TOMAS TY TION AND CABMEN YU, PLAINTIFFS AND APPELLANTS, VS. MARSMAN & COMPANY, INC. AND ALPHA INSURANCE & SURETY JCOMPANY, INC., DEFENDANTS AND APPELLEES.

Appeal from an order granting a motion to dismiss the complaint.

On January 7, 1958, Marsman & Co., Inc., hereafter referred to
as the Corporation, instituted in the Court of First Instance of Davao
Civil Case No. 2543 thereof, against Tomas Ty Tion and the Glory
Trading, a business establishment owned and operated by Ty Tion in the
City of Davao, for the recovery of P5,540 said to represent the balance
of the price of 800 sacks of flour sold by the Corporation to said
defendants. Soon thereafter, or on January 9, 1958, the Corporation
filed in said case a motion for a writ of preliminary attachment, upon
the ground that Ty Tion and the Glory Trading had “removed or disposed
of their property” or were “about to do so with the intent to defraud”
said Corporation. Acting upon this motion, the court issued, on January
10, 1958, the writ prayed for, upon the posting of a bond in the sum of
P5,540, subscribed by the Corporation, as principal, and the Alpha
Insurance & Surety Co., Inc., as surety, to guaranty the payment to
Ty Tion and the Glory Trading of any damages they may suffer should it
appear that the Corporation was not entitled to the attachment. It is
claimed that, in consequence thereof, the Glory Trading and all its
stocks and merchandise were attached by the Provincial Sheriff of
Davao, thereby “resulting in the forced closure of said establishment”;
that, on January 15, 1958, upon the arrival of Ty Tion in Davao, he
posted a P5,540 counterbond, to secure the lifting of the process
aforementioned; that the Corporation objected thereto upon the ground
that said sum did not include the attorney’s fees, expenses of
litigation and costs of the suit, for which, it was averred, there
should be posted an additional bond for P1,500; and that the same was
forthwith given by Ty Tion, and the attachment, accordingly, lifted on
January 20, 1958.

In due course, Ty Tion and the Glory Trading filed their answer,
with a counterclaim for damages allegedly sustained by them on account
of said attachment, which they claimed to be wrongful. Subsequently, Ty
Tion moved to withdraw this counterclaim, for the purpose of filing a
separate civil action to recover the damages involved therein. The
motion having been granted, the present action (Civil Case No. 2588)
was, on March 7, 1958, commenced in the same court, by the spouses Ty
Tion and Carmen Yu, against the Corporation and the aforementioned
surety company, for the recovery of said damages. After the filing of
their respective answers, these defendants moved for a preliminary
hearing, upon the ground that the complaint herein states no cause of
action and that plaintiffs’ alleged cause of action arose out of, and
is necessarily connected with, the transaction or occurrence that is
the subject matter of said Civil Case No. 2543 and should have been set
up as a counter-claim therein. After hearing both parties, the lower
court upheld this view and, accordingly, dismissed the case. Hence,
this appeal by Ty Tion and his wife.

They maintain that the order of dismissal appealed from is
erroneous, it being based upon Section 20 of Rule 59 of the Rules of
Court, which is claimed to be inapplicable to this case. Said provision
reads:

“If the judgment on the action be in favor of the
defendant, he may recover, upon the bond given by the plaintiff,
damages resulting from the attachment. Such damages may be awarded only
upon application arid after proper hearing, and shall be included in
the final judgment. The application ,must be filed before the trial or,
in the discretion of the court, before entry of the final judgment,
with due notice to the plaintiff and his surety or sureties, setting
forth the facts showing his right to damages and the amount thereof.
Damages sustained during the pendency of an appeal may be claimed by
the defendant, if the judgment of the appellate court be favorable to
him, by filing an application therewith, with notice to the plaintiff
and his surety or sureties, and the appellate court may allow the
application to be heard and decided by the trial court”.

It is urged by appellants that this provision applies only when the
plaintiff, who obtained a writ of preliminary attachment, has been
found to have no cause of action, for which reason judgment thereon is
rendered “in favor of the defendant”, and that it has no application
when, having a cause of action—as the Corporation had in Case No. 2543,
for Ty Tion admitted therein his indebtedness for P5,540—said plaintiff
secures the writ wrongfully and illegally, by alleging falsely that the
defendant had disposed or was about to dispose of his properties for
the purpose of defrauding his creditors, which, appellants maintain, is
what the Corporation has done in Civil Case No. 2543.

Regardless of the provisions of said Section 20 of Rule 59,
appellants’ pretense is untenable. Considering that the damages
involved in the present case were allegedly sustained by appellants in
consequence of the writ of preliminary attachment issued in said Case
No. 2543, it is obvious that their alleged cause of action therefor
arose out of the proceedings in that case, and must be litigated
therein. Indeed, the writ was issued therein upon allegations which are
branded by appellants herein as maliciously false, and, as a
consequence, the truth of said allegations, and the liability, if any,
for damages caused thereby, must be determined in that case. In short,
the cause of action of plaintiffs herein must be set up in said Civil
Case No. 2543, not only because it is in the nature of a compulsory
counterclaim (Section 6, Rule 10, Rules of Court), but, also, in order
to avoid multiplicity of actions (Del Rosario vs. Nava, 95 Phil., 637; 50 Off. Gaz., 4189; Estioco vs. Hanada, L-11079, May 21, 1958; Nueva-España vs. Montelibano, 58 Phil., 807, 810- 811; Tan-Syco vs. Javier, 21 Phil., 82; Raymundo vs. Carpio, 33 Phil., 395; Santos vs. Moir, 36 Phil., 350).

Wherefore, without prejudice to the right of plaintiffs herein to
revive or reinstate their counterclaim in said Civil Case No. 2543, the
order appealed from is hereby affirmed, with the costs of this instance
against plaintiff-appellants. It is so ordered.

Bengzon, C. J., Padilla, Bautista Angelo, Labrador, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.