are, thus, presumed to be the
not liable for the account of her husband under his conjugal partnership property of the petitioners. The
continuing guaranty and suretyship agreement with the private respondent failed to adduce evidence that the
PBMCI. The petitioner-wife had the right to file the petitioner-husband acquired the stocks with his
motion for said relief. exclusive money.[55] The barefaced fact that the shares
of stocks were registered in the corporate books of
On the second issue, we find and so hold that the CA
Citycorp Investment Philippines solely in the name of
erred in setting aside and reversing the orders of the
the petitioner-husband does not constitute proof that
RTC. The private respondent, the petitioner in the CA,
the petitioner-husband, not the conjugal partnership,
was burdened to prove that the RTC committed a grave
owned the same.[56] The private respondents reliance
abuse of its discretion amounting to excess or lack of
on the rulings of this Court in Maramba v. Lozano[57]
jurisdiction. The tribunal acts without jurisdiction if it
and Associated Insurance & Surety Co., Inc. v.
does not have the legal purpose to determine the case;
Banzon[58] is misplaced. In the Maramba case, we held
there is excess of jurisdiction where the tribunal, being
that where there is no showing as to when the property
clothed with the power to determine the case,
was acquired, the fact that the title is in the wifes name
oversteps its authority as determined by law. There is
alone is determinative of the ownership of the property.
grave abuse of discretion where the tribunal acts in a
The principle was reiterated in the Associated Insurance
capricious, whimsical, arbitrary or despotic manner in
case where the uncontroverted evidence showed that
the exercise of its judgment and is equivalent to lack of
the shares of stocks were acquired during the marriage
jurisdiction.[51]
of the petitioners.
It was incumbent upon the private respondent to
Instead of fortifying the contention of the respondents,
adduce a sufficiently strong demonstration that the RTC
the ruling of this Court in Wong v. Intermediate
acted whimsically in total disregard of evidence material
Appellate Court[59] buttresses the case for the
to, and even decide of, the controversy before certiorari
petitioners. In that case, we ruled that he who claims
will lie. A special civil action for certiorari is a remedy
that property acquired by the spouses during their
marriage is not conjugal partnership property but contract of loan was between the private respondent
belongs to one of them as his personal property is and the PBMCI, solely for the benefit of the latter. No
burdened to prove the source of the money utilized to presumption can be inferred from the fact that when
purchase the same. In this case, the private respondent the petitioner-husband entered into an accommodation
claimed that the petitioner-husband acquired the shares agreement or a contract of surety, the conjugal
of stocks from the Citycorp Investment Philippines in his partnership would thereby be benefited. The private
own name as the owner thereof. It was, thus, the respondent was burdened to establish that such benefit
burden of the private respondent to prove that the redounded to the conjugal partnership.[63]
source of the money utilized in the acquisition of the
It could be argued that the petitioner-husband was a
shares of stocks was that of the petitioner-husband
member of the Board of Directors of PBMCI and was
alone. As held by the trial court, the private respondent
one of its top twenty stockholders, and that the shares
failed to adduce evidence to prove this assertion.
of stocks of the petitioner-husband and his family would
The CA, likewise, erred in holding that by executing a appreciate if the PBMCI could be rehabilitated through
continuing guaranty and suretyship agreement with the the loans obtained; that the petitioner-husbands career
private respondent for the payment of the PBMCI loans, would be enhanced should PBMCI survive because of
the petitioner-husband was in the exercise of his the infusion of fresh capital. However, these are not the
profession, pursuing a legitimate business. The appellate benefits contemplated by Article 161 of the New Civil
court erred in concluding that the conjugal partnership Code. The benefits must be those directly resulting from
is liable for the said account of PBMCI under Article the loan. They cannot merely be a by-product or a spin-
161(1) of the New Civil Code. off of the loan itself.[64]

Article 161(1) of the New Civil Code (now Article 121[2 This is different from the situation where the husband
and 3][60] of the Family Code of the Philippines) borrows money or receives services to be used for his
provides: own business or profession. In the Ayala case, we ruled
that it is such a contract that is one within the term
Art. 161. The conjugal partnership shall be liable for:
obligation for the benefit of the conjugal partnership.
(1) All debts and obligations contracted by the husband Thus:
for the benefit of the conjugal partnership, and those
(A) If the husband himself is the principal obligor in the
contracted by the wife, also for the same purpose, in
contract, i.e., he directly received the money and
the cases where she may legally bind the partnership.
services to be used in or for his own business or his own
The petitioner-husband signed the continuing guaranty profession, that contract falls within the term
and suretyship agreement as security for the payment obligations for the benefit of the conjugal partnership.
of the loan obtained by the PBMCI from the private Here, no actual benefit may be proved. It is enough that
respondent in the amount of P38,000,000. In Ayala the benefit to the family is apparent at the time of the
Investment and Development Corp. v. Court of Appeals, signing of the contract. From the very nature of the
[61] this Court ruled that the signing as surety is contract of loan or services, the family stands to benefit
certainly not an exercise of an industry or profession. It from the loan facility or services to be rendered to the
is not embarking in a business. No matter how often an business or profession of the husband. It is immaterial,
executive acted on or was persuaded to act as surety for if in the end, his business or profession fails or does not
his own employer, this should not be taken to mean that succeed. Simply stated, where the husband contracts
he thereby embarked in the business of suretyship or obligations on behalf of the family business, the law
guaranty. presumes, and rightly so, that such obligation will
redound to the benefit of the conjugal partnership.[65]
For the conjugal partnership to be liable for a liability
that should appertain to the husband alone, there must The Court held in the same case that the rulings of the
be a showing that some advantages accrued to the Court in Cobb-Perez and G-Tractors, Inc. are not
spouses. Certainly, to make a conjugal partnership controlling because the husband, in those cases,
responsible for a liability that should appertain alone to contracted the obligation for his own business. In this
one of the spouses is to frustrate the objective of the case, the petitioner-husband acted merely as a surety
New Civil Code to show the utmost concern for the for the loan contracted by the PBMCI from the private
solidarity and well being of the family as a unit. The respondent.
husband, therefore, is denied the power to assume
IN LIGHT OF ALL THE FOREGOING, the petition is
unnecessary and unwarranted risks to the financial
GRANTED. The Decision and Resolution of the Court of
stability of the conjugal partnership.[62]
Appeals are SET ASIDE AND REVERSED. The assailed
In this case, the private respondent failed to prove that orders of the RTC are AFFIRMED.
the conjugal partnership of the petitioners was
SO ORDERED.
benefited by the petitioner-husbands act of executing a
continuing guaranty and suretyship agreement with the Ching v. CA, 423 SCRA 356, Case Digest
private respondent for and in behalf of PBMCI. The
FACTS: Philippine Blooming Mills Company, Inc. (PBMCI) contract of loan was between the private respondent
obtained two loans from the Allied Banking Corporation and the PBMCI, solely for the benefit of the latter. No
(ABC). (PBMCI) Executive Vice-President Alfredo Ching presumption can be inferred from the fact that when
executed a continuing guaranty with the ABC for the the petitioner-husband entered into an accommodation
payment of the said loan. The PBMCI defaulted in the agreement or a contract of surety, the conjugal
payment of all its loans so ABC filed a complaint for sum partnership would thereby be benefited. The private
of money against the PBMCI. Trial court issued a writ of respondent was burdened to establish that such benefit
preliminary attachment against Alfredo Ching requiring redounded to the conjugal partnership.
the sheriff of to attach all the properties of said Alfredo
Ching to answer for the payment of the loans.
Encarnacion T. Ching, wife of Alfredo Ching, filed a
Motion to Set Aside the levy on attachment allegeing
inter alia that the 100,000 shares of stocks levied on by
the sheriff were acquired by her and her husband during
their marriage out of conjugal funds. Petitioner spouses
aver that the source of funds in the acquisition of the
levied shares of stocks is not the controlling factor when
invoking the presumption of the conjugal nature of
stocks under Art. 21 and that such presumption subsists
even if the property is registered only in the name of
one of the spouses, in this case, petitioner Alfredo
Ching. According to the petitioners, the suretyship
obligation was not contracted in the pursuit of the
petitioner-husband’s profession or business.

