G.R. No. 104405. May 13, 1993
LIBERTY INSURANCE CORPORATION, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, HON. NAPOLEON K. FLOJO, PRESIDING JUDGE OF BRANCH II, RTC MANILA; ATILLA ARKIN, THE CITY SHERIFF O…
BIDIN, J.:
This
is a petition for review on certiorari seeking to set aside and
to declare null and void the decision dated September 17, 1991 of the respondent
Court of Appeals dismissing petitioner’s petition for review and its resolution
dated February 7, 1992 denying petitioner’s Motion for Reconsideration.
On May 4, 1988 Jose H. Imperial Organizations, Pty., thru Atty.
Jose H. Imperial entered into an agreement with Coca – Cola Bottlers
Philippines to promote two concerts featuring a group known as “Earth,
Wind and Fire” on June 12
and 13, 1988 with Coca-Cola sponsoring the concerts and the former promoting
the same.
To ensure compliance with the terms of the agreement, Coca-Cola
required Imperial Organizations to put up a performance bond. Petitioner Liberty Insurance, upon
application of Imperial Organization put up the performance bond in the amount
of Three Million Pesos (P 3,000,000.00), the principal condition of which was
to “fully and faithfully guarantee the terms and conditions” of the
agreement dated May 24, 1988 entered into between Coca-Cola and Imperial
Organizations. More particularly, the bond
was to guarantee the return to Coca-Cola of “whatever portion of the cash
sponsorship and cash advances to be made by Coca-Cola to finance the holding of
the concerts on the dates aforesaid x x x.” (Rollo, pp.37)
In turn, and as a condition for the issuance of said performance
bond, petitioner required Imperial Organizations, Jose H. Imperial, Atilla
Arkin, and Carmen Madlangbayan to execute an indemnity agreement in its favor
to indemnify it for any and all damages including attorney’s fees which the petitioner may incur by reason of the issuance of the
bond.
It appears that while the concerts took place, Imperial
Organizations and private respondents failed to comply with their obligations to Coca Cola as a result of which
petitioner became liable upon its performance bond paying Coca-Cola Three Million Pesos. Petitioner, demanded reimbursement from Imperial, Arkin and
Madlangbayan based on their indemnity bond but to no avail.
On August 7, 1988 petitioner filed with the Regional Trial Court,
National Capital Region, Branch 2, Manila a complaint for damages with
application for the issuance of a writ of preliminary attachment against
private respondents.
On September 20, 1988, the Trial Court thru the Hon. Rosalio A.
de Leon, issued an order allowing the issuance of the writ, stating that:
“x x x There could have been fraud committed by the defendants
Arkin and Madlangbayan in promising to give as security or collateral to their
Indemnity Agreement, which caused the plaintiff to release the security bond,
when as it turned out, the Transfer Certificate of Title of a parcel of land
supposedly issued by the Register of Deeds of Rizal turned out to be fake, as
the true land title number was issued over a different parcel of land issued in
the name of a person other than defendant Madlangbayan, while defendant Atilla
Arkin delivered an official receipt in the name of a third party but which
vehicle was allegedly sold to him free from lien and encumbrance, when it
turned out that the car was heavily mortgaged to a third party x x x.
“The conclusion of fraud is inevitable in view of the above
circumstances, for any (sic) rate fraud is a state of mind that maybe inferred
from the circumstances extant in the case (Republic vs. Gonzales, 13 SCRA 633).
“In addition to the fact that these representations/promises
of Arkin and Madlangbayan were made prior to the release of the bond (the bond
by then had already been executed), it can still be said that this fraud
existed when the obligation was contracted in line with Sec. 1, par (d), Rule
57, which reads: An attachment may
issue in an action against a party who has been guilty of fraud in contracting
or incurring the obligation upon which the action is brought.
“A debt is fraudulently contracted if at the time of
contracting it, the debtor entertained an intention not to pay, or an intention
not to keep a collateral agreement regarding the disposition of a property
purchased on credit. (Francisco, Rules
of Court, Second [1985] Edition, p. 21) x x x” (Rollo, pp. 38 – 39)
On May 10, 1989 respondent Arkin filed a Motion to Quash/ Recall
Writ of Attachment. On October 19,
1989, the trial court, this time presided by respondent judge Napoleon K.
Flojo, denied the motion, reasoning out as follows:
“Defendant Atilla Arkin posits that no ground existed for the
issuance of the preliminary attachment because he was not guilty of fraud in
incurring the obligation under the indemnity agreement.
