G.R. No. 111080 - Orosa vs. Court of Appeals

Petitioner Philippine Bank of Communications (PBC) filed a complaint against private respondents Bernardino Villanueva, Filipinas Textile Mills, Inc. (FTMI), and Sochi Villanueva (now deceased) before the Regional Trial Court (RTC) Manila, Branch 7 in Civil Case No. 91-56711.
PBC sought payment of ₱2,244,926.30 representing proceeds or value of textile goods purchased under irrevocable letters of credit and trust receipts executed by PBC with private respondent FTMI as obligor, and covered by surety agreements executed by Bernardino Villanueva and Sochi Villanueva.
Private respondents admitted the existence of surety agreements and trust receipts but alleged they already made payments and contended that petitioner imposed onerous interest and charges.

On May 31, 1993, PBC filed a Motion for Attachment arguing that violation of the trust receipts law constitutes estafa, thus grounds exist for a writ of preliminary attachment under Section 1, Rule 57, paragraphs (b) and (d) of the Revised Rules of Court.
Petitioner claimed attachment was necessary because private respondents were disposing of assets to the detriment of creditors.
Petitioner offered to post a bond as required for the writ issuance.
Private respondents opposed the motion, and after a Reply, the RTC issued an Order on August 11, 1993 granting the issuance of writ of preliminary attachment upon posting of bond.

Private respondents filed separate petitions for certiorari with the Court of Appeals (CA), assailing the RTC’s Order of attachment.
In CA-G.R. SP No. 32762, the CA ruled that the RTC committed grave abuse of discretion by not conducting a hearing nor requiring petitioner to substantiate allegations of fraud, embezzlement, or misappropriation.
In CA-G.R. SP No. 32863, the CA found petitioner’s grounds for attachment as general averments insufficient to warrant issuance of writ of preliminary attachment; the CA emphasized that embezzlement, misappropriation, or incipient fraud cannot be presumed but must be proven.
Both CA decisions invalidated the RTC’s order for preliminary attachment.

PBC filed consolidated petitions for review asking the Supreme Court to overturn the CA rulings, contending:

Sufficient grounds existed for issuance of writ of preliminary attachment due to fraud, embezzlement, and misappropriation.
Failure by FTMI and Villanueva to remit proceeds or return goods breached fiduciary duty, constituting embezzlement or misappropriation justifying attachment.

Whether the issuance of the writ of preliminary attachment by the RTC was proper considering the allegations of fraud, embezzlement, and misappropriation by private respondents.
Whether the Court of Appeals correctly annulled the RTC’s order on grounds of lack of sufficient basis and absence of due process hearing.
Whether petitioner’s motion and supporting affidavit sufficiently established facts to justify a writ of preliminary attachment under Section 1(b) and (d) of Rule 57.
Whether failure to remit proceeds or return goods entrusted automatically constitutes valid grounds for preliminary attachment.