ISSUE: WON 100,000 shares of stocks may be levied on

by the sheriff to answer for the loans guaranteed by
petitioner Alfredo Ching

HELD: No.

RATIO: The CA erred in holding that by executing a

continuing guaranty and suretyship agreement with the
private respondent for the payment of the PBMCI loans,
the petitioner-husband was in the exercise of his
profession, pursuing a legitimate business.

The shares of stocks are, thus, presumed to be the

conjugal partnership property of the petitioners. The
private respondent failed to adduce evidence that the
petitioner-husband acquired the stocks with his
exclusive money.

The appellate court erred in concluding that the

conjugal partnership is liable for the said account of
PBMCI.

Article 121 provides: The conjugal partnership shall be

liable for: (1) All debts and obligations contracted by the
husband for the benefit of the conjugal partnership, and
those contracted by the wife, also for the same purpose,
in the cases where she may legally bind the partnership.

For the conjugal partnership to be liable for a liability

that should appertain to the husband alone, there must
be a showing that some advantages accrued to the
spouses.

In this case, the private respondent failed to prove that

the conjugal partnership of the petitioners was
benefited by the petitioner-husband’s act of executing a
continuing guaranty and suretyship agreement with the
private respondent for and in behalf of PBMCI. The
Carlos v. Sandoval, 471 SCRA 266 Respondents filed an Urgent Motion to Discharge the
Writ of Attachment, which was opposed by Carlos. On 4
These consolidated petitions emanated from a civil case
December 1995, the RTC rendered an order denying the
filed by Juan de Dios Carlos (Carlos) against respondents
motion. This caused respondents to file a Petition for
Felicidad Sandoval (Sandoval) and Teofilo Carlos II
Certiorari with the Court of Appeals, seeking to set aside
(Teofilo II) docketed with the Regional Trial Court (RTC)
the RTC order granting the writ of preliminary
of Muntinlupa City as Civil Case No. 95-135.
attachment denying the motion for the discharge of the
In his Complaint before the RTC, Carlos asserted that he writ. This case was docketed as CA-G.R. SP No. 39267.[6
was the sole surviving compulsory heir of his parents,
On 27 February 1996, the Court of Appeals Second
Felix B. Carlos and Felipa Elemia,[1] who had acquired
Division promulgated its Decision in CA-G.R. SP No.
during their marriage, six parcels of land (subject
39267, wherein it granted the Petition for Certiorari and
properties). His brother, Teofilo (Teofilo), died intestate
ordered the discharge and dissolution of the Writ of
in 1992. At the time of his death, Teofilo was apparently
Attachment and Notice of Garnishment.[7] The Court of
married to Sandoval, and cohabiting with her and their
Appeals found that there was no sufficient cause of
child, respondent Teofilo II. Nonetheless, Carlos alleged
action to warrant the preliminary attachment, since
in his Complaint that Teofilo and Sandoval were not
Carlos had merely alleged general averments in order to
validly married as they had not obtained any marriage
support his prayer.[8] Carlos elevated the said Decision
license.[2] Furthermore, Carlos also asserted that Teofilo
to this Court by way of Petition for Review on Certiorari,
II could not be considered as Teofilos child. As a result,
which was docketed as G.R. No. L-125717. In a
Carlos concluded that he was also the sole heir of his
Resolution dated 21 October 1996, the Court denied
brother Teofilo, since the latter had died without leaving
Carloss Petition, and thus the Court of Appeals Decision
any heirs.
ordering the dissolution of the Writ of Attachment and
Carlos also claimed that Teofilo, prior to their father Notice of Garnishment became final
Felixs death in 1963, developed a scheme to save the
In the meantime, the hearing on Carloss Complaint
elder Carloss estate from inheritance taxes. Under the
ensued before the RTC. Respondents duly filed their
scheme, the properties of the father would be
Answer and thereafter filed a Motion for Summary
transferred to Teofilo who would, in turn, see to it that
Judgment. Carlos opposed the motion and countered
the shares of the legal heirs are protected and delivered
with his own Motion for Summary Judgment. On 8 April
to them. Felix assented to the plan, and the subject
1996, the RTC rendered a summary judgment in favor of
properties were transferred in the name of Teofilo. After
Carlos. Carloss victory was wholesale, with the RTC
Teofilos death, Carlos entered into certain agreements
making the following pronouncements:
with Sandoval in connection with the subject properties.
Carlos did so, believing that the latter was the lawful 1. Declaring the marriage between defendant Felicidad
wife of his brother Teofilo. Subsequently though, Carlos Sandoval and Teofilo Carlos solemnized at Silang, Cavite,
discovered that Sandoval and his brother were never on May 14, 1962, evidenced by the Marriage Contract
validly married, as their marriage was contracted submitted in this case, null and void ab initio for lack of
without a marriage license.[3 the requisite marriage license

Carlos now sought to nullify these agreements with 2. Declaring that the defendant minor, Teofilo S. Carlos
Sandoval for want of consideration, the premise for II, is not the natural, illegitimate, or legally adopted child
these contracts being non-existent. Thus, Carlos prayed of the late Teofilo E. Carlos
of the RTC to declare the alleged marriage between
3. Ordering defendant Sandoval to pay and restitute to
Teofilo and Sandoval void ab initio, provided that Teofilo
plaintiff the sum of P18,924,800.00, together with the
died without issue, order that new titles covering the
interest thereon at the legal rate from date of filing of
subject properties be issued in the name of Carlos, and
the instant complaint until fully paid;
require Sandoval to restitute Carlos in the amount of
P18,924,800.00.[4] 4. Declaring plaintiff as the sole and exclusive owner of
the parcel of land, less the portion adjudicated to the
Carlos likewise prayed for the issuance of the provisional
plaintiffs in Civil Case No. 11975, covered by TCT No.
relief of preliminary attachment. The RTC issued an
139061 of the Register of Deeds of Makati City, and
Order dated 7 September 1995 granting the prayer for
ordering said Register of Deeds to cancel said title and
preliminary attachment, and on 15 September 1995, a
to issue another title in the sole name of plaintiff herein;
writ of preliminary attachment. Carlos posted a bond for
P20,000,000.00 issued by herein petitioner SIDDCOR 5. Declaring the Contract, Annex K of the Complaint,
Insurance Corporation (SIDDCOR).[5] Shortly thereafter, between plaintiff and defendant Sandoval null and void,
a Notice of Garnishment was served upon the Philippine and ordering the Register of Deeds of Makati City to
National Bank (PNB) over the deposit accounts cancel TCT No. 139058 in the name of Teofilo Carlos,
maintained by rspondents and to issue another title in the sole name of the
plaintiff herein;
6. Declaring the Contract, Annex M of the Complaint, additionally prayed for moral and exemplary damages.
between plaintiff and defendant Sandoval null and void; [13