“The Court granted the prayer
for a writ of preliminary attachment after
a finding of fraud from the evidence
adduced by the parties. This conclusion was supported by
substantial evidence. There is no cogent reason from the arguments posed by the movant to
warrant and/or recall of the writ.
“Furthermore, the complaint invokes another ground for the
grant of the writ and that is, ‘in
an action against a party who has removed be (sic) disposed of his property, or
is about to do so, with the intent to defraud his creditors,’ x x x, evidenced
by three conveyances or disposals of properties
by defendant AtilIa Arkin, though made
before the institution of the action,
is a circumstance tending to show fraudulent
conveyance with intent to defraud his
creditors. Especially so,
when the payment of herein claim upon
which the action is brought is not
secured by any mortgage or pledge of
real (sic) personal property and plaintiff
had no other sufficient security for the
enforcement of the claim.” (Rollo, p. 58;
underscoring supplied).
After more than a year, or on December 14, 1990, Arkin filed a
Motion for Reconsideration of the aforementioned order of denial.
On March 6, 1991, respondent judge reversed his earlier ruling
and instead issued two orders, (1) granting Arkin’s Motion for Reconsideration
and directing the lifting of the writ of preliminary attachment earlier issued,
and (2) ordering the deputy sheriff assigned to said court to immediately
discharge or lift said writ. The first
order, among other things, states:
x x x x
x x x x x
“The Court, presided at the time by Judge Rosalio De Leon,
found that the defendant has been guilty of fraud in inveigling the plaintiff
to issue the surety bond by offering false collaterals. The ground relied upon by the Court to issue
the attachment was based on Section 1 (d) of Rule 57 of the Rules of Court,
which states:
‘Section 1. Grounds upon
which attachment may issue. – A plaintiff or any party may, at the commencement
of the action or at anytime
thereafter, have the property of the adverse party attached as security for the
satisfaction of any judgment that may be recovered in the following cases:
x x x x x x
‘(d) In action (sic)
against a party who has been guilty of fraud in contracting the obligation upon
which the action is brought, x x x.’
“To constitute a ground for attachment, fraud should be committed
prior to or simultaneous with the birth of the obligation sued upon, which in
this case is the May 30, 1988 surety bond.
x x x x x x x x x
“A close examination of the evidence, on record shows that the
delivery of the fake collaterals were made to Eduardo Cunanan on June 1, 1988,
or two (2) days after the issuance by the plaintiff of the surety bond. Thus, the offering of the fake Transfer
Certificate of Title and encumbered Mercedes Benz car was not prior to or
simultaneous with the execution of the Surety Bond. Such being the case, the offer of the collaterals were not the
cause which induced the plaintiff to issue the surety bond. It is therefore clear that the issuance of
the surety bond on May 30, 1988 was not based on the alleged fraud of the
defendant Arkin offering the fake collaterals.
x x x x x x x x x
“With regards (sic) to the allegations that the defendant
Arkin has removed or disposed of his property, with intent to defraud his
creditors, suffice it to say that (when) the law authorizes the issuance of a
writ of preliminary attachment (it) should be construed in favor of the
defendant and before issuing an Order to that effect, the judge should require
that all the requisites prescribed by law be complied (with), without which a
judge acquires no jurisdiction to issue the writ.
x x x x x x x x x
“Furthermore, allegations that debtors were removing or
disposing some of the properties with intent to defraud creditors must be
specific.
x x x x x x x x x
“In the present case the plaintiff did not prove the intent of
defendant Arkin to defraud creditors. Aside from the fact that the alleged dispositions were made long prior
to the filing of the case, the alleged dispositions were made of conjugal partnership property which
were then the subjects of partition between Arkin and his estranged wife. x x x” (Rollo, pp. 42-43).
Aggrieved, petitioner filed a special civil action for certiorari
with respondent Court of Appeals to set aside the above orders of respondent
judge.
