ELEAZAR V. ADLAWAN AND ELENA S. ADLAWAN, PETITIONERS, VS. HON. JUDGE RAMON AM. TORRES, AS PRESIDING JUDGE OF BRANCH 6, REGIONAL TRIAL COURT CEBU CITY, ABOITIZ & COMPANY, INC. AN…

This is a petition for certiorari and mandamus with
preliminary injunction or restraining order to nullify: (1) the Order dated
September 14, 1983 of respondent Judge Ramon Am. Torres of the Regional Trial
Court, Branch 6, Cebu City, in Civil Case No. CEB-1185 and the Order dated
September 26, 1983 of Judge Emilio A. Jacinto of Branch 23 of the same court in
Civil Case No. CEB-1186, which granted the motion for the issuance of writs of
preliminary attachment for the seizure of the property of petitioners by
respondent Provincial Sheriffs; and (2) the Order dated December 12, 1983 of
respondent Judge Ramon Am. Torres in the consolidated cases, Civil Case No.
CEB-1185 and Civil Case No. CEB-1186.

I

In a complaint dated April 24, 1982 filed with the Court of First
Instance of Cebu, now Regional Trial Court, (Civil Case No. R-21761),
respondent Aboitiz and Company, Inc. (Aboitiz) sought to collect from petitioners
a sum of money representing payments for: (1) the unpaid amortizations of a
loan; (2) technical and managerial services rendered; and (3) the unpaid
installments of the equipment provided by respondent Aboitiz to petitioners
(Rollo, p. 37).

Acting on the ex parte application for attachment,
the Executive Judge of the Court of First Instance of Cebu, issued on May 14,
1982, an order directing the issuance of the writ of preliminary attachment
against the property of petitioners upon the filing by respondent Aboitiz of an
attachment bond.

Subsequently, the case was raffled to Branch 11 of the Court of
First Instance of Cebu, which issued a writ of attachment addressed to the
Provincial Sheriffs of Cebu and the City Sheriff of Davao City. It was the Sheriff of Davao City who
enforced the writ of attachment, resulting in the seizure of heavy construction
equipment, motor vehicle spare parts, and other personal property with the
aggregate value of P15,000,000.00. The
said court also granted the motion of respondent Aboitiz to take possession and
custody of the attached property of petitioners and ordered the Provincial
Sheriff of Davao to deliver the property to respondent Aboitiz.

Petitioners moved for a bill of particulars and to set aside the ex
parte writ of attachment. Finding merit in the motion to set aside the writ, Branch 11 ordered on
July 6, 1982 the lifting of the writ and, consequently, the discharge of the
property levied upon.

Respondent Aboitiz filed an urgent ex parte motion,
praying for the stay of the July 6, 1982 Order for a period of 15 days for it
to be able to appeal the order. The
motion was favorably acted upon.

However, on July 13, 1982, respondent Aboitiz filed a notice of
dismissal of its complaint in accordance with Section 1, Rule 17 of the Revised
Rules of Court. Consequently, Branch 11
issued an order confirming the notice of dismissal, emphasizing that all orders
of the court issued prior to the filing of said notice of dismissal had been
rendered functus oficio, and considering all pending incidents in
the case as moot and academic.

Petitioner Eleazar Adlawan filed a motion praying that the July
6, 1982 Order be implemented and enforced. On December 20, however, Branch 11 denied the motion on account of the
filing by respondent Aboitiz before Branch 16 of the Court of First Instance of
Cebu in Lapu-lapu City of an action for delivery of personal property (Civil
Case No. 619-L), and the filing by petitioner Eleazar Adlawan before Branch 10
of the same court of an action for damages in con­nection with the seizure of
his property under the writ of attachment.

