Case Summary (G.R. No. 219345)
Key Dates
May 15, 2013: Security Bank filed its Complaint for Sum of Money with application for a writ of preliminary attachment.
May 31, 2013: RTC granted the writ upon posting of a P10,000,000 bond.
July 4 and August 12, 2013: RTC denied respondents’ motion to lift the writ and their motion for reconsideration.
December 12, 2014: CA decision lifting the writ.
June 26, 2015: CA resolution denying Security Bank’s motion for reconsideration.
January 30, 2017: Supreme Court decision under G.R. No. 219345.
Applicable Law
1987 Philippine Constitution; Rules of Court, Rule 57, Section 1(d) (fraud in contracting or performance of obligation); Presidential Decree No. 115 (trust receipts); Revised Penal Code Article 315(1) (estafa).
Proceedings Below
Security Bank sued for unpaid obligations under trust receipts and surety agreements totaling P10,000,000, plus interest, fees, and costs. It applied for a writ of preliminary attachment under Rule 57. Respondents moved to lift the writ, arguing lack of prima facie fraud and reliance on restructuring negotiations. The RTC denied their motion and motion for reconsideration.
Court of Appeals Ruling
The CA held that: (1) non-payment alone cannot prove fraud; (2) failure to return goods or proceeds under trust receipts does not ipso facto establish fraud; (3) respondents’ repayment proposal negated fraudulent intent; and (4) fraud must exist at contracting. It lifted the attachment, and denied reconsideration.
Issue on Review
Whether the Court of Appeals erred in nullifying the writ of preliminary attachment issued by the RTC.
Petitioner’s Arguments
Security Bank contended that respondents induced it to extend credit through representations and warranties of solvency, then misappropriated trust-receipt goods or proceeds. It maintained that respondents’ repayment proposal was a dilatory tactic, unsupported by documents or actual meetings, evidencing post-contract fraud.
Respondents’ Arguments
They asserted that mere failure to pay did not prove fraud; their loan restructuring negotiations disproved fraudulent intent; and Security Bank’s allegations were general and unsupported by specific circumstances in affidavits or hearing evidence.
Analysis of Provisional Remedy
A writ of preliminary attachment is an ancillary remedy to secure judgment recovery by levying defendant’s property. Under Rule 57, Section 1(d), attachment lies where a party was guilty of fraud in contracting or in the performance of the obligation giving rise to the action. Fraud need not be proven by direct evidence but must be specifically alleged and supported by factual circumstances.
Substantiation of Fraud Allegations
Security Bank’s complaint detailed respondents’ assurances to pay by maturity, warranties of solvency in the Credit Agreement, and their execution of Continuing Suretyship and multiple Trust Receipt Agreements. Attachments included the Credit and Suretyship Agreements, trust receipts, demand letters, and the judicial affidavit of German Vincent Pulgar IV, who testified to respondents’ failure to turn over goods or sale proceeds.
Violation of Trust Receipts as Civil Fraud
Trust receipts, governed by P.D. No. 115, impose dual obligations: to remit sale proceeds or return unsold goods. Non-compliance constitutes estafa without proving intent to defraud. Civil fraud for attachment purposes exists when failure to comply is specifically alleged and supported by evidence showing misappropriation of entrusted goods or proceeds.
Distinction from Philippine Bank of Communications
In PBCom, allegations were vague, af
...continue readingCase Syllabus (G.R. No. 219345)
Facts and Background
- On May 15, 2013, Security Bank Corporation (“Security Bank”) filed a Complaint for Sum of Money with an Application for Issuance of a Writ of Preliminary Attachment before the Regional Trial Court (RTC), Branch 59, Makati City, Civil Case No. 13-570.
- Respondents included Great Wall Commercial Press Company, Inc. (“Great Wall”) as debtor and its sureties: Alfredo Buriel Atienza, Fredino Cheng Atienza, and Spouses Frederick Cheng Atienza and Monica Cu Atienza.
- The complaint sought recovery of unpaid obligations under a credit facility covered by multiple trust receipts and surety agreements, plus interest, attorney’s fees, and costs, on a principal amount of ₱10,000,000.00.
- Security Bank alleged default in payment despite maturity dates ranging from December 11, 2012 to May 7, 2013.
Application and Issuance of the Writ of Preliminary Attachment
- After hearing, on May 31, 2013, the RTC granted Security Bank’s application for a writ of preliminary attachment and required the posting of a bond in the amount of ₱10,000,000.00.
- The bond was posted by Security Bank to secure any judgment eventually rendered in its favor.
Respondents’ Motion to Lift the Writ of Preliminary Attachment
- On June 3, 2013, respondents filed a Motion to Lift Writ of Preliminary Attachment Ad Cautelam, arguing grave abuse of discretion:
- Alleged lack of prima facie basis for attachment.
- Failure of affidavits to establish fraudulent intent.
- General allegations of fraud contradicted by respondents’ attempted loan restructuring efforts.
RTC Rulings
- In its July 4, 2013 Order, the RTC denied respondents’ motion, finding:
- Credit and Continuing Suretyship Agreements contained warranties and representations that induced the bank to extend credit.
- Multiple trust receipt agreements were executed but goods or proceeds therefrom were neither returned nor remitted.
- Such non-compliance evidenced fraud in the performance of obligations.
- A motion for reconsideration was likewise denied by RTC Order dated August 12, 2013.
Court of Appeals Ruling
- Respondents elevated the matter to the Court of Appeals (CA) via petition for certiorari.
- In its December 12, 2014 Decision, the CA lifted the writ of preliminary attachment, holding:
- Allegations were insufficient to warrant the provisional remedy.
- Fraud cannot be inferred from inability to pay or failure to comply.
- Non-return of goods or proceeds