7. Ordering the cancellation of TCT No. 210877 in the After various pleadings were duly filed by the parties,
names of defendant Sandoval and defendant minor the Court of Appeals Special Fourth Division issued a
Teofilo S. Carlos II and ordering the Register of Deeds of Resolution dated 23 March 1998, certifying that all the
Manila to issue another title in the exclusive name of necessary pleadings have been filed, and that the case
plaintiff herein. may already be referred to the Raffle Committee for
assignment to a ponente for study and report. The same
8. Ordering the cancellation of TCT No. 210878 in the
Resolution likewise denied without elaboration a
names of defendant Sandoval and defendant minor
Motion to Dismiss on the ground of forum-shopping
Teofilo S. Carlos II and ordering the Register of Deeds of
filed earlier by Carlos.[14]
Manila to issue another title in the sole name of plaintiff
herein.[9] On such denial, Carlos filed a Motion for
Reconsideration. Respondents likewise filed a Motion
Upon promulgation of the Summary Judgment, Carlos
for Partial Reconsideration dated 17 April 1998, arguing
moved before the RTC for execution pending appeal.
that under the Revised Internal Rules of the Court of
The RTC granted the motion for execution pending
Appeals (RIRCA), the case may be re-raffled for
appeal upon the filing of a bond.[10] On 27 May 1996,
assignment for study and report only after there is a
the RTC issued a Writ of Execution
resolution that the case is deemed submitted for
Meanwhile, respondents filed a Motion for decision.[15] They pointed out that re-raffle could not
Reconsideration of the Summary Judgment, which was yet be effected, as there were still pending incidents,
denied in an Order dated 20 May 1996. Respondents particularly the motions for reconsideration of Carlos
then appealed the RTC Decision to the Court of Appeals, and themselves, as well as the Motion for Judgment on
wherein such appeal was docketed as CA-G.R. CV No. Attachment Bond.
53229. The case was raffled to the appellate courts
On 26 June 1998, the Court of Appeals Former Special
Fourteenth Division for completion of records. Sandoval
Fourth Division promulgated two resolutions.[16] The
and Carlos also filed a Petition for Certiorari with
first, in response to Carloss Motion for Reconsideration,
Temporary Restraining Order dated 2 June 1996. This
again denied Carloss Motion to Dismiss the Appeal and
special civil action primarily attacked the allowance of
Motion for Suspension, but explained the reasons for
execution pending appeal, and prayed for the
such denial.
annulment of the Order granting execution pending
appeal, and of the Writ of Execution The second resolution is at the center of the present
petitions. The assailed Resolution agreed with
On 10 December 1996, in CA-G.R. CV No. 53229,
respondents that it was first necessary to resolve the
respondents filed a Motion for Judgment On the
pending incidents before the case could be re-raffled for
Attachment Bond. They noted that the Court of Appeals
study and report. Accordingly, the Court of
had already ruled that the Writ of Preliminary
Appealsproceeded to rule on these pending incidents.
Attachment issued by the RTC was improperly granted
While the first resolution dwelt on the pending motions
and that its Decision, as affirmed by the Supreme Court,
filed by Carlos, this Resolution tackled the other matter
had attained finality. Accordingly, they were entitled to
left unresolved, the Motion for Judgment on
damages under Section 20, Rule 57 of the then Rules of
Attachment Bond. The Court of Appeals found the claim
Civil Procedure, which governed claims for damages on
for damages meritorious, citing the earlier decisions
account of unlawful attachment. In support of their
ruling that Carlos was not entitled to the preliminary
allegation of damages, they cite the Notice of
attachment. Invoking Section 20, Rule 57 of the Rules of
Garnishment served on PNB Malolos Branch, where
Court, as well as jurisprudence,[17] the Court of Appeals
Felicidad Carlos maintained deposits amounting to
ruled that it was not necessary for the determination of
P15,546,121.98.[11]
damages on the injunction bond to await the decision
Also presented in support of the motion was a Notice of on appeal.
Delivery/Payment by the RTC Sheriff, directing the PNB
The Court of Appeals then proceeded to determine to
Malolos Branch to deliver the amounts previously
what damages respondents were entitled to. In ruling
garnished by virtue of the Writ of Execution dated 27
that the award of actual damages was warranted, the
May 1996;[12] a Manifestation filed by PNB dated 19
court noted
July 1996 in CA-G.R. SP No. 40819, stating that PNB had
already delivered to the RTC Sheriff on 27 June 1996 the It is also not disputed that the PNB, on June 27, 1996,
amount of P15,384,509.98 drawn against the accounts issued two managers checks: MC No. 938541 for
of Carlos; and a Certification to the same effect issued P4,932,621.09 and MC 938542 for P10,451,888.89
by the PNB Malolos Branch. In an Addendum to Motion payable to the order of Luis C. Bucayon II, Sheriff IV, RTC,
for Judgment on the Attachment Bond, respondents Branch 256, Muntinlupa, duly received by the latter in
the total amount of PESOS FIFTEEN MILLION THREE
HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED
NINE & 98/100 (P15,384,509.98), drawn against the
G.R. No. 135830
accounts of Ms. Felicidad Sandoval Vda. de Carlos which
were earlier garnished for the satisfaction of the above- This Appeal by Certiorari with Prayer for Temporary
mentioned writ of attachment (Annex E, Motion for Restraining Order/Preliminary Injunction dated 26
Judgment on the Attachment Bond, pp. 7-8)[18] October 1998 filed by Carlos assailed the two
resolutions of the Court of Appeals both dated 26 June
....
1998, as well as the Resolution of 10 October 1998,
The contention of [Carlos] that the writ of attachment which denied Carloss motion for reconsideration. Carlos
was not implemented falls flat on the face of the argues that the Court of Appeals, through the Former
manifestation of PNB that the delivery of the garnished Special Fourth Division, could not have resolved the
P15,384,509.98 to him was effected through the sheriff. Motion for Judgment on the Attachment Bond since the
[19] case had not yet been re-raffled under the two-raffle
system for study and report; that the Court of Appeals
The Court of Appeals found that moral and exemplary
erred in resolving the motion without conducting any
damages were not warranted, there being no malice in
hearing; that the Court of Appeals had no jurisdiction
pursuing the attachment. The appellate court also found
over the motion as the docketing fees had not yet been
the claim of P2,000,000.00 for attorneys fees as
filed; that the motion for judgment, which did not
excessive, and reduced the sum by half.
contain any certification against forum-shopping, was an
Correspondingly, the dispositive portion of the assailed
application subject to the requirements of certification
Resolution reads:
against forum-shopping; that there was no supporting
WHEREFORE, premises considered, judgment is hereby evidence to support the award of damages; and that the
rendered against the attachment bond, ordering Court of Appeals committed grave abuse of discretion in
SIDDCOR INSURANCE CORPORATION and plaintiff- denying the Motion for Reconsideration without
appellee to pay defendants-appellants, jointly and adverting to specific reasons mentioned for the denial
severally, the sum of P15,384,509.98 and 12% interest of each issue.[25]
per annum from June 27, 1996 when the unlawful
Carlos likewise ascribes grave abuse of discretion to the
garnishment was effected until fully paid and
Court of Appeals in its other Resolution dated 26 June
P1,000,000.00 as attorneys fees with 6% interest
1998 for its refusal to dismiss CA-G.R. CV No. 53229 on
thereon from the trial courts decision on April 8, 1986
the ground of forum-shopping, adding that the
until fully paid.
appellate court should have deferred resolution of the
SO ORDERED.[20] Motion for Judgment on the Attachment Bond
considering the prejudicial question raised in Carloss
Both Carlos and SIDDCOR filed their respective motions motion to dismiss the main case on the ground of
for reconsideration of the Resolution. For their part, forum-shopping.
respondents filed a Motion for Immediate Execution
dated 7 August 1998 in regard to the Resolution of 26 G.R. No. 13603
June 1998 awarding them damages.
This concerns a Petition for Review filed by SIDDCOR,
In the Resolution dated 10 October 1998,[21] the Court likewise challenging the Resolution of 26 June 1998 of
of Appeals denied the motions for reconsideration and the Court of Appeals and the 10 October 1998
granted the Motion for Immediate Execution. In Resolution wherein Siddcors Motion for
granting the Motion for Immediate Execution, the Court Reconsideration, among others, was denied. Siddcor
of Appeals cited the reasons that the appeal to be argues therein that the Court of Appeals erred in ruling
undertaken from the 26 June 1998 Resolution was on the motion for damages without awaiting judgment
patently dilatory; that there were no material and in the main case; granting that damages may be
substantial defenses against the motion for judgment on awarded, these should encompass only such damages
the attachment bond, rendering the appeal pro-forma incurred during the pendency of the appeal; and that a
and dilatory; that Sandoval was of advanced age and hearing was necessary to prove the claim for damages
might not enjoy the fruits of the judgment on the and the appellate court erred in granting the award for
attachment bond; and that immediate execution would damages despite lack of hearing.
end her suffering due to the arbitrary garnishment of
G.R. No. 137743
her account pursuant to an improper attachment.[22]
The third petition for adjudication, a Petition for
In its Motion for Reconsideration, SIDDCOR explicitly
Certiorari under Rule 65 with Prayer for Temporary
assailed the allowance of the Motion for Immediate
Restraining Order or Preliminary Injunction, was also
Execution.[23] This was denied by the Court of Appeals
filed by SIDDCOR. This petition, dated 8 March 1999,
in a Resolution dated 22 December 1998.[24]
specifically assails the allowance by the Court of Appeals
From these antecedents, the following petitions were of the immediate execution of the award of damages,
filed before this Court:
made through the resolutions dated 10 October 1998 Justice Rebecca de Guia-Salvador,[32] who thereafter
and 22 December 1998. agreed to inhibit herself.[33] Then on 7 August 2003, the
Court of Appeals Former First Division issued a