Respondent court dismissed the petition on the ground that the
filing of the said petition was premature considering that there was yet a remedy available in the ordinary
course of law, i.e., filing a motion
for reconsideration of the challenged orders. Hence, this petition with the following assignment of errors:
“I. A
MOTION FOR RECONSIDERATION IS NOT ALWAYS A CONDITION PRECEDENT TO THE FILING OF
A SPECIAL CIVIL ACTION FOR CERTIORARI, AS THERE IS NO APPEAL OR ANY
PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW AVAILABLE TO
HEREIN PETITIONER;
“II. RESPONDENT
HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DISSOLUTION OF THE WRIT OF
PRELIMINARY ATTACHMENT ON THE BASIS OF SECTION 13, RULE 57, OF THE RULES OF
COURT SUPPORTED (SIC) BY ANY EVIDENCE;
“III. RESPONDENT
COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN CONCLUDING THAT HEREIN
PETITIONER FAILED TO RAISE AS AN ISSUE THE DELAYED FILING OF PRIVATE
RESPONDENT’S MOTION FOR RECONSIDERATION DATED DECEMBER 14, 1990, IN
PETITIONER’S OPPOSITION THERETO.
“IV. THE
APPREHENSION OF THE HEREIN PETITIONER REGARDING THE PROPENSITY OF PRIVATE
RESPONDENT TO DISPOSE OF HIS PROPERTIES IN FRAUD OF HIS CREDITORS TURNED OUT TO
BE TRUE AND CORRECT. (Rollo, pp. 24-26,
30).
In brief, the
questions posited by the instant petition may be consolidated into two
issues, namely:
1) Whether or not
the writ of preliminary attachment in question was properly or regularly
issued and 2) Whether or not petitioner’s failure to file a motion for
reconsideration of the questioned orders of the court a quo bars the filing of
a special civil action for certiorari before the respondent court.
In an action
against a party who has been guilty of fraud in contracting the debt or
incurring the obligation upon which the action is brought, Section 1 (d) of Rule 57 authorizes the
plaintiff or any proper party to have the property of the adverse party
attached as security for the satisfaction of any judgment that may be recovered
therein. Thus:
“Rule 57, Sec. 1. Grounds upon which attachment may issue. –
“(d): “In an
action against a party who has been guilty of a fraud in contracting the debt
or incurring the obligation upon which the action is brought, or in concealing
or disposing of the property for the taking, detention or conversion of which the
action is brought;”
To sustain an attachment on this ground, it must be shown that
the debtor in contracting the debt or incurring the obligation intended to
defraud the creditor. The fraud must
relate to the execution of the agreement and must have been the reason which
induced the other party into giving consent which he would not have otherwise
given. To constitute a ground for
attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be
committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting
it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not
be proved by direct evidence but may be inferred from the circumstances
attendant in each case (Republic v. Gonzales, 13 SCRA 633 [1965]).
Here, it has
been established that all the collaterals given by the respondent Arkin
as security for the bond were either fraudulent or heavily encumbered. Records show that Transfer Certificate of
Title No. 300011 supposedly issued by the Register of Deeds of Rizal covering a
parcel of land with an area of 25,750 square meters located at Muntinlupa, Las
Piñas, M.M. and registered in the name of Carmen Madlangbayan, used as one of
the collaterals, turned out to be fake and spurious as the genuine TCT No.
300011 of the Office of the Register of Deeds of Rizal covers a parcel of land
located in Angono, Rizal with an area of 514 square meters registered in the
name of persons other than respondents Imperial, Arkin, and Madlangbayan. Likewise, the supposed lien-free motor
vehicle offered as collateral turned out to be heavily mortgaged and was even
disposed of without informing petitioner. Furthermore, it has also been proven that subsequent to the issuance of
the May 30, 1988 surety bond, respondent Arkin started disposing of his other
properties. Prior to the filing of the
complaint, respondent not only
had sold the motor vehicle given as collateral but that his two other
condominium units were also alienated in favor of a company of which respondent
Arkin is the president. All these
circumstances unerringly point
to the devious scheme of respondent Arkin to defraud petitioner.
It is therefore
clear that fraud was present when private respondent, among others,
entered into an indemnity agreement with petitioner. The actuations of respondent Arkin indubitably lead to the
conclusion that he never entertained the idea of fulfilling his obligations
under the agreement and was bent on defrauding petitioner from the very
beginning.
Under the
circumstances, we perceive no impropriety or irregularity in the
issuance of the writ of attachment especially so where petitioner has fully
complied with the requirements for the issuance thereof.
