WALTER E. OLSEN & CO., PLAINTIFF AND APPELLEE, VS. WALTER E. OLSEN, DEFENDANT AND APPELLANT.

This is an appeal taken by the defendant from a judgment of the Court
of First Instance of Manila, sentencing him to pay plaintiff
corporation the sum of P66,207.62 with legal interest thereon at the
rate of 6 per cent per annum from February 1, 1923, the date of the
filing of the complaint, until full payment, and the costs, and
dismissing the cross-complaint and counterclaim set up by him.

As ground of his appeal, the defendant assigns four errors as committed
by the trial court, to wit: (1) The holding that the
defendant-appellant contracted fraudulently the debt which the
plaintiff-appellee seeks to recover in its complaint; (2) its failure
to set aside the writ of preliminary attachment issued by it ex parte;
(3) the fact of it not having absolved the defendant from the complaint
of the plaintiff corporation and of not having given judgment for the
defendant and against the plaintiff for the amount of his counterclaim,
after deducting the debt due from him to the plaintiff corporation in
the sum of P66,207.62; and (4) its action in denying the motion for new
trial of the defendant.

As the first two supposed errors are intimately connected with each other, we will discuss them jointly.

The first question that arises is whether or not an order denying a
motion for the annulment of a preliminary attachment may be reviewed
through an appeal.

The preliminary attachment is an
auxiliary remedy the granting of which lies within the sound discretion
of the judge taking cognizance of the principal case upon whose
existence it depends. The order of the judge denying a motion for the
annulment of a writ of preliminary attachment, being of an incidental
or interlocutory and auxiliary character, cannot be the subject of an
appeal independently from the principal case, because our procedural
law now in force authorizes an appeal only from a final judgment which
gives an end to the litigation. (Section 143, Act No. 190; 3 C. J.,
549, par. 389.) This lack of ordinary remedy through an appeal does not
mean, however, that any excess a lower court may commit in the exercise
of its jurisdiction is without remedy; because there are the especial
remedies, such as certiorari, for the purpose. (Leung Ben vs. O’Brien, 38 Phil., 182.)

While it is true that an order denying a motion for the annulment of a
preliminary attachment is not subject to review through an appeal
independently from the principal case, it not constituting a final
order, yet when the writ of preliminary attachment becomes final by
virtue of a final judgment rendered in the principal case, said writ is
subject to review jointly with the judgment rendered in the principal
case through an ordinary appeal. The appellate court has the power to
revoke or confirm said order, in like manner as a judgment on the
merits; because it is a ruling to which an exception may be taken, and
therefore is subject to review in an appeal by bill of exceptions.
(Secs. 141-143, Act No. 190.) The fact that section 441 of the Code of
Civil Procedure does not provide any remedy against the granting or
denial of a motion for the annulment of a writ of preliminary
attachment, except in case of excess of jurisdiction, does not confer
upon said order a final and irrevocable character, taking it out from
the general provisions as to appeal and review, for a special provision
is necessary for that purpose.

Having arrived at the
conclusion that an order denying a motion for the annulment of a
preliminary attachment may be reviewed in an appeal taken from a final
judgment rendered in the principal case, in which said order was
entered as an auxiliary remedy, we will now turn to consider the
question whether or not the trial court committed error in denying the
motion for the annulment of the preliminary attachment levied upon the
property of the defendant-appellant.

It is admitted by the
defendant-appellant that he is indebted to the plaintiff-appellee
corporation in the sum of P66,207.62, but denies that he has contracted
said debt fraudulently.

The evidence shows that the
defendant-appellant was president-treasurer and general manager of the
plaintiff-appellee corporation and exercised direct and almost
exclusive supervision over its function, funds and books of account
until about the month of August, 1921. During that time he has been
taking money of the corporation without being duly authorized to do so
either by the board of directors or by the by-laws, the money taken by
him having amounted to the considerable sum of P66,207.62. Of this sum,
P19,000 was invested in the purchase of the house and lot now under
attachment in this case, and P50,000 in the purchase of 500 shares of
stock of Prising at the price of P100 per share for himself and Marker.
A few days afterwards he began to sell the ordinary shares of the
corporation for P430 each. The defendant-appellant attempted to justify
his conduct, alleging that the withdrawal of the funds of the
corporation for his personal use was made in his current account with
said corporation, in whose treasury he deposited his own money and the
certificates of title of his shares, as well as of his estate, and that
at the first meeting of the stockholders, which took place on February
1, 1919, a statement of his account with a debit balance was submitted
and approved.

Having, as he had, absolute and almost
exclusive control over the function of the corporation and its funds by
virtue of his triple capacity as president, treasurer and general
manager, the defendant-appellant should have been more scrupulous in
the application of the funds of said corporation to his own use. As a
trustee of said corporation, it was his duty to see by all legal means
possible that the interests of the stockholders were protected, and
should not abuse the extraordinary opportunity which his triple
position offered him to dispose of the funds of the corporation.
Ordinary delicacy required that in the disposition of the funds of the
corporation for his personal use, he should be very careful, so as to
do it in such a way as would be compatible with the interests of the
stockholders and his fiduciary character. And let it not be said that
he did every thing openly and with the security of his shares of stock,
because as he could dispose of the funds of the corporation so he could
dispose of his own shares and with greater freedom. And let it not also
be said that other officers of the corporation, such as the
vice-president, the secretary and other chiefs and employees, were
doing the same thing, because that does not show but that his bad
example had spread among his subordinates and all believed themselves
with the same right as their chief to dispose of the funds of the
corporation for their personal use, although it were merely by way of
loan, without any security of whatever kind of course. The approval of
his account at the first meeting of the stockholders cannot be
considered as a justification of his conduct, nor does it remove every
suspicion of bad faith, because the corporation was constituted
exclusively by the defendant-appellant himself and his cospeculator,
Marker, and nothing else could be expected from it. As to the debt he
owed to the corporation, Walter E. Olsen was in effect a lender and a
borrower at the same time. The conduct of the defendant-appellant in
connection with the funds of the corporation he represented was more
than an irregularity; and while it is not sufficiently serious to
constitute a criminal fraud, it, is undoubtedly a fraud of a civil
character, because it is an abuse of confidence to the damage of the
corporation and its stockholders, and constitutes one of the grounds
enumerated in section 424, in connection with section 412, of the Code
of Civil Procedure for the issuance of a preliminary attachment, and
the order of the Court of First Instance of Manila, denying the motion
for the annulment of the injunction in question, is in accordance with
law.

As to the counterclaim set up by the
defendant-appellant, we have nothing to add to the considerations of
the trial court which we make ours.

For the foregoing, and
no error having been found in the judgment appealed from, the same is
hereby affirmed, with the costs against the defendant-appellant. So
ordered.

Avanceña, C. J., Street, Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.

Johnson, J., did not take part.