JARDINE-MANILA FINANCE, INC., PETITIONER, VS. COURT OF APPEALS, IMPACT CORPORATION, RICARDO DE LEON, AND EDUARDO DE LEON, RESPONDENTS.

This is a petition for review on certiorari seeking to
reverse and set aside: (a) the August
29, 1980 decision of the Court of Appeals^[1]
in Special Proceedings CA-G.R. No. SP-09972-R entitled “Impact
Corporation, et al. v. Hon. Buenaventura Guerrero, etc., et al.” annulling
the order and the writ of attachment issued by the Court of First Instance of Rizal in Civil Case No. 34617 entitled “Jardine-Manila Finance, Inc. v. Impact Corporation, et
al.”^[2]
and (b) the Resolution dated October
7, 1980 denying herein petitioner’s motion for reconsideration.^[3]

On September 28, 1979, petitioner Jardine-Manila
Finance, Inc. (JARDINE) filed a complaint in
the then Court of First Instance (CFI) of Rizal,
docketed as Civil Case No. 34617, against private respondents Impact
Corporation (IMPACT), Ricardo de Leon and Eduardo de Leon, to collect various
sums of money allegedly due from therein defendant IMPACT under a credit
accommodation by way of a discounting line agreement.^[4]
Herein private respondents Ricardo de Leon and Eduardo de Leon were included as
defendants by virtue of their undertaking covered by a Surety Agreement under
which they bound themselves jointly and severally with defendant IMPACT to pay
herein petitioner all of IMPACT’s obligations under
the aforesaid agreement.^[5]

It was alleged that in April and May 1979, IMPACT assigned its
receivables to JARDINE on the condition that IMPACT was to collect them on
their due dates from their issuers and remit the collected amounts to JARDINE
and/or repurchase the assigned receivables;^[6]
but despite the fact that IMPACT had collected the amounts due on said
receivables, it failed or refused to turn over the amounts so collected to
JARDINE.

JARDINE thus demanded payment of P1,000,212.64, the total amount
due under said various deeds of assignment, plus interest of P16,614.64 as of
September 6, 1979 and 25% of the aforesaid amount as attorney’s fees, exemplary
damages and other expenses of litigation.

Likewise contained in said complaint is petitioner’s application
for a writ of preliminary attachment against private respondents.  The allegations in support of said petition
for a writ of preliminary
attachment are quoted in full:

“Special
Allegations

for

Preliminary
Attachment”

“A.    The foregoing
allegations are hereby repleaded and made integral
parts hereof.

“B.   The defendant corporation at the time of the
execution of the aforesaid deeds of assignment had reservation not to remit to
plaintiff the proceeds of the receivables assigned to plaintiff as confirmed by
their refusal to remit the same to plaintiff although the issuers of the
receivables assigned to plaintiff had already paid to defendant corporation
their obligations on said receivables to the latter.

“C.   Defendants Ricardo de Leon and Eduardo de
Leon who are likewise officers
of defendant corporation in order to elicit plaintiff’s approval to enter into
said deeds of assignment with defendant corporation, executed the aforesaid
surety agreement (Annex L), likewise, with reservation in their minds not to honor their obligations under the
same as what they actually did when they refused to pay the obligations of defendant corporation to plaintiff pursuant to the provisions
of said surety agreement.  (Annex L)

“D.   Defendant corporation, Ricardo de Leon and
Eduardo de Leon have no visible
other sufficient security for
the claim sought to be enforced by this action of plaintiff other than their real and personal properties
which are located in Metro Manila and in the province
of Rizal, Province of
Nueva Ecija or
elsewhere.  (underscoring ours)

“E.   Plaintiff’s action against defendant
corporation is based upon documents and therefrom a
sufficient cause of action exists.

