Case Summary (G.R. No. 19843)
Procedural History and Applicable Law
The case was initiated on April 8, 1991, before the Regional Trial Court (RTC) of Manila, Branch 7. The petitioner filed a Motion for Preliminary Attachment on May 31, 1993, relying mainly on alleged violations of the Trust Receipts Law, which under Presidential Decree No. 115, as amended, constitutes estafa (fraud) punishable under Article 315 paragraph 1(b) of the Revised Penal Code. The petitioner invoked grounds under Rule 57, Section 1(b) and (d) of the 1997 Revised Rules of Court (applicable at the time), seeking to attach the properties of the respondents as security. The RTC granted the writ of preliminary attachment conditioned on the posting of a bond, but upon petition, the Court of Appeals nullified this order in separate decisions dated May 24, 1994, and March 31, 1995.
Grounds for Motion of Attachment and Petitioner’s Allegations
The petitioner argued that the failure of respondents to remit proceeds or return entrusted goods violated their fiduciary duty, thus constituting embezzlement or misappropriation under Rule 57, Section 1(b). Additionally, petitioner contended that fraud was committed in contracting the debt or obligation, justifying attachment under Section 1(d). Lastly, petitioner claimed the respondents were dissipating their properties, warranting urgent issuance of attachment to preserve creditor’s rights.
Court of Appeals’ Rulings on the Issuance of Writ of Preliminary Attachment
The Court of Appeals found grave abuse of discretion on the part of the RTC for issuing the writ without conducting a hearing and requiring petitioner to substantiate allegations of fraud, embezzlement, or misappropriation. It noted a lack of sufficient grounds and factual basis in petitioner’s motions, with allegations being vague and general without supporting particulars or evidence. The Court emphasized that fraud or embezzlement cannot merely be presumed but must be clearly established for attachment to be granted.
Supreme Court’s Analysis on Sufficiency of Grounds and Proof Required for Attachment
Applying the 1987 Philippine Constitution and pertinent rules of court, the Supreme Court affirmed the Court of Appeals’ rulings. It highlighted that the remedy of attachment is extraordinary and summary, thus requiring strict compliance with procedural and substantive requisites. The court held that petitioner’s Motion and supporting affidavit lacked particularized allegations of fraud or fraudulent intent, relying merely on general assertions that respondents failed to remit proceeds or return goods. The affidavit was conclusory, reiterating the legal basis without providing sufficient factual support.
Fraud and Preconceived Intent to Defraud as Prerequisites for Attachment
The Court reiterated established jurisprudence that to sustain attachment under Rule 57, Section 1(d), petitioner must show that respondents had a preconceived plan or intention not to pay at the time of contracting the obligation. Fraud is a state of mind inferred from circumstances rather than direct evidence. The record did not demonstrate that respondents intended to defraud the petitioner in incurring the obligations. In fact, respondents claimed substantial payments had been made, leaving only a small balance due, negating any presumption of fraudulent intent.
Requirement of Preliminary Hearing and Due Process Considerations
The Supreme Court emphasized that due process mandates a hearing wherein respondents must be given an opportunity to dispute the allegations before issuance of a writ of attachment. The petitioner’s failure to hold such a hearing was a procedural defect constituting grave abuse of discretion. The respondents' defenses regarding payments and cessation of operations could not be ignored and
...continue readingCase Syllabus (G.R. No. 19843)
Background and Procedural History
- This case involves consolidated petitions for review filed by Philippine Bank of Communications against two separate decisions of the Court of Appeals, namely CA-G.R. SP No. 32863 and CA-G.R. SP No. 32762.
- The Court of Appeals decisions, dated May 24, 1994, and March 31, 1995, respectively, nullified the Regional Trial Court of Manila, Branch 7’s Order dated August 11, 1993, granting a writ of preliminary attachment in Civil Case No. 91-56711.
- The underlying case was initiated by Philippine Bank of Communications on April 8, 1991, filing a Complaint against Bernardino Villanueva, Filipinas Textile Mills, Inc. (FTMI), and Sochi Villanueva (deceased) for the payment of ₱2,244,926.30.
- The amount claimed represented proceeds or the value of various textile goods, purchased under irrevocable letters of credit and trust receipts, with FTMI as obligor and Bernardino and Sochi Villanueva as sureties.
- Private respondents admitted the existence of surety agreements but alleged that payments had been made and disputed the onerous interest and other charges.
- Petitioner filed a Motion for Attachment on May 31, 1993, arguing that violation of the trust receipts law constitutes estafa and grounds for preliminary attachment under Rule 57, Section 1(b) and (d).
- The Regional Trial Court granted the motion on August 11, 1993, conditioned upon posting of an attachment bond.
- After the denial of Filipinas Textile Mills' Motion for Reconsideration, the private respondents filed separate certiorari petitions to the Court of Appeals, which were granted, invalidating the writs of attachment on differing grounds.
- The consolidated petitions before the Supreme Court challenge the Court of Appeals’ rulings, asserting that there was sufficient basis for the writ and that failure to remit proceeds or return goods constitutes embezzlement or misappropriation under fiduciary duties.
Issues Presented
- Whether the Court of Appeals erred in ruling that there was insufficient basis for the issuance of a writ of preliminary attachment despite allegations of fraud, embezzlement, and misappropriation.
- Whether failure to remit proceeds or return entrusted goods violates fiduciary duty in a manner constituting embezzlement or misappropriation, thus justifying preliminary attachment.
- Whether the trial court committed grave abuse of discretion by issuing the