Resolution deferring action on the motions for
SIDDCOR hereunder argues that Section 2, Rule 39 of reconsideration in light of the temporary restraining
the Rules of Civil Procedure requires that execution of a order issued by this Court until the resolution of the
judgment or final order pending appeal may be made present petitions.
only on motion of the prevailing party and may be made
The factual background may be complicated, but the
even before the expiration of the period to appeal.[26]
court need only concern itself with the propriety of the
Respondents had argued in their Motion for Immediate
judgment on the attachment bond and the subsequent
Execution that the judgment sought to be executed
moves to secure immediate execution of such judgment.
(that on the attachment bond) was interlocutory and
Should this Court be called upon to tackle the merits of
not appealable, yet cited rulings on execution pending
the original action, Carloss complaint, it shall be in the
appeal under Section 2, Rule 39 in support of their
review of the final resolution of the Court of Appeals in
position. SIDDCOR cites this inconsistency as proof of a
CA-G.R. CV No. 53229.
change of theory on the part of respondents which
could not be done for the theories are incompatible. Consolidation of Issues in G.R. Nos. 135830 and 13603
Such being the case, SIDDCOR argues, the Court of
The petitions in G.R. Nos. 135830 and 136035 are
Appeals gravely abused its discretion in granting
concerned with the award of damages on the
immediate execution since respondents had filed its
attachment bond. They may be treated separately from
motion on the premise that the award on the judgment
the petition in G.R. No. 137743, which relates to the
bond was interlocutory and not appealable. SIDDCOR
immediate execution of the said award.
also claims that the judgment on the attachment bond
is not interlocutory, citing Stronghold Insurance Co., Inc. We consolidate the main issues in G.R. Nos. 135830
v. Court of Appeals[27] wherein it was ruled that such and 136035, as follows: (1) whether the assailed
indeed constitutes a final and appealable order. judgment on the attachment bond could have been
rendered, as it was, prior to the adjudication of the
SIDDCOR points out that no hearing was conducted on
main case; (2) whether the Court of Appeals properly
the Motion for Immediate Execution despite the
complied with the hearing requirement under Section
requirement in Section 2, Rule 39 that discretionary
20, Rule 57 prior to its judgment on the attachment
execution may only issue upon good reasons to be
bond; and (3) whether the Court of Appeals properly
stated in a special order after due hearing. SIDDCOR
ascertained the amount of damages it awarded in the
likewise notes that the motion granting immediate
judgment on the attachment bond.
execution was granted in the very same resolution
which had denied the motion for reconsideration of the Resolving these issues requires the determination of the
resolution sought to be immediately executed. For proper scope and import of Section 20, Rule 57 of the
SIDDCOR, such constituted a denial of procedural due 1997 Rules of Civil Procedure. The provision governs the
process insofar as its statutory right to appeal was disposal of claims for damages on account of improper,
concerned, as the resolution that it intended to appeal irregular or excessive attachment.
from was already the subject of immediate execution.
SECTION 20. Claim for damages on account of improper,
Finally, SIDDCOR contests the special reasons cited by irregular or excessive attachment. An application for
the Court of Appeals in granting the Motion for damages on account of improper, irregular or excessive
Immediate Execution. attachment must be filed before the trial or before
appeal is perfected or before the judgment becomes
Facts Arising Subsequent to the Filing of Instant
executory, with due notice to the attaching obligee or
Petitions
his surety or sureties, setting forth the facts showing his
On 7 May 1999, the Court of Appeals issued a Writ of right to damages and the amount thereof. Such
Execution directing the enforcement of the judgment on damages may be awarded only after proper hearing and
the attachment bond.[28] However, in a Resolution shall be included in the judgment on the main case.
dated 9 June 1999, this Court through the First Division
If the judgment of the appellate court be favorable to
issued a Temporary Restraining Order, enjoining the
the party against whom the attachment was issued, he
enforcement of the said Writ of Execution
must claim damages sustained during the pendency of
On 15 October 2002, the Court of Appeals First Division the appeal by filing an application in the appellate court
rendered a Decision[29] on the merits of CA-G.R. CV No. with notice to the party in whose favor the attachment
53229, setting aside the Summary Judgment and was issued or his surety or sureties, before the
ordering the remand of the case for further judgment of the appellate court becomes executory.
proceedings.[30] Both parties filed their respective The appellate court may allow the application to be
motions for reconsideration.[31] In addition, Carlos filed heard and decided by the trial court.
a motion to inhibit the author of the assailed decision,
Nothing herein contained shall prevent the party against In this case, both Carlos and SIDDCOR were duly notified
whom the attachment was issued from recovering in the by the appellate court of the Motion for Judgment on
same action the damages awarded to him from any the Attachment Bond and were required to file their
property of the attaching obligee not exempt from respective comments thereto.[41] Carlos and SIDDCOR
execution should the bond or deposit given by the latter filed their respective comments in opposition to
be insufficient or fail to fully satisfy the award. privaterespondents motion.[42] Clearly, all the relevant
(Emphasis supplied.) parties had been afforded the bare right to be heard on
the matter.
Section 20 essentially allows the application to be filed
at any time before the judgment becomes executory. It Concededly, the facts of this case differ from that in
should be filed in the same case that is the main action, Paramount, wherein the award of damages was
and cannot be instituted separately.[34] It should be predicated under Section 8, Rule 58, and the trial on the
filed with the court having jurisdiction over the case at merits included the claim for damages on the
the time of the application.[35] The remedy provided by attachment bond. The Court did note therein that the
law is exclusive and by failing to file a motion for the counsel of the surety was present during the hearings.
determination of the damages on time and while the [43] In this case, unlike in Paramount, there were no
judgment is still under the control of the court, the open court hearings conducted by the Court of Appeals,
claimant loses his right to damages.[36] and it is precisely this absence that the petitioners
assert as fatal.
There is no question in this case that the Motion for
Judgment on the Attachment Bond filed by respondents Plainly, there is no express requirement under the rule
on 10 December 1996 was properly filed since it was that the hearing be done in open court, or that the
filed with the Court of Appeals during the pendency of parties be allowed to confront adverse witnesses to the
the appeal in the main case and also as an incident claim of damages on the bond. The proper scope of the
thereto. The core questions though lie in the proper hearing requirement was explained before Paramount in
interpretation of the condition under Section 20, Rule Peroxide Philippines Corp. v. Court of Appeals,[44] thus:
57 that reads: Such damages may be awarded only after
. . . [It] is undeniable that when the attachment is
proper hearing and shall be included in the judgment on
challenged for having been illegally or improperly
the main case. Petitioners assert that there was no
issued, there must be a hearing with the burden of
proper hearing on the application for damages and that
proof to sustain the writ being on the attaching creditor.
the Court of Appeals had wrongfully acted on the
That hearing embraces not only the right to present
application in that it resolved it prior to the rendition of
evidence but also a reasonable opportunity to know the
the main judgment.
claims of the opposing parties and meet them. The right
Such Damages May Be Awarded only After Proper to submit arguments implies that opportunity,
Hearing otherwise the right would be a barren one. It means a
fair and open hearing.
We first discuss whether the proper hearing
requirement under Section 20, Rule 57 had been From this pronouncement, we can discern that the
satisfied prior to the award by the Court of Appeals of proper hearing contemplated would not merely
damages on the attachment bond. encompass the right of the parties to submit their
respective positions, but also to present evidence in
Section 20 of Rule 57 requires that there be a proper
support of their claims, and to rebut the submissions
hearing before the application for damages on the
and evidence of the adverse party. This is especially
attachment bond may be granted. The hearing
crucial considering that the necessary elements to be
requirement ties with the indispensable demand of
established in an application for damages are essentially
procedural due process. Due notice to the adverse party
factual: namely, the fact of damage or injury, and the
and its surety setting forth the facts supporting the
quantifiable amount of damages sustained. Such
applicant's right to damages and the amount thereof
matters cannot be established on the mere say-so of the
under the bond is essential. No judgment for damages
applicant, but require evidentiary support. At the same
may be entered and executed against the surety without
time, there was no equivocal statement from the Court
giving it an opportunity to be heard as to the reality or
in Peroxide that the hearing required under the rule
reasonableness of the damages resulting from the
should be a full-blown hearing on the merits
wrongful issuance of the writ.[37]
In this case, we rule that the demands of a proper
In Paramount Insurance v. Court of Appeals,[38] the
hearing were satisfied as of the time the Court of
Court held that under the rule, it was neither mandatory
Appeals rendered its assailed judgment on the
nor fatal that there should be a separate hearing in
attachment bond. The circumstances in this case that
order that damages upon the bond can be claimed,
we consider particularly telling are the settled premises
ascertained and awarded.[39] What is necessary only is