“F.   Plaintiff is willing to post a bond in an
amount to be fixed by the Honorable Court, not exceeding plaintiff’s claim
which will be conditioned to the effect that plaintiff will pay all the costs
which may be adjudged to the adverse party and all damages which they may sustain by reason of
attachment, if the Honorable Court should finally adjudge that the applicant
plaintiff is not entitled thereto.”^[7]

On the basis of the foregoing allegations, the lower court
granted JARDINE’s petition for the issuance of a writ
of preliminary attachment on October
16, 1979.^[8]

On October 19, 1979,
therein defendants filed a motion to set aside the writ of preliminary
attachment.  They also submitted to the
court a quo a memorandum in support of
their motion to dissolve the attachment contending that the grounds alleged by
the plaintiff in its application for a writ of attachment are not among the
grounds specified under Section 1 of Rule 57; that the defendants have other
sufficient security; that there was no affidavit of merit to support the
application for attachment as required by Section 3 of Rule 57 and that the
verification of the complaint was defective as it did not state that the amount
due to the plaintiff above all legal setups or counterclaims is as much as the
sum for which the order is sought.^[9]

JARDINE opposed said motion
arguing that the mental reservation of defendants at the time of the execution
of the deeds of assignment constituted fraud; that such fraud was further
confirmed by the fact that defendants actually failed to remit the proceeds of
the collection of receivables assigned by them; that defendants failed to
disclose to the plaintiff the fact that they had already collected the
receivables assigned by them; that the amounts collected by defendant
corporation were received by defendants in trust for plaintiff and defendant
corporation appropriated for itself said collection.^[10]

On November 7, 1979,
the trial court denied defendants’ motion to annul the writ of preliminary
attachment.  Thereupon, defendant Impact
Corporation went to the appellate court on a petition for certiorari
seeking to annul said writ.^[11]

The findings of the Court of Appeals are as follows:

“To our mind there is no question that the allegations of the
complaint proper which were repleaded and made
integral part of the application for preliminary attachment (paragraph A) made
out a case of conversion or misappropriation of property held in trust which is
the subject of the complaint for said allegations stated that IMPACT had assigned to JARDINE certain
receivables with the understanding that it was to collect the same from the
issuers of said receivables and deliver the amounts collected to JARDINE, but
in spite of the fact that IMPACT had actually collected said amounts, it failed
to turn over said receivables to JARDINE. 
There was, therefore, in the allegations of said complaint true conversion
of the amounts received by defendant in trust for plaintiff.  Defendants in their motion to discharge the
attachment and the memorandum filed by them in support of said motion had in
effect, admitted the conversion of the amounts collected by defendant IMPACT,
but justified the use of said amounts to meet its operational expenses to
prevent a complete shutdown of its operations.

“While we find that the grounds alleged by plaintiff, the
herein private respondent, to support its application for preliminary
attachment are among those enumerated in Section 1 of Rule 57 as grounds upon
which an attachment may be issued, we are constrained nonetheless to rule
against the regularity or legality of the attachment issued by respondent Court
because there was no allegation made by plaintiff in its application for the
issuance of a writ of attachment to the effect ‘that there is no sufficient
security for the claim sought to be enforced, by the action, and the amount due
to the applicant or the value of the property on the basis of which is entitled
to recover, is as much as the sum for which the order is granted above all
legal counterclaims,’ a requirement for the granting of an order of attachment
under Section 3 of Rule 57.”^[12]

Thus, on August 29, 1980,
the Court of Appeals annulled the assailed writ of attachment for having been
issued improperly and irregularly, the dispositive
portion of which reads:

“IN VIEW OF THE FOREGOING, the petition to annul the order and
the writ of attachment issued by respondent Court is hereby GRANTED and
judgment is rendered declaring said order and writ of attachment null and void
for having been issued improperly and irregularly.  The restraining order issued by this Court on
November
9, 1979 restraining respondents from enforcing the writ of
attachment issued by respondent Judge on October 16, 1979 is hereby made PERMANENT.  With costs against private respondents.”^[13]

Hence this recourse.

Reduced to bare essentials,
the records show that in the exercise of its discretion, the lower court found
justification in the issuance of the attachment.  On the other hand, the Court of Appeals while
in accord with the lower court that a sufficient cause of action exists for
petitioner and that the ground for its application for attachment is one of
those mentioned in Section 1, Rule 57 of the Rules of Court, found the issuance
of the attachment irregular or illegal in the absence of the following
allegations in the application for attachment: (1) that “there is no sufficient security for the claim
sought to be enforced by the action; and (2) that “the amount due to the
applicant or the value of the property on the basis of which he is entitled to
recover, is as much as the sum for which the order is granted above all legal
counterclaims.”

