FRANCISCO L. LAZATIN, PLAINTIFF AND APPELLANT, VS. ANGEL C. TWAÑO AND GREGORIO T. CASTRO, DEFENDANTS AND APPELLEES.

Lazatin versus Twaño

The Case

This is the case of Lazatin versus Twaño and Castro, decided by the Supreme Court in July 1961. Francisco Lazatin sued Angel Twaño and Gregorio Castro to recover a sum of money, and in aid of that suit he caused a writ of preliminary attachment to be issued. The writ was later dissolved, and the defendants counterclaimed for damages arising from the wrongful attachment. The case matters because it draws the line between two distinct sources of liability: the liability of an attachment plaintiff upon his bond, which requires only actual or compensatory damages, and his liability in tort for maliciously suing out the attachment, which alone can support moral damages. It is a staple of the law on damages and provisional remedies.

Procedural History

The dispute began in the Court of First Instance of Manila, in a civil case brought by Twaño and Castro against Lazatin and others for the recovery of a sum of money realized from the purchase and resale of surplus auto-trucks. The trial court dismissed the complaint and also dismissed the intervention. That dismissal was appealed to the Court of Appeals, which reversed the trial court and declared the parties co-owners in the business, ordering the defendants, including Lazatin, to pay the plaintiffs. That judgment became final and was executed by levying on Lazatin's properties and selling them at public auction, with Twaño and Castro as the purchasers.

Lazatin then filed the present action against Twaño and Castro and secured a writ of attachment. The trial court dissolved the writ. After the defendants answered with special defenses and a counterclaim, the trial court, on a preliminary hearing on the special defenses, dismissed the complaint on the ground that it was barred by a prior judgment and by the statute of limitations, and then proceeded to hear the counterclaim. The trial court rendered judgment ordering the estate of Lazatin, he having died during the proceedings, to pay attorney's fees, moral damages to each defendant, interest on the attached sum, and costs, with the surety company solidarily liable on its bond.

The appeal was certified by the Court of Appeals to the Supreme Court because the issues involved were purely legal in character.

Facts

Twaño and Castro and Lazatin had been co-owners in a business of buying and selling surplus auto-trucks purchased from the United States government. In the earlier litigation, the Court of Appeals held them co-owners and ordered Lazatin and his co-defendants to pay Twaño and Castro. That decision became final and was executed. Lazatin's properties were levied upon and sold at public auction to Twaño and Castro. Before the redemption period expired, Lazatin deposited the redemption price with the Sheriff of Pampanga.

On the same day that he filed the present action to recover a supposed balance of the proceeds of the trucks, Lazatin secured a writ of attachment, alleging that there was no security for his claim and that the defendants were about to dispose of their property to defraud creditors. Pursuant to the writ, the Sheriff of Pampanga refused to deliver the redemption money to Twaño and Castro.

The defendants moved to dissolve the writ, and the trial court dissolved it. The defendants then answered, setting up prescription and prior judgment as special defenses, and counterclaimed for attorney's fees, moral damages, and interest, alleging that the action was clearly unfounded and that the attachment had been wrongfully and falsely procured. Lazatin died during the pendency of the case, and an administrator of his estate was appointed. The trial court dismissed the complaint as barred by prior judgment and by the statute of limitations, and, after hearing on the counterclaim, awarded attorney's fees, moral damages, and interest against the estate, with the surety solidarily liable on the attachment bond.

Issues

• Whether or not the defendants may recover moral damages for the wrongful issuance of the writ of attachment in the absence of proof that the writ was maliciously sued out.
• Whether or not the defendants may recover attorney's fees on the ground that the civil action against them was clearly unfounded.

Applicable Provisions

Article 2219 of the Civil Code provides:

Moral damages may be recovered in the following and analogous cases: (8) malicious prosecution.

This provision bears on the case because the Court treats a wrongful attachment as analogous to malicious prosecution, so that malice is essential before moral damages may be awarded.

Section 4 of Rule 59 of the Rules of Court provides:

The party applying for the order must give a bond executed to the defendant in an amount to be fixed by the judge not exceeding the plaintiff's claim, that the plaintiff will pay all the costs which may be adjudged to the defendant and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the plaintiff was not entitled thereto.

This provision bears on the case because the defendants invoked its phrase "all damages" to justify moral damages, and the Court construed that phrase to reach only actual damages absent malice.

Article 2208 of the Civil Code provides:

In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

This provision bears on the case because the Court tested the award of attorney's fees against its paragraphs 4 and 11.

Ruling

On the first issue, the Court held that moral damages cannot be recovered. The action for damages arising from the wrongful issuance and levy of an attachment is identical or analogous to the ordinary action for malicious prosecution, and so malice is an essential ingredient. The Court examined the trial court's decision and found no express ruling that the writ was maliciously sued out, and no finding of facts from which malice could necessarily be inferred. The dissolution of the writ was due to a technicality, and no moral damages could be inferred from the mere fact that the redemption price was retained by the sheriff for a period of thirty-eight days.

The Court rejected the argument that Section 4 of Rule 59 dispenses with malice. That section does not prescribe the remedies of the attachment defendant but merely provides an action for recovery upon the bond, based on the undertaking made, and not upon liability arising from a tortious act. Where malice is not essential, the attachment defendant is entitled to recover only the actual damages sustained. Where the attachment is maliciously sued out, the damages recoverable may include compensation for every injury to credit, business, or feeling. The Rules of Court being of older vintage than the Civil Code, the matter of damages under the Rules must be encompassed within the framework of the Civil Code.

On the second issue, the Court held that the action was not shown to be clearly unfounded. The complaint was not dismissed because the facts alleged were found untrue, but on purely technical grounds of prescription and prior judgment. Such an error of judgment did not justify the inference that the action was clearly unfounded. Nevertheless, considering that the defendants were drawn into the litigation and compelled to hire an attorney, the Court deemed it just and equitable to award attorney's fees under paragraph 11 of Article 2208, and found the sum awarded by the trial court reasonable.

Doctrine

An action to recover damages from an attachment plaintiff for the wrongful issuance and levy of an attachment is analogous to an action for malicious prosecution. Under Article 2219 of the Civil Code, moral damages may be recovered in cases of malicious prosecution and analogous cases, so malice is essential before moral damages may be awarded for a wrongful attachment. Absent malice, only actual or compensatory damages may be recovered, confined to the actual loss from deprivation of the attached property or injury to it.

Section 4 of Rule 59 creates a liability upon the attachment bond, not a liability in tort. Its phrase "all damages" refers to damages resulting from the undertaking itself, measured by the principles of the general law on damages, and does not by itself authorize moral damages.

Attorney's fees may be awarded under paragraph 4 of Article 2208 only where the civil action is clearly unfounded, and a dismissal on technical grounds of prescription and prior judgment does not establish that the action was clearly unfounded. Even so, the Court may award attorney's fees under paragraph 11 of Article 2208 where it deems it just and equitable.

Disposition

The decision of the trial court was modified by eliminating the award of moral damages, and affirmed in all other respects, with costs against the plaintiff-appellant.

Remember This

Memorize this line: a wrongful attachment without malice supports only actual damages, because moral damages for malicious attachment require malice, the writ being analogous to malicious prosecution. Examiners use this case to test the distinction between liability on the attachment bond under Rule 59 and liability in tort for malicious attachment, and to test the requirements for moral damages and attorney's fees.