On the contrary,
what we see as having been attended by irregularity is the assailed
order of respondent judge lifting the writ of attachment based on grounds which
are contradicted by the evidence on record. It is a fact that respondent Arkin gave fake land titles as collaterals
and even disposed of real properties in his obvious attempt to defraud
petitioner. And yet, respondent judge
concluded that petitioner’s allegation that respondent Arkin’s fraudulent alienation
of his properties has no foundation in fact. This is plain absurdity. As
respondent judge himself noted in his earlier order denying respondent Arkin’s
motion to quash writ of attachment, the latter’s three (3) conveyances,
“though made before the institution of the action, is a circumstance tending to show
fraudulent conveyance with intent to defraud his creditors. Especially
so, when the payment of herein claim upon which the action is brought is
not secured by any mortgage or pledge of real (or) personal property and plaintiff
had no other sufficient security for the enforcement of the claim”
(Rollo, p. 58). Such being the case,
respondent Arkin’s claim that the writ of attachment has been
irregularly issued should not have merited serious consideration by respondent
judge.
Be that as it may, the instant case being “an action against
a party who has been guilty of fraud in contracting the obligation upon which
the action is brought”, respondent Arkin is not allowed to file a motion
to dissolve the attachment on the ground that the writ has been improperly or
irregularly issued. As we held in
Mindanao Savings and Loan Assoc. vs. Court of Appeals (172 SCRA 480
[1989]):
“x x x, when the preliminary attachment is issued upon a
ground which is at the same time the applicant’s cause of action: e.g., x x x an action against a party who
has been guilty of fraud in contracting the debt or incurring the obligation
upon which the action is brought, the defendant is not allowed to file a motion
to dissolve the attachment under Section 13 of Rule 57 by offering to show the
falsity of the factual averments in the plaintiff’s application and affidavits on which the writ was
based and consequently that the writ based therein had been improperly or
irregularly issued – the reason being that the hearing on such motion for
dissolution of the writ would be tantamount to a trial on the merits. In other words, the merits of the action
would be ventilated at a mere hearing of a motion, instead of the regular
trial. Therefore, when the writ of
attachment is of this nature, the only way it can be dissolved is by a
counterbond.”
Petitioner next
contends that a motion for reconsideration need not at all times be
resorted to before a special civil action for certiorari may be
instituted before respondent court.
Ordinarily, certiorari will not lie unless an inferior
court, through a motion for reconsideration, had been given an opportunity to
correct the imputed errors. However,
this rule admits of exceptions such as 1) when the issue raised is one purely
of law; 2) where public interest is involved; 3) in cases of urgency (Quirino
vs. Grospe, 169 SCRA 702 [1989]); or 4) where special circumstances warrant
immediate or more direct action (People vs. Dacudao, 170 SCRA 489 [1989]).
In the case at
bar, petitioner’s failure to file a motion for reconsideration in the
trial court before commencing certiorari proceedings in the Court of
Appeals is not fatal considering the existence of special circumstances that
warrant immediate and more direct action (Saldana vs. CA, 190 SCRA 396 [1990]).
The indecent haste with which respondent Arkin had been disposing
of his properties demonstrates the imperative need for a more adequate relief
requiring an immediate and more direct action. There was an urgency which caused the present case to fall under one of
the exceptions thereby
allowing petitioner to file a petition for certiorari without the
need of first filing a motion for reconsideration.
Filing a motion
for reconsideration would have served no useful purpose nor can it be
considered a plain, speedy and adequate remedy since the order directing the
sheriff to discharge or lift the writ of attachment was issued on the same day
the order granting the quashal was made. It would not have automatically forestalled Arkin from further disposing
of his properties. It is rather
disturbing how respondent judge, after ruling in his order of October 19, 1989,
denying respondent’s motion to quash, that the trial court’s finding of fraud
in incurring the obligation under the indemnity agreement was supported by
substantial evidence, would, in his order of March 6, 1991 granting the motion
for reconsideration, based on the same substantial evidence supporting a
finding of fraud, later reverse himself and declare that “the plaintiff
(petitioner herein) did not prove the intent of defendant Arkin to defraud
creditors.”
Through the
order for the “immediate” lifting of the writ, respondent
Judge, in one swift stroke, completely subverted the valid order of attachment
issued after a finding of fraud, which finding he himself has declared as
supported by substantial evidence. We
hold that respondent judge in issuing the contested orders has acted
capriciously, whimsically and arbitrarily and with grave abuse of discretion
amounting to lack or in excess of jurisdiction correctible by the special writ
of certiorari.
WHEREFORE, the petition is GRANTED. The assailed order of respondent judge dated
March 6, 1991 is SET ASIDE and the order dated October 19, 1989 is hereby REINSTATED. Costs against private respondent.
SO ORDERED.
Feliciano, (Chairman), Davide, Jr., Romero, and Melo, JJ.,
concur.