Ultimately, the issue therefore, is whether or not non­compliance
with the formal requirements invalidate the writ of attachment.

On both counts, petitioner admits not having used the exact words
of the Rules in making the requisite allegations, but nonetheless it alleged
that it presented ultimate and specific facts, first — in showing that there
is indeed no other sufficient security for the claim sought to be enforced as
shown in paragraph D of the Complaint earlier quoted; and second — while it
did not specifically state that the sum due is above all legal counterclaims,
such conclusion of fact is no longer necessary in the face of actual proof in
the answer which did not carry any counterclaim.  In fine, petitioner stresses that mere forms
must not be given more weight than substance.^[14]

In excusing the
deficiencies of its application
for a writ of preliminary
attachment, petitioner relies heavily on the case of De Borja v. Platon,^[15] where this Court sustained the writ
of attachment issued by the lower court in favor of the defendants based on the
counterclaim of the latter despite the lack of allegations in the affidavit
attached to the petition for the issuance of the writ of attachment that the
amount due the counterclaim was as much as the sum for which the order is
granted above all legal counterclaims.

It will be noted however, that the trial court found that the
counterclaim of the defendants exceeded the claims of the plaintiff.  Thus, this Court held that “as the trial
court had before it the evidence adduced by both sides, the petition for a writ
of preliminary attachment having been filed four years after the trial court
had begun, we presume that the
lower court having in mind such
evidence, ordered the attachment accordingly.”^[16]

In sharp contrast, in the case at bar,
where the records undeniably reveal that: (1) the complaint was filed on
September 28, 1979;^[17]
(2) the writ of preliminary attachment was issued on October 16, 1979;^[18]
(3) the motion to annul preliminary attachment dated October 19, 1979 was filed
on the same day;^[19]
(4) the answer of defendant IMPACT dated October 30, 1979^[20]
was received by the RTC Pasig only
on November 5, 1979,^[21]
it is evident that the questioned writ was issued ex parte;
and at a time when the Court a quo had yet no
basis for concluding that the amount due to petitioner is as much as the sum
for which the order is granted above all legal counterclaims.

It is therefore, readily apparent that the conclusions in the De
Borja case cannot be applied to the case at
bar.  In fact even petitioner’s plea for
liberality as it vigorously invokes the doctrine on said case which refused
“to sanction that formalism and that technicality which are
discountenanced by the modern laws of procedure” is an obvious misreading
of the ruling of this Court which states:

“On the first point, we
believe a writ of preliminary attachment may be issued in favor of a defendant
who sets up a counterclaim.  For the
purpose of the protection afforded by such
attachment, it is immaterial whether
the defendants Borja and wife simply presented a
counterclaim or brought a separate civil action against Jose de Borja, plaintiff in
the previous case and petitioner
herein.  To lay down a subtle distinction
would be to sanction that formalism and that technicality which are
discountenanced by the modern laws of procedure for the sake of speedy and
substantial justice.  x x x.”^[22]

as a liberal approach to the required
allegations in the application for a writ of preliminary attachment when what
this Court actually allowed was the presentation of a counterclaim by the
defendant instead of a separate civil action in compliance with one of the
basic requirements for the issuance of said writ.

The authority to issue an attachment, like the jurisdiction of
the court over such proceedings rests on express statutory provisions and
unless there is authority in the statute, there is no power to issue the writ, and such authority as the statute
confers must be strictly construed.^[23]
In fact, “(E)ven where liberal construction is the rule, the statute or
the right to attachment thereby granted may not be extended by judicial
interpretation beyond the meaning conveyed by the words of the statute.”^[24]
Petitioner’s application for a writ of preliminary attachment must therefore be
scrutinized and assessed by the requisites and conditions specifically
prescribed by law for the issuance of such writ.

Section 3, Rule 57 of the Revised Rules of Court governs the
issuance of a writ of attachment, to wit:

“Sec. 3.  Affidavit and
bond required. – An order of attachment shall be granted only when it is made
to appear by the affidavit of the applicant or some other person who personally
knows of the facts, that a sufficient cause of action exists, that the case is
one of those mentioned in section 1 hereof, that there is no sufficient
security for the claim sought to be enforced by the action, and that the amount
due to applicant or the value of the property the possession of which he is
entitled to recover is as much as the sum for which the order is granted above
all legal counterclaims.”

