Case Summary (G.R. No. 181721)
Petitioner
Watercraft Venture Corporation operates yacht and boat building, repair, storage and maintenance facilities at the Subic Bay Freeport Zone and charges US$272.00 per month for boat storage with interest for unpaid charges. It sued to collect alleged unpaid storage fees and sought a writ of preliminary attachment as security for any judgment.
Respondent
Alfred Raymond Wolfe was employed by Watercraft (disputed position title: Shipyard Manager v. Service and Repair Manager). He stored his sailboat, the Knotty Gull, at Watercraft’s facilities and, according to Watercraft, never paid storage fees. Wolfe denied owing the claimed amount, asserted competing factual accounts concerning ownership/possession of the sailboat, and had a pending labor case against Watercraft.
Key Dates
Relevant chronology: Wolfe hired June 1997; employment terminated March 7, 2002; Boat Pull‑Out Clearance signed June 29, 2002; Watercraft filed complaint July 7, 2005; RTC granted order for writ of preliminary attachment July 15, 2005 and writ/notice issued August–September 2005; Wolfe moved to discharge November 8, 2005; RTC denied discharge March 20, 2006 and denied reconsideration November 10, 2006; Court of Appeals (CA) annulled the RTC orders September 27, 2007 and denied reconsideration January 24, 2008; Supreme Court decision affirming the CA was rendered in 2015.
Applicable Law
Primary procedural provisions invoked: Rule 57 (Sections 1, 3 and 4) and Rule 8 (Section 5) of the Rules of Court concerning preliminary attachment and the required particularity of averments of fraud. The decision was rendered under the legal framework prevailing after 1987 and, as the case decision is post‑1990, the 1987 Philippine Constitution is the constitutional backdrop. Controlling jurisprudence cited includes Cosiquien, Liberty Insurance Corporation, Chuidian v. Sandiganbayan, La Granja, and related authorities referenced in the records.
Factual Background
Watercraft alleged Wolfe used its storage facilities from his employment start in 1997 until June 2002 without paying storage fees, and that he signed a Boat Pull‑Out Clearance dated June 29, 2002 acknowledging an outstanding balance of US$16,324.82. Repeated demands were allegedly ignored, and Watercraft calculated the outstanding obligation as Php3,231,589.25 inclusive of interest as of April 2, 2005. Watercraft filed a complaint for collection and sought a writ of preliminary attachment on grounds of fraud in contracting or incurring the obligation and that Wolfe was about to depart the Philippines to defraud creditors.
Orders and Attachments Issued
The RTC found Watercraft’s ex parte application sufficient in form and substance and ordered issuance of a writ of preliminary attachment conditioned on posting of an attachment bond. Pursuant to the writ and notices, several of Wolfe’s vehicles were levied; his bank accounts were garnished; and a later intervenor asserted ownership of one levied vehicle by deed of sale.
Motions and RTC Disposition
Wolfe filed a motion to discharge the writ of preliminary attachment arguing absence of alleged fraud and that he was not a flight risk (citing valid visas, long residence in the Philippines, corporate and professional ties, and a pending labor case). The RTC denied Wolfe’s motion to discharge and his motion for a preliminary hearing, and denied reconsideration, prompting Wolfe’s certiorari petition to the CA.
Court of Appeals Ruling
The CA granted Wolfe’s petition, annulled and set aside the RTC orders, and declared the writ of attachment and related notices null and void. The CA held that the affidavit of merit failed to plead the circumstances constituting fraud with the particularity required by Rule 8, Section 5, and that the RTC should have conducted a hearing to ascertain the truth of contested allegations when challenged. The CA also found the evidence insufficient to establish that Wolfe was a flight risk.
Issues Presented to the Supreme Court
Watercraft raised two issues: (1) whether the RTC’s ex parte issuance of the preliminary attachment was valid; and (2) whether the affidavit of merit sufficiently alleged the circumstances of fraud to warrant issuance of a preliminary writ of attachment.
