TRADERS ROYAL BANK, PETITIONER, VS. THE HONORABLE COURT OF APPEALS, THE HONORABLE COURT OF FIRST INSTANCE OF RIZAL (PASAY CITY), BRANCH XXIX, THE HONORABLE MANUEL VALENZUELA, PU…

The issue in this case is whether or not the trial court
committed grave abuse of discretion in ordering the partial lifting of a writ
of preliminary attachment and in granting ex-parte
the release of respondents’ marginal deposit of P197,722.94.

On 6 March 1980, petitioner filed with the respondent trial court
a complaint for a sum of money, with an application for a writ of preliminary
attachment against the private respondents. 
Its principal causes of action involve a promissory note of
P2,270,000.00 and domestic letters of credit in the amounts of (a) P540,000.00
covering the purchase of lumber, furniture and kotatsu
(sic) from the OESCO Timber Co., (b) P600,000.00 covering the purchase of narra lumber from the OESCO Timber Co. and (c) P300,000.00
covering the purchase of red lauan and tanguile lumber from the R. Syquian
Sawmill.  In connection with said letters
of credit, private respondent G.M. Wood Export Industries, Inc., hereinafter
referred to as G.M. Wood, through its President and General Manager, private
respondent Gonzales, signed and delivered to the petitioner the corresponding
documents of trust.^[1]
The case was docketed as Civil Case No. 7928-P.

The trial court issued a writ of preliminary attachment.  However, on 24 April 1980, petitioner and
private respondents filed a Joint Motion containing stipulations regarding a
temporary arrangement between them under which G.M. Wood was allowed to
continue with its business operations without, however, prejudicing or
jeopardizing petitioner’s interest in the attached or garnished properties of
G.M. Wood; the said motion provides:

“a. That the writ of attachment is not hereby
lifted x x x and the
attachment/garnishment /levy on the properties of defendant shall subsists
(sic).”

The motion also mentions that by virtue
of the writ, G.M. Wood’s machineries, office equipment and finished and
unfinished wood products in its factory were levied upon and garnishment was
made upon major banks in Metro Manila on private respondents’ money.^[2]

On 29 April 1980, the trial court approved the joint motion but
lifted partially the attachment levied on private respondents’ properties.

On 19 May 1980, petitioner filed an omnibus motion praying, among
others, for:  (a) the reconsideration of
the above order insofar as it mandated the partial lifting of the writ of
attachment and (b) the total reinstatement of the attachment on the properties.^[3]
The hearing for this motion was postponed three (3) times at the instance of
private respondents.  On the third time;
the hearing was again postponed to 15 August 1980, but on this date, private
respondents did not appear; petitioner then verbally moved for the submission
of the motion for resolution.  The formal
motion to this effect was likewise filed. ^[4]
The trial court did not act thereon; instead, on 29 January 1981, it issued an
Order^[5]
granting private respondents’ urgent motion for the release to private
respondent Gonzales of the marginal deposit of P197,722.94.  Petitioner was not furnished with a copy of
the motion, which does not even contain the required notice of hearing.  Petitioner thus filed a motion for
reconsideration^[6]
which the trial court denied in its Order of 11 February 1981.^[7]

The trial court likewise denied on 16 February 1981 petitioner’s
motion to reconsider the 29 April 1980 Order.^[8]

Petitioner then filed with the Court of Appeals a special civil
action for certiorari to set aside the Orders of 29 January 1981 and 11
February 1981.  This petition was
docketed as C.A.-G.R. No. 12078.  Upon
its receipt of the 16 February 1981 Order, petitioner filed a supplemental
petition to set it aside.  Petitioner’s
main thesis is that these orders were issued with grave abuse of discretion and
should therefore be declared null and void.

