G.R. No. L-6572. May 14, 1954
MAX CHAMORRO & CO., PETITIONER, VS. PHILIPPINE READYMIX CONCRETE CO., INC. AND HON. MANUEL P. BARCELONA, JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, RESPONDENTS.
REYES, J.:
the Court of First Instance of Manila dissolving a writ of preliminary
attachment.
The record shows that on December 8, 1951 petitioner filed an action
in said court against the respondent Philippine Ready-Mix Concrete Co.,
Inc., for the recovery of P4,355.09 due plaintiff for road building
materials furnished the defendant in May and June of that year. Through
an ex parte petition filed simultaneously with the complaint and
alleging disposal of property on defendant’s part with the intent to
defraud its creditors, plaintiff had a writ of preliminary attachment
issue, and, on the authority thereof, garnished funds of an equivalent
amount due defendant from the Bureau of Public Works. Defendant move to
have the attachment discharged, alleging that the same had been
procured on a false ground, but the motion was denied. However, this
ruling was reconsidered by another Judge after the death of the one in
charge of the case, and the attachment was ordered dissolved, the court
having found that the transactions cited to justify the attachment as
constituting dispositions of property in fraud of creditors were
effected “to pay legitimate debts or to comply with legitimate
obligations” and not to defraud defendant’s creditors.
Alleging that this finding is contrary to law and the evidence, the
petition for certiorari seeks annulment of the order lifting the
attachment on the ground that it constitutes a clear abuse of judicial
discretion.
The petition is without merit.
The only transactions cited by .plaintiff as constituting
dispositions of property with intent to defraud creditors are those
specified in the affidavit of its attorney, Maximo Calalang, as follows:
“1. On August 7, 1950, the defendant corporation
assigned in favor of the Philippine National Bank P461,372.00 worth of
its collectible amounts from the Bureau of Public Works;“2.
On February 20, 1951, the defendant corporation assigned in favor of
the RFC 50 per cent of all payments due the defendant corporation until
the full amount of P300 and its interest at the rate of 6 per cent per
annum is fully paid, and thereafter 30 per cent of all payments due the
defendant corporation until its other indebtedness with the RFC is
fully paid;“3. On August 21, 1951, the defendant corporation
assigned in favor of Mr. Domingo Bautista (Plaintiff in Domingo
Bautista vs. Phil. Ready-Mix, Civil Case No. 1482, Court of First
Instance of Rizal) 15 per cent of its free 503—the first 50 per cent
having been assigned to the RFC—until the full amount of P58,465 owed
by the defendant corporation in favor of Domingo Bautista is paid,
together with the value of other materials which said Domingo Bautista
shall deliver to the Defendant;“4. During the month of
September, 1951, the defendant assigned in favor of the Manila Surety
& Fidelity 10 per cent of its collection from the government until
the amount of P49,010 is fully paid;“5. In the 10th day of
June, 1952 the Phil. Ready-Mix sold by absolute sale 97 parcels of land
located in the province of Rizal for more than P136,000 to Andres and
Jose, both Soriano, the whereabouts of which proceeds of sale is
unknown to the plaintiff.”
The above transactions are, however, explained in the rebuttal joint
affidavit of the officers of the respondent company, the pertinent
portion of which is reproduced in the Order below, as follows:
“(a) The assignment of expected collections
up to an amount of P461,372, on April 8, 1950, in favor of the
Philippine National Bank was limited to specific contracts, to wit: Philippine Rehabilitation Projects PR-69(11) and PR-5(21); that the deed of assignment states plainly that
the assignment was made ‘in consideration of certain loans, to the
assignors; and that said assignment was an advance arrangement required
by the PNB for the payment or liquidation of loans extended to finance road construction projects of the debtor-assignors.“(b)
The alleged assignment on February 20, 1951 in favor of the RFC was
likewise limited to expected collections from specific projects until a
stipulated amount shall have been paid; that all assignments made in
favor of the RFC were for the sole purpose of paying the obligations incurred by
the debtor-assignor by way of loans, credits and overdrafts granted by
said financing institution; and that said assignment was required by
the RFC in the normal course of business to secure said loans to
finance operation of the debtor assignor.“(c) The
assignment on August 21, 1951, of a small percentage of collections
from specified projects in favor of Mr. Domingo Bautista, a creditor
who filed an action in court, was made precisely to pay a legitimate indebtedness to the said person
and further to guarantee the payment to said person of future
deliveries of materials to the corporation; and that this assignment
was necessary to insure a steady supply of road construction materials
at the projects.“(d) The assignment in September
1951, in favor of the Manila Surety & Fidelity Co. of a percentage
collections from specified contracts, until an amount of P49,010 shall
have been collected, was made in order to indemnify the said surety company
against a possible liability under surety bond issued upon the request
of the assignor who was compelled to put up a bond in three pending
civil cases; that the amounts collected thereunder by the surety are mere deposits,
not a true assignment; that the deed of assignment clearly provides
that the said amount ‘shall be kept in trust by the Manila Surety &
Fidelity Co., Inc., to the credit of the Philippine Ready-Mix
Concrete Co., Inc., to be refunded upon the cancellation of the bond,
and shall not be used for any purpose other than to secure the bond
therein mentioned.’“(e) The sale of 97 parcels of
land on June 10, 1952 for P136,000 was dictated by business necessity.