In the replevin suit, Branch 16 ordered the seizure and delivery
of the property described in the complaint. Said property were later delivered by the provincial sheriff to
respondent Aboitiz. Alleging that while
his office was situated in Cebu City, Adlawan was a resident of Minglanilla,
and therefore, the Lapu-lapu City court should not entertain the action for
replevin. Petitioner Eleazar Adlawan
filed an omnibus motion praying for the reconsideration and dissolution of the
writ of seizure, the retrieval of the property seized, and the dismissal of the
complaint. He also averred that the
property seized were in custodia legis by virtue of the writ of
attachment issued by Branch 11. His
omnibus motion was denied. Subsequently, he filed a motion for reconsideration which was not
granted.

The denial of his omnibus motion led petitioner Eleazar Adlawan
to file a petition for certiorari and mandamus in the Supreme
Court (G.R. No. 63225). The Third
Division of this Court ruled on April 3, 1990 that since attachment is an
ancillary remedy, the withdrawal of the complaint left it with no leg to stand
on. Thus, the Court disposed of the
case as follows:

“WHEREFORE, in view of the foregoing, this Court rules that
the attached properties left in the custody of private respondent Aboitiz and
Company, Inc. be returned to petitioner Eleazar V. Adlawan without prejudice to
the outcome of the cases filed by both parties” (Rollo, p. 324).

Respondent Aboitiz filed a motion for reconsideration of the
decision, contending that the replevin case was distinct and separate from the
case where the writ of attachment was issued. It argued that the writ of replevin, therefore, remained in force as the
Third Division of the Supreme Court had not found it illegal. The motion was, however, denied with
finality in the Resolution of July 11, 1990.

Undaunted, respondent Aboitiz filed a second motion for
reconsideration with a prayer that the dispositive portion of the decision be
clarified. It asserted that because the
writ of preliminary attachment was different from the writ of replevin, we
should rule that the property subject of the latter writ should remain in custodia
legis of the court issuing the said writ.

In the Resolution dated September 10, 1990, the Third Division
stated that “the properties to be returned to petitioner are only those
held by private respondent (Aboitiz) by virtue of the writ of attachment which
has been declared non-existent.” Accordingly, the dispositive portion of
the April 3, 1990 decision of the Third Division of this Court was modified to
read as follows:

“WHEREFORE, in view of the foregoing, this Court rules that
the properties in the custody of the private respondent Aboitiz & Company
by virtue of the writ of attachment issued in Civil Case No. R-21761 be
returned to the petitioner, but properties in the custody of the private
respondent by virtue of the writ of replevin issued in Civil Case No. 619-L be
continued in custodia legis of said court pending litigation
therein.”

The Decision in G.R. No. 63225 having become final and executory,
entry of judgment was made on November 15, 1990. This should have terminated the controversy between petitioners
and respondent Aboitiz insofar as the Supreme Court was concerned, but that was
not to be. On September 9, 1983
respondent Aboitiz filed against petitioners two complaints for collection of
sums of money with prayers for the issuance of writs of attachment in the
Regional Trial Court, Branch 23, Cebu City, docketed as Civil Cases Nos.
CEB-1185 and CEB-1186. The complaint in
Civil Case No. CEB­-1185 alleged that petitioner Eleazar Adlawan (defendant
therein) was awarded a contract for the construction of the Tago Diversion
Works for the Tago River Irrigation Project by the National Irrigation
Administration and that respondent Aboitiz (plaintiff therein) loaned him money
and equipment, which indebtedness as of June 30, 1983 totalled P13,430,259.14. Paragraph 16 of the complaint states:

“16. That, in view of the enormous liabilities
which the defendants have with the plaintiff, defendants executed a real estate
mortgage covering eleven (11) parcels of land in favor of Philippine Commercial
and Industrial Bank (PCIB) to secure a P1,000,000.00 loan with said bank and
was able to remove, conceal and dispose of their properties, obviously to
defraud the plaintiff, x x x” (Rollo, pp. 65-66).

The complaint in Civil Case No. CEB-1186 alleged that petitioner
Eleazar Adlawan (defendant therein) was awarded a contract for the construction
of the Lasang River Irrigation Project by the National Irrigation
Administration and that respondent Aboitiz (plaintiff therein) loaned him money
and equipment, which indebtedness as of June 30, 1983 totalled
P5,370,672.08. Paragraph 15 of the
complaint is similarly worded as paragraph 16 of the complaint in Civil Case
No. CEB-1185.