In its decision of 30 September 1981,^[9]
the Court of Appeals dismissed the petition based on the following
grounds:  Firstly, the said court failed
to note or discern a single document of the various documents which petitioner
alleged to have been executed by private respondents authorizing the petitioner
to charge or debit any present or future balance of any and/or deposit accounts
of the latter with the former.  Secondly,
it cannot uphold the theory of petitioner that marginal deposits are not really
deposits but are considered collateral security, for if this were so, “it
becomes a paradox that petitioner would still make mention of certain and
various documents which private respondents allegedly executed in favor of
petitioner bank authorizing the latter to charge or debit any present or future
balance of any and/or deposit accounts of the private respondents with the
petitioner bank.” Thirdly, as to the grievance that due process was
violated by the ex-parte issuance of the 29
January 1981 Order, the same is unfounded because when petitioner filed a
motion for reconsideration, he was afforded a full-blown hearing on 11 February
1981; thus, due process was sufficiently observed.  In the application of the due process
requirement, what is sought to be safeguarded is not lack of notice but the
denial of opportunity to be heard.^[10]

Petitioner’s motion to reconsider the aforesaid decision was
denied by the Court of Appeals in its resolution of 5 April 1982 wherein it
ruled that the private respondents did not receive the amount of P2,270,000.00
as mentioned in the promissory note dated 30 August 1979; considering that this
is the only possible account to which any fund or deposit of private
respondents may be applied, the marginal deposit cannot, therefore, be applied
to it since private respondents are not even liable on the note.

Hence, this petition wherein petitioner submits the following
issues for consideration:

“CAN THE RESPONDENT COURT OF APPEALS OR A COURT OF FIRST
INSTANCE ORDER THE DELIVERY OF THE PROPERTY OF A PARTY LITIGANT TO THE ADVERSE
PARTY, WHICH PROPERTY IS NOT THE OBJECT OF LITIGATION, AND DO SO — A) WITHOUT
SERVICE OF THE MOTION, BASIS OF THE ORDER; B) WITHOUT HEARING; C) WITHOUT
SERVICE OF SAID ORDER TO COUNSEL; AND WITHOUT RECOURSE TO OTHER REMEDY, I.E.,
REQUIRING IMMEDIATE COMPLIANCE?

CAN THE RESPONDENT COURT OF APPEALS MAKE FINDINGS OF FACTS WITHOUT
PRESENTATION OF EVIDENCE?”^[11]

After private respondents filed their Comment, this Court gave
due course to the petition.  Thereafter,
the parties filed their respective Briefs.

There is merit in the petition.

We have carefully examined the pleadings and We agree with the
petitioner that the marginal deposit of P197,722.94 is not involved in Civil
Case No. 7928-P.  It is not denied by
private respondents that this marginal deposit is in connection with their importation
of machineries for which they obtained
letters of credit from petitioner. 
“The marginal deposit requirement is a Central Bank measure to cut
off excess currency liquidity which would create inflationary pressure.  It is a collateral security given by the
debtor, and is supposed to be returned to him upon his compliance with his
secured obligation.  Consequently, the
bank pays no interest on the marginal deposit, unlike an ordinary bank deposit
which earns interest in the bank.”^[12]

None of the causes of action in the complaint, earlier alluded
to, involve any liability on the part of the private respondents arising from
the importation of machineries.  There is
no showing that it is the subject of a counterclaim in the respondents’ Answer
with the end in view of recovering its deposit. 
Private respondents assert, however, that the marginal deposit was
litigated upon in the case because it was among the properties included in
either the attachment order of 7 March 1980 or the modified attachment order of
29 April 1980.  The first order is
all-embracing as it covers all kinds of properties belonging to the
respondents, including the marginal deposit.^[13]
This assertion is clearly without merit. 
The mere fact that an attachment order is issued does not mean that the
defendant’s property is automatically seized. 
Otherwise stated, an attachment order is not self-executory.  There must first be a levy on or garnishment
of the property to be made by the sheriff. 
This levy or garnishment is the operative act that brings the property
in custodia legis.  Section 5, Rule 57 of the Rules of Court
provides for the manner of attachment of property.  In the instant case, the sheriff certified
that no levy or garnishment was made against private respondents’ property in
the possession of petitioner.^[14]
Accordingly, the trial court acquired no jurisdiction over the marginal
deposit.  Moreover, since by its very
nature the marginal deposit is already in the possession of the petitioner as
collateral security in a transaction private respondents entered into in
connection with the importation of machineries – which cannot be validly
released to the latter until the satisfaction of the principal obligation —
its attachment for the benefit of petitioner would be unnecessary unless, in
the meantime, the private respondents had settled the principal
obligation.  Such settlement is a factual
issue which is not raised in the pleadings.