that the judicial finding on the wrongfulness of the
for the attaching party and his surety or sureties to be
attachment was then already conclusive and beyond
duly notified and given the opportunity to be heard.[40
review, and that the amount of actual damages
sustained was likewise indubitable as it indeed could be To impose as mandatory on the Court of Appeals or the
found in the official case record in CA-G.R. CV No. Supreme Court to hear the application for damages
53229. As a result, petitioners would have been through full-blown hearings in open court is supremely
precluded from either raising the defenses that the unwise and beyond the demands of Section 20, Rule 57.
preliminary attachment was valid or disputing the The effect would be unduly disruptive on the daily
amount of actual damages sustained by reason of the workflow of appellate courts such as the Court of
garnishment. The only matter of controversy that could Appeals and the Supreme Court, which rarely conduct
be litigable through the traditional hearing would be the open court hearings. Neither could the Court see what
matter of moral and exemplary damages, but the Court is so markedly special about an application for damages,
of Appeals appropriately chose not to award such fact-oriented as it may be, that would require it to be
damages. heard by the appellate courts in open court when no
such mandatory rule applies to other judicial matters for
Moreover, petitioners were afforded the opportunity to
resolution that are also factual in nature.
counter the arguments extended by the respondents.
They fully availed of that right by submitting their For example, the review of death penalty convictions by
respective comments/oppositions. In fine, the due the Court of Appeals and the Supreme Court
process guarantee has been satisfied in this case. necessitates a thorough evaluation of the evidence
presented, notwithstanding the prior factual
It should be noted that this case poses a situation
appreciation made by the trial court.[45]
different from what is normally contemplated under
Notwithstanding the factual nature of the questions
Section 20, Rule 57wherein the very wrongfulness of the
involved, there is no rule requiring the Court of Appeals
attachment remains one of the issues in contention in
or the Supreme Court to call death penalty cases for
the main case. In such a case, there would be a greater
hearing or oral argument. If no such mandatory rule for
demand for a more extensive hearing on the application
hearing is imposed on the appellate courts when the
of damages. The modality of hearing should remain
supreme penalty of death is involved, why then should
within the discretion of the court having jurisdiction to
an exceptional rule be imposed in the case for the
hear the application for damages. The only demand,
relatively insignificant application for damages on the
concordant to due process, would be the satisfaction of
attachment bond?
the right to be heard, to present evidence, and to rebut
the evidence and arguments of the opposing party. If open court hearings are ever resorted to by appellate
courts, such result from the exercise of discretion rather
Some disquisition is necessary on whether or not, as
than by imposition by statute or procedural rule.
petitioners submit, a full-blown hearing in open court is
Indeed, there is no existing statute, procedural rule, or
compulsory under Section 20, Rule 57. To impose this as
jurisprudential fiat that makes it mandatory on the
a mandatory requirement would ultimately prove too
Court of Appeals or the Supreme Court to conduct an
onerous to our judicial system. Perhaps such a demand
open-court hearing on any matter for resolution. There
would be less burdensome on the regional trial courts,
is nothing demonstrably urgent with an application for
which, as a matter of routine, receive testimonial or
damages under Section 20, Rule 57 that would
documentary evidence offered de novo, and to
necessitate this Court to adopt an unprecedented rule
formulate conclusions on the admissibility and
mandating itself or the Court of Appeals to conduct full-
credibility of the same.
blown open court hearings on a particular type of
However, a different situation applies if it is the Court of action.
Appeals or the Supreme Court before which the
This pronouncement does not contradict our ruling in
application for damages is filed. Both these courts,
Hanil Development v. IAC,[46] which Carlos interprets as
which are capacitated to receive and act on such
requiring the Court of Appeals to conduct a proper
actions, are generally not triers of facts, and do not, in
hearing on an application for damages on the
the course of daily routine, conduct hearings. It is partly
attachment bond. Hanil concerned the refusal by the
for such reason that Section 20, Rule 57 authorizes
Intermediate Appellate Court (now Court of Appeals) to
these appellate courts to refer the application for
take cognizance of the application for damages on the
damages to the trial court for hearing and decision. The
attachment bond, such refusal being reversed by the
trial courts are functionally attuned to ascertain and
Court, which ruled that the Intermediate Appellate
evaluate at the first instance the necessary factual
Court (IAC) had jurisdiction to accept and rule on such
premises that would establish the right to damages.
application. While the Court therein recognized that the
Still, reference of the application for damages to the trial
IAC was empowered to try cases and conduct hearings,
court is discretionary on the part of the appellate
or otherwise perform acts necessary to resolve factual
courts. The latter, despite their traditional appellate
issues in cases,[47] it did not require the appellate court
jurisdiction and review function, are still empowered
to conduct a hearing in open court, but merely to
under Section 20 to rule on the application for damages,
reinstate the application for damages.
notwithstanding the factual dimension such question
presents. Admittedly, the dispositive portion of Hanil required the
Court of Appeals to conduct hearings on the application
for damages,[48] but nowhere in the decision was a said applicant, the proofs may nevertheless also
general rule laid down mandating the appellate court to establish that said applicant's proferred ground for
conduct such hearings in open court. The ascertainment attachment was inexistent or specious and hence, the
of the need to conduct full-blown hearings is best left to writ should not have issued at all; i.e., he was not
the discretion of the appellate court which chooses to entitled thereto in the first place. In that event, the final
hear the application. At the same time, the Court verdict should logically award to the applicant the relief
cautions the appellate courts to carefully exercise their sought in his basic pleading, but at the same time
discretion in determining the need for open-court sentence himusually on the basis of a counterclaimto
hearings on the application for damages on the pay damages caused to his adversary by the wrongful
attachment bond. The Court does not sanction the attachment. [Emphasis supplied.]
indolent award of damages on the attachment bond by
Moreover, a separate ruleSection 8, Rule 58 covers
the appellate court without affording the adverse party
instances when it is the trial court that awards damages
and the bonding company concerned the opportunity to
upon the bond for preliminary injunction of the adverse
present their sides and adduce evidence in their behalf,
party. Tellingly, it requires that the amount of damages
or on the basis of unsubstantiated evidence.
to be awarded be claimed, ascertained, and awarded
And Shall be Included in the Judgment on the Main Case under the same procedure prescribed in Section 20 of
Rule 57.
Section 20, Rule 57 does state that the award of
damages shall be included in the judgment on the main In this case, we are confronted with a situation wherein
case, and seemingly indicates that it should not be the determination that the attachment was wrongful did
rendered prior to the adjudication of the main case. not come from the trial court, or any court having
jurisdiction over the main action. It was rendered by the
The rule, which guarantees a right to damages incurred
Court of Appeals in the exercise of its certiorari
by reason of wrongful attachment, has long been
jurisdiction in the original action reviewing the propriety
recognized in this jurisdiction.[49] Under Section 20,
of the issuance of the Writ of Preliminary Attachment
Rule 57 of the 1964 Rules of Court, it was provided that
against the private respondents. Said ruling attained
there must be first a judgment on the action in favor of
finality when it was affirmed by this Court.
the party against whom attachment was issued before
damages can be claimed by such party.[50] The Court The courts are thus bound to respect the conclusiveness
however subsequently clarified that under the rule, of this final judgment, deeming as it does the allowance
recovery for damages may be had by the party thus by the RTC of preliminary attachment as improper. This
prejudiced by the wrongful attachment, even if the conclusion is no longer subject to review, even by the
judgment be adverse to him.[51] court called upon to resolve the application for damages
on the attachment bond. The only matter left for
The language used in the 1997 revision of the Rules of
adjudication is the proper amount of damages.
Civil Procedure leaves no doubt that there is no longer
need for a favorable judgment in favor of the party Nevertheless, Section 20, Rule 57 explicitly provides that
against whom attachment was issued in order that the award for damages be included in the judgment on
damages may be awarded. It is indubitable that even a the main case. This point was apparently not lost on the
party who loses the action in main but is able to Court of Appeals when it rendered its Resolution dated
establish a right to damages by reason of improper, 23 March 1998, certifying that the case may now be
irregular, or excessive attachment may be entitled to referred to the Raffle Committee for assignment to a
damages. This bolsters the notion that the claim for ponente. The appellate court stated therein: The
damages arising from such wrongful attachment may Resolution of defendants-appellants motion for
arise and be decided separately from the merits of the judgment on the attachment may be incorporated in the
main action. As noted by the Court in Philippine Charter decision by the ponente for study and report,[53] and
Insurance Corp. v. Court of Appeals:[52] such observation is in conformity with Section 20.

