Pilipinas Shell Petroleum Corp. vs. Pobre

Factual Background

In 2008 and 2009, petitioner entered into three Retailer Supply Agreements (RSAs) with Angel, agreeing that petitioner would supply Shell brand fuel and lubricants for sale through the three Shell stations located in Tuguegarao City. On October 26, 2017, Angel informed petitioner that he intended to resign as Shell dealer/operator effective December 16, 2017 due to declining health and conditions requiring constant medical attention. On December 15, 2017, Angel made a final purchase of Shell products amounting to P4,846,555.84. The next day, he reiterated his resignation and requested that payment for the last purchase be set off against receivables allegedly due from him for promotional programs he conducted for petitioner.

On March 9, 2018, petitioner sent Angel a reconciliation of accounting records and sought confirmation that the outstanding balance, net of Angel’s accounts payable, amounted to P2,787,529.33. On the same day, Gino sent a letter to petitioner requesting the dismantling and removal of Shell signages at the three stations because he had assumed ownership of the properties. On March 13, 2018, petitioner demanded that Angel comply with his obligations under the RSAs and pay the outstanding balance of P4,846,555.84, while also demanding that respondents cease and desist from using competitor brand products. Petitioner rejected Gino’s request for removal of Shell signages, reasoning that it would violate the subsisting RSAs.

Respondents opposed petitioner’s demands. Angel acknowledged the reconciliation and expressed willingness to pay P2,787,529.33 but sought to deduct amounts charged as Globe Telecom EDC terminal installation fees, asserting that the terminals were never installed in the three sites. Angel also maintained that his resignation terminated his obligation to continue operating the Shell stations. He further denied selling competitor brand products. Petitioner insisted that Angel could not unilaterally terminate the RSAs and could not assign the stations to Gino, who was associated with a competitor, Phoenix Petroleum Philippines, Inc. Gino responded that he was neither the owner nor lessor of the properties and merely supplied Shell products through the stations while Angel remained able and willing to pay.

Unable to settle, petitioner filed its complaint in the RTC, praying for payment of P4,846,555.84 for the last purchase, adherence to the RSAs, actual and compensatory damages for lost profits from January to June 2018 of P10,000,000.00, moral and exemplary damages and attorney’s fees of P3,000,000.00, and an order compelling Angel to either retain a fourth site as a Shell branded station or pay P75,000,000.00 in nominal damages representing profits petitioner claimed it could have earned from the operation of the fourth site. Petitioner also sought a writ of preliminary attachment, alleging fraud in the performance of Angel’s obligations.

RTC Issuance of the Writ and Subsequent Motions

On May 17, 2019, the RTC issued an order providing for the issuance of the Writ of Preliminary Attachment in favor of petitioner and directed the sheriff to attach respondents’ properties to secure satisfaction of petitioner’s total claim of P92,846,555.84. Respondents moved for reconsideration ad cautelam, alternatively seeking discharge of the writ and/or reduction of the attachment amount to petitioner’s principal claim. They argued that petitioner failed to prove the alleged fraud under Section 1(d), Rule 57 of the Rules of Court.

On October 7, 2019, the RTC partly granted respondents’ motion by excluding the claimed moral and exemplary damages from the amount covered by the writ and reducing the total to P89,846,555.84. After an omnibus motion for inhibition with motion for reconsideration, the case was reassigned to Branch 58. There, the new presiding judge denied respondents’ motion for reconsideration on February 14, 2020 for lack of merit.

Proceedings Before the Court of Appeals

Respondents filed a petition for certiorari before the CA, asserting that the RTC gravely abused its discretion in issuing the October 7, 2019 and February 14, 2020 orders. In its March 23, 2021 decision, the CA set aside the RTC orders and ordered the immediate lifting and dissolution of the Writ of Preliminary Attachment. The CA held that petitioner failed to prove fraud as required under Section 1(d), Rule 57 and failed to establish that respondents had insufficient security to answer the claim. The CA also found errors in the manner the RTC assessed the attachment coverage, including its inclusion of amounts not proper for attachment.