The trial court then acted without jurisdiction or with grave
abuse of discretion when it ordered the petitioner to release the marginal
deposit.  What is more reprehensible in
the conduct of the trial court is its deliberate failure to act with dispatch
on petitioner’s motion to reconsider both the Order of 29 April 1980 insofar as
it partially lifted the writ of attachment and the approval, ex-parte, of the motion to release the marginal
deposit.  There was, of course, merit in
the first motion as the trial court acted rather capriciously when it partially
lifted the writ.  None of the parties
asked for such lifting.  On the contrary,
in their joint motion, they explicitly agreed “a.  That the writ of attachment is not hereby
lifted by virtue of this temporary arrangement and the
attachment/garnishment/levy on the properties of defendant shall subsists
(sic).”^[15]
As to the motion for release, We note from the Order dated 29 January 1981 that
it is denominated as urgent and was filed only on 28 January 1981.  Respondents do not deny the fact that no copy
thereof was furnished the petitioner; they also do not dispute the fact that no
notice of its hearing was indicated in the motion.  The movants then
deliberately violated the requirement of notice prescribed in Sections 4 and 5,
Rule 15 of the Rules of Court.  This
requirement is mandatory.  A
motion that does not contain a notice of hearing is a mere scrap of paper; it
presents no question which merits the attention and consideration of the court.  It is not even a motion for it does not
comply with the rules and the clerk of court has no right to receive it.^[16]
Being a mere scrap of paper, the trial court had no other alternative but to
disregard it.  Even if the motion
contained a notice, still the trial court could not have validly acted on it
for, as of the date it acted thereon, no proof of service of the notice on
petitioner was shown.  Section 6 of the aforecited Rule provides that:

“No motion shall be acted upon by the court, without proof of
service of the notice thereof, except when the court is satisfied that the
rights of the adverse party or parties are not affected.”

In this case, the right of the petitioner was definitely
affected.  That petitioner subsequently
filed a motion to reconsider and that it underwent a full-blown hearing did
not, contrary to the postulation of the Court of Appeals, cure the fatal error.

The foregoing disquisitions render unnecessary the second issue
raised in this petition.

WHEREFORE, the instant petition is hereby GRANTED.  The decision of the respondent Court of 30
September 1981 and its resolution of 5 April 1982 in C.A.-G.R. No. 12078 and
the Orders of the trial court of 29 January 1981 and 11 February 1981 in Civil
Case No. 7928-P are hereby REVERSED and SET ASIDE.  The partial lifting of the writ of attachment
is likewise SET ASIDE.

Costs against private respondents.

SO ORDERED.

Gutierrez, Jr., (Chairman), Feliciano, Bidin,
and Romero, JJ., concur.

^[1]
Appendix “A”, Brief for Petitioner.

^[2]
Appendix “B”, Id.,
44-49.

^[3]
Appendix “C”, Brief for Petitioner.

^[4]
Appendix “D”, Id.

^[5]
Appendix “E”, Id.

^[6]
Appendix “F”, Id.

^[7]
Appendix “G”, Id.

^[8]
Appendix “H”, Brief for Petitioner.

^[9]
Annex “A” of Petition; Rollo, 25-32.

^[10] Bermejo vs. Barrios, 31 SCRA 764 [1970].

^[11] Rollo, 8-9.

^[12] Abad vs. Court of Appeals, 181 SCRA  191 [1990].

^[13] Rollo, 46-47.

^[14]
Annex. “A” of Annex “C”, Respondent’s Comment; Id.,
71.

^[15]
Appendix “B”, Brief for Petitioners, 45.

^[16] Firme vs. Reyes, 92 SCRA 713 [1979], citing Manakil vs. Revilla, 42
Phil. 81 [1921]; The Roman Catholic Bishop of Lipa vs.
The Municipality of Unisan, 44 Phil. 866 [1920]; The
Director of Lands vs. Sanz, 45 Phil. 117
[1923].  See also Filipinas Fabricators
& Sales, Inc. vs. Magsino, 157 SCRA 469 [1988];
Bank of the Philippine Islands vs. Far East Molasses Corp., 198 SCRA 689
[1991].