The surety does not, to be sure, become liable on its However, this reasoning was assailed by respondents,
bond simply because judgment is subsequently who argued that the motion for judgment on the
rendered against the party who obtained the attachment bond was a pending incident that should be
preliminary attachment. The surety becomes liable only decided before the case can be re-raffled to a ponente
when and if "the court shall finally adjudge that the for decision. Respondents may be generally correct on
applicant was not entitled to the attachment." This is so the point that a case can only be deemed submitted for
regardless of the nature and character of the judgment decision only after all pending incidents are resolved.
on the merits of the principal claims, counterclaims or Yet since Section 20, Rule 57 provides that their
cross-claims, etc. asserted by the parties against each application for damages on the attachment bond shall
other. Indeed, since an applicant's cause of action may be included in the judgment on the main case, it is clear
be entirely different from the ground relied upon by him that the award for damages need not be resolved before
for a preliminary attachment, it may well be that the case is submitted for decision, but should instead be
although the evidence warrants judgment in favor of resolved and included in the judgment on the main
case, or the decision on the Appeal by Certiorari filed by securing a just, speedy and inexpensive disposition of
the respondents. every action and proceeding.[55] With this precept, all
the more justification is supplied for allowing the award
Thus, the action of the Court of Appeals in resolving the
for damages despite its apparent prematurity, if it is in
application for damages even before the main judgment
all other respects proper.
was issued does not conform to Section 20, Rule 57.
However, the special particular circumstances of this The same reasons apply in resolving the question of
case lead us to rule that such error is not mortal to the whether the Court of Appeals could have decided the
award of damages. Motion for Judgment on the Attachment Bond
considering that the case had not yet been re-raffled
As noted earlier, the award of damages was made after
under the two-raffle system for study and report. Under
a proper hearing had occurred wherein all the
Section 5, Rule 3 of the RIRCA, a case filed with the
concerned parties had been given the opportunity to
Court of Appeals undergoes two raffles for assignment
present their arguments and evidence in support and in
to a particular Justice. The first raffle is made for
rebuttal of the application for damages. The premature
completion of records.[56] Afterwards, all raffled
award of damages does not negate the fact that the
appealed cases, the records of which have been
parties were accorded due process, and indeed availed
completed and submitted for decision, shall be re-
of their right to be heard.
raffled for assignment to a Justice for study and report.
Moreover, we are compelled to appreciate the [57]
particular circumstance in this case that the right of
private respondents to acquire relief through the award
of damages on account of the wrongful preliminary
attachment has been conclusively affirmed by the
highest court of the land. This differs from the normal
situation under Section 20, Rule 57 wherein the court The fact that Section 20, Rule 57 provides that the
having jurisdiction over the main action is still required award of damages on the attachment bond shall be
to ascertain whether the applicant actually has a right to included in the judgment on the main case necessarily
damages. To mandatorily require that the award of implies that it is to be made only after the case has been
damages be included in the judgment in the main case re-raffled for study and report, and concurrently
makes all the sense if the right to damages would be decided with the judgment of the ponente in the main
ascertained at the same time the main judgment is case. Again, the Court of Appeals failed to consider
made. However, when the said right is already made Section 20, Rule 57 when it acted upon the application
viable by reason of a final judgment which is no longer even before the second raffle was made.
subject to review, there should be no unnecessary
impediments to its immediate implementation.