Supreme Court’s General Legal Framework on Attachment
The Supreme Court reiterated that a writ of preliminary attachment is a harsh, extraordinary, and summary remedy to be strictly construed in favor of the defendant. For ex parte issuance, Section 3 of Rule 57 requires an affidavit of merit and the applicant’s bond; the affidavit must show (i) a sufficient cause of action, (ii) that the case falls under grounds in Section 1 of Rule 57, (iii) absence of other sufficient security, and (iv) the amount due or value justifying the order. The court emphasized that whether an affidavit sufficiently establishes these facts is a matter committed to judicial discretion.
Standard for Alleging Fraud
The Court applied established jurisprudence that fraud, as a ground for attachment under Section 1(d) of Rule 57, requires proof that the debtor, when contracting the debt or incurring the obligation, had a preconceived plan or intention not to pay. Fraudulent intent cannot be inferred solely from nonpayment; it must be shown by particular facts (time, persons, places, and specific acts) because mental state is not ordinarily subject to direct proof. Rule 8, Section 5 requires particularity in pleading circumstances of fraud.
Application to the Affidavit of Merit — Fraud
The Court examined Rosario Raaoa’s affidavit and found the allegations largely factual recitations of use and nonpayment, together with a conclusion that Wolfe was “clearly guilty of fraud.” The affidavit did not plead specific circumstances showing a preconceived intention by Wolfe to defraud at the time he contracted or incurred the obligation. Paragraph 16, which asserted fraud from nonpayment and refusal to pay, was characterized as a legal conclusion unsupported by particulars. Accordingly, the affidavit failed the particularity requirement and could not sustain ex parte issu
...continue readingCase Syllabus (G.R. No. 181721)
Case Caption, Court and Decision
- Supreme Court of the Philippines, Third Division, G.R. No. 181721.
- Decision authored by Justice Peralta; rendered September 9, 2015; Notice of Judgment received October 16, 2015.
- Petition for review on certiorari under Rule 45 seeking reversal of the Court of Appeals (CA) Resolution dated January 24, 2008 and CA Decision dated September 27, 2007 in CA-G.R. SP No. 97804.
- Final disposition: Petition DENIED; CA Decision dated September 27, 2007 and CA Resolution dated January 24, 2008 AFFIRMED.
- Members who concurred in the Supreme Court decision: Velasco, Jr. (Chairperson), Villarama, Jr., Perez (designated Acting Member in lieu of Associate Justice Bienvenido L. Reyes per Special Order No. 2112 dated July 16, 2015), and Jardeleza, JJ.
Parties, Business and Contractual Context
- Petitioner: Watercraft Venture Corporation (hereafter “Watercraft”), engaged in building, repairing, storing and maintaining yachts, boats and other pleasure crafts at Subic Bay Freeport Zone, Subic, Zambales.
- Petitioner’s standard charge for boat storage: US$272.00 per month, with interest of 4% per month for unpaid charges.
- Respondent: Alfred Raymond Wolfe (hereafter “Wolfe”), a British national and resident of Subic Bay Freeport Zone, employed by Watercraft (dispute as to exact title).
- Vessel at issue: sailboat named Knotty Gull, stored in Watercraft’s boat storage facilities while Wolfe was employed.
Factual Background (Employment, Storage and Alleged Debt)
- June 1997: Wolfe was hired by Watercraft — petitioner’s affidavit asserts his role as Shipyard Manager; Wolfe’s answer contends he was hired as Service and Repair Manager.
- Wolfe placed his sailboat, Knotty Gull, in Watercraft’s storage facilities soon after employment began and used those facilities throughout his employment.
- Watercraft’s position: Wolfe was not exempt from paying storage fees despite employment and never paid storage fees from June 1997 through June 2002.
- February 1998: Wolfe’s version alleges he purchased the sailboat pursuant to an agreement with Watercraft’s then General Manager Barry Bailey and President Ricky Sandoval, for repair, staff training/fill-in use, and eventual sale; he claims he was appointed agent under a central Listing Agreement and entitled to a 10% sales commission.
- March 7, 2002: Watercraft terminated Wolfe’s employment.