The stringent conditions for the issuance of the writ have been
echoed in all subsequent cases, even as late as K.O. Glass Construction Co. Inc. vs.
Valenzuela,^[25]
wherein the writ of preliminary attachment issued was annulled and set aside on
the findings that while the plaintiff “may have stated in his affidavit
that a sufficient cause of action exists against the defendant Kenneth U.
Glass, he did not state therein that the case is one of those mentioned in
Section 1 hereof; that there is no other sufficient security for the claim
sought to be enforced by the action; and that the amount due to the applicant
is as much as the sum for which the order is granted above all legal
counterclaims.”

More specifically, it has been held that the failure to allege in
the affidavit the requisites prescribed for the issuance of the writ of
preliminary attachment, renders the writ of preliminary attachment issued
against the property of the defendant fatally defective, and the judge issuing
it is deemed to have acted in excess of his jurisdiction.^[26]
In fact, in such cases, the defect cannot
even be cured by amendment.^[27]

Since the attachment is a harsh
and rigorous remedy which exposes the debtor to humiliation and annoyance, the
rule authorizing its issuance must be strictly construed in favor of
defendant.  It is the duty of the court
before issuing the writ to ensure that all the requisites of the law have been
complied with.^[28] Otherwise, a judge acquires no
jurisdiction to issue the writ.

The general rule is that the affidavit is the foundation of the
writ, and if none be filed or
one be filed which wholly fails
to set out some facts required by law to be stated therein, there is no
jurisdiction and the proceedings are null and void.  Thus, while not unmindful of the fact that
the property seized under the writ and brought into court is what the court
finally exercises jurisdiction over, the court cannot subscribe to the
proposition that the steps pointed out by statutes to obtain such writ are
inconsequential, and in no sense jurisdictional.^[29]

Considering that
petitioner’s application for the subject writ of preliminary attachment
did not fully comply with the requisites prescribed by law, said writ is, as it
is hereby declared null and void and of no effect whatsoever.

This conclusion renders a discussion of petitioner’s other
argument unnecessary.

WHEREFORE, the decision of the Court of Appeals dated August 29, 1980 is hereby
AFFIRMED.  Costs against petitioner.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin, and Cortes, JJ., concur.

^[1]
Penned by Justice Lino M. Patajo, concurred in by Justices Emilio A. Gancayco and Buenaventura S. de la Fuente

^[2]
C.A. Records,
p. 230

^[3]
C.A. Records,
p. 248

^[4]
Records, p. 36

^[5]
Rollo, p. 13; C.A.
Records, p. 102

^[6]
Rollo, p. 12

^[7]
Rollo, pp. 14-15

^[8]
Rollo, p. 15; C.A.
Records, p. 116

^[9]
Annex G, pp. 138-143, C.A.
Records

^[10]
Annex I, p. 146, C. A. Records

^[11]
Annex J, p. 160, Records

^[12]
Rollo, pp. 17-18

^[13]
Rollo, p. 21

^[14]
Rollo, p. 7

^[15]
73 Phil. 659

^[16]
ibid., p. 660

^[17]
Annex “C”, C.A.
Records, p. 36

^[18]
Annex “E”, Rollo, p. 15, C. A.
Records, p. 116

^[19]
Annex “F”, C.A.
Records, p. 117

^[20]
Annex “D”, Rollo, p. 115

^[21]
Annex “D”, Rollo, p. 104

^[22]
Ibid., p. 660

^[23]
7 C.J.S. 324; 1980 ed.

^[24]
7 C.J.S. 242; 1980 ed.

^[25]
L-18756, September 11, 1982,
116 SCRA 568

^[26]
ibid., Guzman v. Catolico, 65 Phil. 261-262
(1937)

^[27]
Cu Unjeng and Cu Unjeng v.
Goddard, 58 Phil. 489 (1933)

^[28]
Salgado v. C.A., 128 SCRA 395, citing Giani v. Ramirez, 54 Pacific Reporter (2d) 91-92

^[29]
Duxerry v. Dahle, 81
NW 198-199 (1899)