And finally, any ruling on our part voiding the award of

damages solely for the reason that it was not included in
the judgment on the main case, and remanding the
motion to the Court of Appeals for proper adjudication Had Section 20, Rule 57 been faithfully complied with, a
together with the main case may exhibit fealty to the different Justice of the Court of Appeals would have
letter of the procedural rule, but not its avowed aims of penned the ruling on the application for damages, in
promoting a just and speedy disposition of every action accordance with the RIRCA. Yet this circumstance does
and proceeding. After all, if we were to compel the not outweigh the other considerations earlier
Court of Appeals to decide again on the application for mentioned that would warrant a liberal interpretation of
damages and incorporate its ruling in the judgment on the procedural rules in favor of respondents. The parties
the main action, the appellate court will be examining had adduced all their arguments and evidence before
exactly the same evidence and applying exactly the the Court of Appeals, and indeed, these were
same rules as it already did when it issued the assailed appreciated on first instance by Justice Demetria, who
resolution awarding damages on the bond. This would eventually penned the assailed resolutions. There was
be unnecessarily redundant especially considering that already a final determination that the attachment was
the Supreme Court had already affirmed that there was wrongful. And any delay brought about by requiring that
wrongful attachment in this case it be the ponencia, determined after the second raffle,
who decides the application for damages may bear pro
There is also the fact that remanding the question of forma adherence to the letter of the rule, but would
damages, singly for the purpose of adhering to the letter only cause the delay of the resolution of this long-
of the procedural rule, would further prolong the pending case. Procedural rules are designed, and must
resolution of the main case, which has been with the therefore be so interpreted as, to give effect to lawful
Court of Appeals for more than nine years now.[54] Our and valid claims and not to frustrate them.[58]
Rules of Court precisely requires liberal construction of
the procedural rules to promote the objective of
Even SIDDCOR acknowledges that there are recognized The case Paramount Insurance Corp. v. Court of
instances where the award of damages or judgment on Appeals[63] is instructive. It discusses the scope of the
the attachment bond may not be included in the bond executed by upon an application for preliminary
decision on the main case, such as if the main case was injunction,[64] which similarly covers all damages which
dismissed for lack of jurisdiction and no claim for [may be] sustain[ed] by reason of the injunction or
damages could have been presented in the main case. temporary restraining order if the court should finally
[59] decide that the applicant was not entitled thereto.[65]
The surety in that case claimed that it could be liable
Scope of Damages Properly Awardable
only to the amount of damages accruing from the time
Next, we examine the particular award of damages the injunction bond was issued until the termination of
made in this case, consisting of P15,384,509.98, plus the case, and not from the time the suit was
interest, as well as P1,000,000.00 as attorneys fees. commenced.[66] In rebutting this claim, the Court ruled:
There seems to be no dispute that the former amount
. . . . Rule 58, Section 4(b), provides that a bond is
constituted the amount drawn against the account of
executed in favor of the party enjoined to answer for all
Sandoval by reason of the writ of execution issued by
damages which he may sustain by reason of the
the trial court on 27 May 1996. This fact was confirmed
injunction. This Court already had occasion to rule on
by the PNB, in its Manifestation dated 19 July 1996,
this matter in Mendoza v. Cruz, where it held that "(t)he
confirming the garnishment.
injunction bond is intended as a security for damages in
Respondents burden in proving damages in this case case it is finally decided that the injunction ought not to
was considerably lessened by the fact that there was have been granted. It is designed to cover all damages
already a final judgment, no longer subject to review, which the party enjoined can possibly suffer. Its
that the preliminary attachment allowed by the trial principal purpose is to protect the enjoined party
court was indeed wrongful. Hence, all that was against loss or damage by reason of an injunction." No
necessary to be proved was the amount of damage distinction was made as to when the damages should
actually sustained by respondents by reason of the have been incurred.[67]
wrongful attachment. It is unquestioned that by virtue
of the writ of preliminary attachment, a Notice of
Garnishment was served upon the PNB over deposit Our ruling in Philippine Charter Insurance Corp. v. Court
accounts maintained by respondents. Said Notice of of Appeals, relied upon by the Court of Appeals,
Garnishment placed under the control of the RTC all the squarely applies to this case:
accounts maintained by respondents, and prevented the
Under the circumstances, too, there can be no
transfer or disposition of these accounts.[60] Then the
gainsaying the suretys full awareness of its undertakings
subsequent Writ of Execution dated 27 May 1996
under its bond: that, as the law puts it: "the plaintiff will
ordered the delivery to Carlos of these accounts earlier
pay all costs which may be adjudged to the
subjected to garnishment.[61]
defendant(s), and all damages which may be sustained
Clearly, the amount of actual pecuniary loss sustained by reason of the attachment, if the same shall finally be
by respondents has been well established. The adjudged to have been wrongful and without cause,"
Manifestation submitted by the PNB further affirmed and that those damages plainly comprehended not only
the actual amount seized by Carlos, an amount which those sustained during the trial of the action but also
could not have been acquired had it not been for the those during the pendency of the appeal. This is the law,
writ of preliminary attachment which was wrongfully and this is how the surety's liability should be
issued. understood. The surety's liability may be enforced
whether the application for damages for wrongful
Carlos lamely argues in his petition that there was no
attachment be submitted in the original proceedings
concrete or supporting evidence to justify the amount
before the Trial Court, or on appeal, so long as the
of actual damages, a claim that is belied by the official
judgment has not become executory. The surety's
case records. The more substantive argument is
liability is not and cannot be limited to the damages
presented by SIDDCOR, which submits that any damages
caused by the improper attachment only during the
that may be awarded to respondents can include only
pendency of the appeal. That would be absurd. The
those that were incurred, if any, during the pendency of
plain and patent intendment of the law is that the
the appeal. But this contention is belied by Section 4,
surety shall answer for all damages that the party may
Rule 57 of the 1997 Rules of Civil Procedure, which
suffer as a result of the illicit attachment, for all the time
provides that the bond issued for preliminary
that the attachment was in force; from levy to
attachment is conditioned that the applicant will pay all
dissolution. . . .
the costs which may be adjudged to the adverse party
and all damages which he may sustain by reason of the The fact that the second paragraph of the rule speaks
attachment, if the court shall finally adjudge that the only of "damages sustained during the pendency of the
applicant was not entitled thereto.[62] appeal" is of no moment; it obviously proceeds from the
assumption in the first paragraph that the award for the
damages suffered during the pendency of the case in approximately three percent of the actual damages
the trial court was in fact "included in the final suffered by and awarded to respondents. We also delete
judgment" (or applied for therein before the appeal was the imposition of legal interest made by the Court of
perfected or the judgment became executory); hence, it Appeals on the awarded attorneys fees.
states that the damages additionally suffered thereafter,
Other Issues Raised in G.R. No. 135830
i.e., during the pendency of the appeal, should be
claimed before the judgment of the appellate tribunal The issues raised in G.R. No. 136035 have been
becomes executory. It however bears repeating that dispensed with, and the remaining issues in G.R. No.
where. as in the case at bar, the judgment of the Trial 135830 are relatively minor. There is no need to dwell at
Court has expressly or impliedly sustained the length on them
attachment and thus has given rise to no occasion to
speak of, much less, file an application for damages for
wrongful attachment, and it is only in the decision of the Carlos insists that respondents were liable to have paid
Court of Appeals that the attachment is declared docket fees upon filing of their Motion for Judgment on
wrongful and that the applicant "was not entitled Attachment Bond, on the theory that they claimed
thereto," the rule is, as it should be, that it is entirely therein for the first time the alleged damages resulting
proper at this time for the application for damages for from the dissolved attachment. The said motion is
such wrongful attachment to be filedi.e., for all the characterized as an initiatory proceeding because it is
damages sustained thereby, during all the time that it claimed therein for the first time, the damages arising