These 97 parcels of land were originally mortgaged to the RFC. To pay
the indebtedness to the RFC and to meet other urgent obligations, these
lands were sold; of the proceeds of the sale, P120,892 was turned over
to the RFC in part payment of the outstanding balance; the balance of
P15,111.50 was also turned over to the RFC which amount was ‘to be
released in favor of the mortgagor against invoices of raw materials to
be purchased by the mortgagor’; that these terms were imposed by
the RFC as mortgagee of the property sold, for the protection of its
credit and to insure that the balance will be used only in road
construction projects of the corporation.” As the lower court says in
its order, the above explanations have not been contradicted, much less
refuted, by plaintiff and they really clearly show that the
transactions were effected to pay legitimate debts or to comply with
legitimate obligations and to enable defendant to conduct its business
operations. They may as the lower court observes, have the effect of
giving preference to certain creditors; but such preference is not a
legal ground for attachment.“The disposal of most of
defendant’s property for the purpose of paying his debts, and the use
of the proceeds thereof for that purpose only, were insufficient to
sustain an attachment on the ground that he had disposed of his
property with intent to hinder and delay his creditors.” (SylL,
Blakemore vs. Eagle, 73 Ark. 477; S. W. 637.)“The fact that
a debtor in good faith sells all his property to pay certain of his
creditors to the exclusion of others is not a ground for attachment.”
(See Campell vs. Warner, 22 Kan. 604.)“A preferential
transfer or payment without actual fraud does not constitute a
disposition of property with intent to delay and defraud creditors, so
as to authorize an attachment.” (Syll., Crookston State Bank vs. Lee,
Minn. 112; 144 N. W. 433.)“The transfer by a debtor of all
his property does not warrant the issuance of attachment, tho the
transfer results in a preference of some creditors and in hindering or
delaying others in the collection of their claims where there is no
element of intentional fraud.” (See Moeller vs. Van Loo, 180 111. App.
435.)
It should also be noted that, as observed by the court below, the
first and second transactions mentioned above took place long before
the accrual of plaintiff’s action. And the objection that the
respondent is on the verge of insolvency does not necessarily
strengthen petitioner’s case, since insolvency is not a ground for
attachment, especially when defendant has not been shown to have
committed any act intended to defraud its creditors.
“To authorize an attachment, at least one of the
causes mentioned in the statute must exist. Mere insolvency * * * is
not a ground of attachment. A man may be unable to pay his debts in
full, and still be doing all in his power to pay them, and, so long as
he furnishes no statutory cause of attachment against him, no
attachment will be against his property.” (Federal Farm Mortg. Corp.
vs. Mulder, 280 N. W. 454, 455; Walker vs. Hagerty, 20 Neb. 482, 30 N.
W., 556.)Where a merchant, in failing circumstances, caused
by poor business management, gave a chattel mortgage to a creditor to
whom he was heavily indebted, and turned over to him all his property
not exempt from execution, and gave other mortgages thereon to other
creditors, in the order they applied for them, such acts do not
establish a fraudulent disposition of his property warranting an
attachment on that ground. (See Burnham vs. Patmor, 3 Kan. App. 257; 45 Pac. 115.)
Petitioner alleges that there are other cases pending against the
respondent company with preliminary attachment issued in some of them,
so that there is probability that, with all those accumulated claims
against it, the company would not be in a position to pay petitioner.
These are bare allegations which may or may not be true. What we have
to decide in the present case is whether the lower court, on the basis
of the proof adduced at the hearing, which consists of the affidavits
set forth above, has abused its discretion in lifting the attachment
secured on an ex parte motion. Upon examination of said
affidavits, we do not find that the court below has been guilty of such
abuse of discretion. On the contrary, we find that its conclusion as to
law and fact are correct, for the transactions entered into by the
respondent company with the RFC and others do not show intent to
defraud its creditors and are therefore no ground for the issuance of a
writ of preliminary attachment under section 1 of Rule 59. Convinced
that the writ had been improperly issued, the lower court only acted as
directed in section 13 of the same Rule when it ordered the attachment
discharged.
The petition for certiorari is, therefore, denied with costs against petitioner.
Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.