G.R. No. L-35990 - Aboitiz and Co., Inc. vs. Cotabato Bus Co., Inc.

The petition arises from Civil Case No. 7329 of the Court of First Instance of Davao (Branch I) involving a writ of preliminary attachment.
Petitioner Aboitiz & Company, Inc. filed a verified complaint on November 2, 1971, for the collection of money amounting to P155,739.41 against respondent Cotabato Bus Company, Inc.
An affidavit of merit, executed by the petitioner’s Assistant Manager, supported the complaint by alleging that the defendant had disposed of or was about to dispose of its properties with the intent to defraud its creditors.

Relying on the affidavit and the verified complaint, the trial court issued a writ of preliminary attachment ex-parte on November 3, 1971.
The writ enabled the provincial sheriff to attach personal properties of the respondent, including buses, machinery, and equipment.
The ground for the writ was the apprehension that the defendant could remove or dispose of its assets to defraud creditors.

Respondent filed an “Urgent Motion to Dissolve or Quash Writ of Attachment.”
An affidavit executed by the respondent’s Assistant Manager, Baldovino Lagbao, was attached to the motion. This affidavit claimed:

Oppositions and a supplemental opposition were subsequently filed against the urgent motion.
The trial court denied the motion stating that Lagbao’s testimony tended to corroborate the petitioner’s affidavit rather than disprove it.
A motion for reconsideration by the respondent was also denied by the lower court.

The respondent sought certiorari before the Court of Appeals alleging grave abuse of discretion by the trial court.
On due notice, the Court of Appeals issued a restraining order that:

Prevented the trial court from further enforcing the writ of attachment.
Inhibited the trial court from proceeding with the hearing of Civil Case No. 7329.

Declared the trial court’s attached orders (from November 3, December 2, and December 11, 1971) null and void.
Ordered the release of the attached properties.
Made permanent the initial restraining order.

Failure to properly discuss or appreciate evidence showing that the respondent had removed or diverted funds and assets—particularly given the evidence that the respondent's bank deposits were reduced to nil.
Oversight in not considering the significance of the respondent’s refusal to submit bank records as required under a subpoena duces tecum.
Failure to account for the removal of five attached buses during the pendency of the motion to dissolve the attachment, which was argued to be an act intended to defraud the petitioner.

The petitioner maintained that the evidence, including the nil bank account and the alleged non-payment of creditors (including secured creditors like the DBP), proved that the respondent had acted in fraud of its creditors.

Whether the respondent bus company had actually disposed of or was about to dispose of its properties in an act of defrauding its creditors.

Did the evidence sufficiently establish that the company was diverting or removing funds and assets?
Was there any proof—aside from allegations and apprehension—of actual disposition of properties?

Whether the alleged state of insolvency, indicated by the respondent’s nil bank deposits, could serve as a valid ground for the issuance of a writ of attachment.

Does a mere reduction of bank funds to nil, amid heavy operating expenses, incontrovertibly establish insolvency?
Must the petitioner prove that the respondent’s income was being improperly diverted rather than consumed in regular business operations?

Whether the trial court and the Court of Appeals correctly applied the evidentiary standards and legal principles regarding preliminary attachment.

Was the issuance of the writ of attachment justified based on the affidavit of merit?
Did the Court of Appeals err in issuing a restraining order that completely barred the trial court from hearing the underlying civil case?