was in force, not only during the pendency of the from the attachment. In the same vein, Carlos argues
appeal. . . .[68 that the absence of a certification against forum-
The rule is thus well-settled that the bond issued upon shopping attached to the motion renders the said
an application for preliminary attachment answers for motion as fatal. Again, it is pointed out that initiatory
all damages, incurred at whatever stage, which are pleadings must contain the said certification against
sustained by reason of the attachment. The award of forum-shopping.
actual damages by the Court of Appeals is thus proper in Our ruling in Santo Tomas University Hospital v.
amount. However, we disagree that the rate of legal Surla[73] is instructive. It was argued therein that the
interest be counted from the date of the unlawful requirement of the certification against forum-shopping,
garnishment, or on 27 June 1996. Properly, interest as contained in Administrative Circular No. 04-94,[74]
should start to accrue only from the moment it had covered compulsory counterclaims. The Court ruled
been finally determined that the attachment was otherwise:
unlawful, since it is on that basis that the right to
damages comes to existence. In this case, legal interest It bears stressing, once again, that the real office of
commences from the date the Court of Appeals decision Administrative Circular No. 04-94, made effective on 01
in CA-G.R. SP No. 39267 became final, by reason of its April 1994, is to curb the malpractice commonly
affirmation by this Court referred to also as forum-shopping. . . . The language of
the circular distinctly suggests that it is primarily
The award of attorneys fees in the amount of intended to cover an initiatory pleading or an incipient
P1,000,000.00 is also questioned before this Court, application of a party asserting a claim for relief.
considering that the Court of Appeals did not award
moral or exemplary damages. The general rule may be It should not be too difficult, the foregoing rationale of
that an award of attorneys fees should be deleted the circular aptly taken, to sustain the view that the
where the award of moral and exemplary damages are circular in question has not, in fact, been contemplated
eliminated.[69] Nonetheless, attorneys fees may be to include a kind of claim which, by its very nature as
awarded under the Civil Code where the court deems it being auxiliary to the proceeding in the suit and as
just and equitable that attorneys fees and expenses of deriving its substantive and jurisdictional support
litigation should be recovered,[70] even if moral and therefrom, can only be appropriately pleaded in the
exemplary damages are unavailing.[71 answer and not remain outstanding for independent
resolution except by the court where the main case
Particularly, the Court has recognized as just and pends. Prescinding from the foregoing, the proviso in
equitable that attorney's fees be awarded when a party the second paragraph of Section 5, Rule 8, of the 1997
is compelled to incur expenses to lift a wrongfully issued Rules of Civil Procedure, i.e., that the violation of the
writ of attachment.[72] The amount of money anti-forum shopping rule "shall not be curable by mere
garnished, and the length of time respondents have amendment . . . but shall be cause for the dismissal of
been deprived from use of their money by reason of the the case without prejudice," being predicated on the
wrongful attachment, all militate towards a finding that applicability of the need for a certification against forum
attorneys fees are just and equitable under the shopping, obviously does not include a claim which
circumstances. However, we deem the amount of cannot be independently set up.[75] (Emphasis
P1,000,000.00 as excessive, and modify the award of supplied.)
attorneys fees to P500,000.00 which represents merely
It is clear that under Section 20, Rule 57, the application There is no doubt that a judgment on the attachment
for damages on the attachment bond cannot be bond is a final and appealable order. As stated earlier, it
independently set up, but must be filed in the main is, under normal course, included in the main judgment,
case, before the judgment therein becomes final and which in turn is final and appealable. Respondents
executory. Santo Tomas squarely applies in determining admit that they had erred in earlier characterizing the
that no certification against forum-shopping was said judgment as an interlocutory order. Still, SIDDCOR
required in the Motion for Judgment on the Attachment argues that such earlier error is fatal, and that the Court
Bond. The same reasoning also sustains a ruling that of Appeals abused its discretion in ruling on the motion
neither legal fees were required for the filing of the said on a theory different from that urged on by respondents
motion. Section 1, Rule 141 of the Rules of Court
provides that legal fees are prescribed upon the filing of
the pleading or other application which initiates an By no means could respondents be deemed as estopped
action or proceeding.[76] Since the said application for from changing their legal theory, since the rule on
judgment on the attachment bond cannot be estoppel applies to questions of fact and not questions
considered as an initiatory pleading, as it cannot be of law.[78] Moreover, courts are empowered to decide
independently set up from the main action, it is not cases even if the parties raise legal rationales other than
likewise chargeable with legal fees. that which would actually apply in the case. The basis of
whether respondents are entitled to immediate
As to the issue relating to the other Resolution dated 26
execution arises from law, particularly Section 2(a), Rule
June 1998 denying the motion to dismiss appeal on the
39 of the Rules of Court, and not solely on whatever
ground of forum-shopping, we find Carloss arguments
allegations may be raised by the movant.
as unmeritorious. Forum-shopping allegedly existed
because petitioners had filed two cases before the Court Thus, we find no grave abuse of discretion on the part of
of Appeals, CA-G.R. CV No. 53229, and the Petition for the Court of Appeals, even though it allowed execution
Certiorari with Temporary Restraining Order dated 2 pending appeal on a legal basis different from that
June 1996 attacking the allowance of execution pending originally adduced by respondents. After all, the
appeal. Evidently, the two causes of action in these two reasoning ultimately employed by the appellate court is
petitions are different, CA-G.R. CV No. 53229 being an correct, and it hardly would be judicious to require the
appeal from the Summary Judgment rendered by the lower court to adhere to the movants erroneous
RTC, and the second petition assailing the subsequent ratiocination and preclude the proper application of the
allowance by the RTC of execution pending appeal. law.
There is no identity between these two causes of action
that would warrant a finding of forum-shopping. We need not review in length the justification of the
Court of Appeals in allowing execution pending appeal.
Issues Raised in G.R. No. 137743 The standard set under Section 2(a), Rule 39 merely
requires good reasons, a special order, and due hearing.
To recount, respondents, having obtained a favorable
Due hearing would not require a hearing in open court,
decision on their Motion for Judgment on the
but simply the right to be heard, which SIDDCOR availed
Attachment Bond, filed a Motion for Immediate
of when it filed its opposition to the motion for
Execution of the award of damages. This was granted by
immediate execution. The Resolution dated 16 October
the Court of Appeals in its Resolution dated 16 October
1998 satisfies the special order requirement, and it does
1998, said resolution now specifically assailed by
enumerate at length the good reasons for allowing
SIDDCOR in G.R. No. 137743.
execution pending appeal. As to the appreciation of
In their Motion for Immediate Execution, respondents good reasons, we simply note that the advanced age
theory in seeking the immediate execution of the award alone of Sandoval would have sufficiently justified
of damages was that said award was not subject to execution pending appeal, pursuant to the well-settled
appeal, the ruling thereupon being an interlocutory jurisprudential rule.[79] The wrongfulness of the
order.[77] This position was not adopted by the Court of attachment, and the length of time respondents have
Appeals in its 16 October 1998 Resolution, which was been deprived of their money by reason of the wrongful
otherwise favorably disposed to respondents. Instead, attachment further justifies execution pending appeal
the Court of Appeals predicated the immediate under these circumstances
execution on the following grounds: (1) that the judicial
WHEREFORE, the petitions are DISMISSED. The
finding that the writ of preliminary attachment was
Temporary Restraining Order issued in the Resolution
wrongful was already final and beyond review; (2) there
dated 9 June 1999 is hereby LIFTED. The assailed
were no material and substantial defenses against the
Resolution of the Court of Appeals Special Fourth
motion for the issuance of the judgment bond; (3)
Division dated 26 June 1998 is AFFIRMED with the
Sandoval was elderly and sickly, without means of
MODIFICATIONS that the legal interest on the award of
livelihood and may not be able to enjoy the fruits of the
actual damages should commence from the date of the
judgment on the attachment bond; (4) that immediate
finality of the Decision of the Court of Appeals in CA
execution would end her suffering caused by the
arbitrary garnishment of her PNB account.
G.R. SP No. 39267 and that the award of attorneys fees
is in the amount of P500,000. Costs against petitioners.

SO ORDERED.