- June 2002 (allegedly June 29, 2002): Wolfe signed a Boat Pull-Out Clearance and removed Knotty Gull from Watercraft’s facilities; Watercraft alleges that in that clearance Wolfe merely acknowledged an outstanding balance of US$16,324.82 (unpaid storage fees for June 1997–June 2002) but did not pay it.
- Watercraft alleges repeated demands for payment were ignored by Wolfe.
Complaint, Amounts Claimed and Relief Sought
- July 7, 2005: Watercraft filed a Complaint for Collection of Sum of Money with Damages and an Application for the Issuance of a Writ of Preliminary Attachment (Civil Case No. 4534‑MN, raffled to RTC Branch 170, Malabon City).
- Specific monetary allegations:
- Unpaid boat storage balance alleged in the Boat Pull-Out Clearance: US$16,324.82 (covering June 1997–June 2002).
- As of April 2, 2005, Watercraft claimed the outstanding obligation inclusive of interest amounted to Php3,231,589.25.
- Prayer included issuance of writ of preliminary attachment as security for satisfaction of any judgment in petitioner’s favor.
RTC Rulings on Attachment and Procedural Acts
- July 15, 2005: RTC issued an Order granting Watercraft’s ex parte application for writ of preliminary attachment conditioned upon filing an attachment bond in the amount of Php3,231,589.25.
- Resultant process:
- Writ of Attachment dated August 3, 2005 and Notice of Attachment dated August 5, 2005 were issued.
- Levied properties: two vehicles — a gray Mercedes Benz (plate XGJ 819) and a maroon Toyota Corolla (plate TFW 110).
- August 12, 2005: Wolfe’s Bank of the Philippine Islands accounts were garnished.
- Notice of Attachment and Levy dated September 5, 2005 resulted in levy on a white Dodge pick-up truck (plate XXL 111).
Interventions and Motions Filed by Respondent Wolfe
- Jeremy Simpson filed a Motion for Leave of Court to Intervene, claiming ownership of the Dodge pick-up truck by virtue of a notarized Deed of Sale dated August 4, 2005, Certificate of Registration No. 3628665‑1, and Official Receipt No. 271839105.
- November 8, 2005: Wolfe filed a Motion to Discharge the Writ of Attachment arguing:
- Watercraft failed to show fraud as required for attachment; mere failure to pay does not equal fraud.
- He is not a flight risk, citing:
- his Special Subic Working Visa and Alien Certificate of Registration validity (Special Subic Working Visa valid until April 25, 2007; ACR valid until May 11, 2006 — as averred by Wolfe in his motion).
- long-term residence of him and his family in the Philippines since 1997 and his daughters studying locally.
- his status as stockholder and officer of Wolfe Marine Corporation (SEC-registered), consultant to Subic projects, member of Multipartite Committee for new port development in Subic, and member of the Subic Chamber of Commerce.
- his intent to continue prosecuting a pending labor case he filed against Watercraft.
RTC’s Denials of Wolfe’s Motions and Reconsideration
- March 20, 2006: RTC denied Wolfe’s Motion to Discharge Writ of Attachment and Motion for Preliminary Hearing on affirmative defenses (forum shopping, litis pendentia, laches), finding lack of merit.
- November 10, 2006: RTC denied Wolfe’s motion for reconsideration for lack of merit.
Appeal to the Court of Appeals and CA Decision
- Wolfe filed a petition for certiorari before the CA challenging the RTC’s orders.
- CA Decision dated September 27, 2007:
- Annulled and set aside the RTC Orders dated March 20, 2006 and November 10, 2006.
- Declared NULL and VOID the Writ of Attachment (issued Aug. 3, 2005), Notice of Attachment (Aug. 5, 2005), and Notice of Attachment and Levy (Sept. 5, 2005).
- Directed return of attached vehicles to their owners.
- CA’s reasoning (summarized and relied upon):
- Issuance of the writ of preliminary attachment ex parte constituted grave abuse of discretion given defects in the affidavit of merit.
- Cited Cosiquien v. Court of Appeals: a writ based on an affidavit lacking required allegations is fatally defecti