As to Angel, the CA ruled that petitioner did not establish fraud with the specificity required, emphasizing that Angel was authorized to continue purchasing Shell products during the subsistence of the RSAs, and that petitioner had acceded to purchase orders despite knowing of Angel’s resignation intent. The CA further stated that fraud could not be presumed from mere non-compliance with contractual obligations. The CA also found that Angel’s failure to execute an RSA for the fourth site did not indicate fraud; it reasoned that Section 1(d), Rule 57 presupposes an actual agreement induced by fraudulent conduct, and the evidence at most suggested preparatory stages to execute a contract rather than fraud tied to consent.

With respect to Gino, the CA held that characterizing his relationship and privity to the RSAs—particularly whether he was an assignee—would involve matters tied to the merits of the main case. It ruled that Gino’s refusal to comply with the RSAs did not constitute fraud per se, and that even assuming assignment, petitioner failed to allege specific acts of fraud by Gino. The CA likewise criticized the RTC’s approach to the requisites under Rule 57 for attachment: it noted that the RTC addressed fraud but failed to properly determine the additional requisite involving sufficiency of security.

The CA denied petitioner’s motion for reconsideration in its December 21, 2021 resolution.

Issue Raised Before the Supreme Court

Petitioner elevated the case to the Supreme Court and framed the primary issue as whether the CA erred in lifting and dissolving the Writ of Preliminary Attachment issued by the RTC.

Procedural Ruling on Timeliness of the Petition for Certiorari

Before addressing the substantive validity of the attachment, the Court resolved the procedural objection that the CA should have dismissed respondents’ certiorari petition for being filed out of time. Petitioner asserted that respondents received the RTC order dated October 7, 2019 on October 25, 2019, and thus had sixty (sixty) days under Section 4, Rule 65 to file their certiorari petition until December 24, 2019, yet respondents filed it on March 22, 2020. Petitioner further argued that respondents’ second motion for reconsideration did not toll the running of the period.

Respondents countered that there was no prohibited second motion for reconsideration because their second motion sought the discharge of the writ, which they claimed to be a distinct remedy under Section 13, Rule 57. The Court noted both sides were partly correct when viewed through the procedural options recognized in Davao Light & Power Co., Inc. v. Court of Appeals, which explained that preliminary attachment may be prevented or frustrated through multiple routes, and availing one does not automatically waive defects that may be raised through another.

The Court ruled that respondents properly sought two different effects in their motions. With respect to the RTC’s denial of their plea to reconsider the issuance of the writ, the challenge should have been raised within the Rule 65 period, and the second motion did not toll that period. However, the same conclusion did not extend to the RTC’s denial of their alternative prayer to discharge the writ. The Court reasoned that the remedy to discharge on other grounds is distinct under Section 13, Rule 57, and that the Rule 65 period for challenging the denial of that discharge began to run upon respondents’ receipt of the RTC order dated February 14, 2020. The Court further observed that the CA characterized the petition as attacking only the RTC denial of discharge and the order denying reconsideration thereof, not the original issuance of the writ in May 17, 2019. It thus held there was no merit in petitioner’s timeliness objection. The Court also stated that, even assuming some delay, the equities and substantial justice allowed relaxation of the period under Rule 65 jurisprudence.

Legal Standards for Preliminary Attachment Under Rule 57

On the merits, the Court reaffirmed that preliminary attachment is a statutory and provisional remedy that allows a plaintiff to have the adverse party’s property taken into the custody of the court as security for a future judgment. Because it interferes with property prior to a determination of actual liability, courts must strictly construe the provisions authorizing attachment and must exercise caution in issuing writs. The Court emphasized that the burden lies on the movant to prove entitlement to the writ, and failure to comply with the requisites under Rule 57 results in a writ issued in excess of the trial court’s jurisdiction.

For attachment under Section 1(d), Rule 57, the Court reiterated four requisites: first, the existence of a sufficient cause of action; second, that the case falls under the provision’s fraud ground; third, that there is no other sufficient security for the claim; and fourth, that the amount due or the value of the property the movant is entitled to recover is at least as much as the sum for which the order is granted, above all legal counterclaims.

Application: Lack of Proof of Fraud and Insufficient Security

The Court held that the RTC failed to determine the existence of the second and third requisites.

On the fraud ground, the Court held that fraud alleged under Section 1(d), Rule 57 must b