Civil Case No. CEB-1185 was raffled to the Regional Trial Court,
Branch 6, presided by respondent Judge Ramon Am. Torres. On September 14, 1983, respondent Judge
ordered the issuance of a writ of attachment upon respondent Aboitiz’ filing of
a bond of P5,000,000.00. Similarly, in
Civil Case No. CEB-1186, which was raffled to Branch 23, presiding Judge Emilio
A. Jacinto ordered the issuance of a writ of attachment upon the filing of a
bond of P2,500,000.00. Accordingly, in
Civil Case No. CEB-1185, the Acting Provincial Sheriff of Cebu issued separate
writs dated September 26, 1983 addressed to the Sheriffs of Cebu, Davao and
Metro Manila. No writ of preliminary
attachment was, however, issued in Civil Case No. CEB-1186.

Petitioners then filed in Civil Cases Nos. CEB-1185 and CEB-1186
urgent motions to hold in abeyance the enforcement of the writs of
attachments. They alleged in the main
that since their property had been previously attached and said attachment was
being questioned before the Supreme Court in G.R. No. 63225, the filing of the
two cases, as well as the issuance of the writs of attachment, constituted undue
interference with the processes of this court in the then pending petition
involving the same property.

Upon motion of respondent Aboitiz, Branch 23 issued on October
13, 1983, an order directing the transfer to Branch 6 of Civil Case No.
CEB-1186 for consolidation with Civil Case No. CEB-1185.

Meanwhile, in its comment on petitioners’ motion to withhold the
enforcement of the writs of attachment, respondent Aboitiz alleged that the voluntary
dismissal of Civil Case No. R-21761 under Section 1, Rule 17 of the Revised
Rules of Court was without prejudice to the institution of another action based
on the same subject matter. It averred
that the issuance of the writ of attachment was justified because petitioners
were intending to defraud respondent Aboitiz by mortgaging 11 parcels of land
to the Philippine Commercial and Industrial Bank (PCIB) in consideration of the
loan of P1,100,000.00, thereby making PCIB a preferred creditor to the
prejudice of respondent Aboitiz, which had an exposure amounting to
P13,430,259.14.

Petitioners then filed a rejoinder to said comment, contending
that since the property subject of the writ of attachment have earlier been
attached or replevied, the same property were under custodia legis
and therefore could not be the subject of other writs of attachment.

On December 12, 1983, respondent Judge issued an order finding no
merit in petitioners’ motion for reconsideration and directing the sheriffs of
Cebu, Davao and Metro Manila “to proceed with the enforcement and
implementation of the writs of preliminary attachment.” Respondent Judge
ruled that the writs of attachment were issued on the basis of the supporting
affidavits alleging that petitioner had removed or disposed of their property
with intent to defraud respondent Aboitiz (Rollo, pp. 109-113).

On December 15, petitioners filed an ex parte
motion praying: (1) that the December 12, 1983 Order be set for hearing; (2)
that they be given 15 days within which to either file a motion for
reconsideration or elevate the matter to this Court or the then Intermediate
Appellate Court; and (3) that within the same 15-day period the implementation
or enforcement of the writs of attachment be held in abeyance.

On the same day, respondent Judge issued an order holding in
abeyance the enforcement of the writs of preliminary attachment in order to
afford petitioners an opportunity to seek their other remedies (Rollo, p. 116).

On December 27, petitioners filed the instant petition for certiorari
and mandamus. They alleged that
respondent Judge gravely abused his discretion in ordering the issuance of the
writs of preliminary attachment inasmuch as the real estate mortgage executed
by them in favor of PCIB did not constitute fraudulent removal, concealment or
disposition of property. They argued
that granting the mortgage constituted removal or disposition of property, it
was not per se a ground for attachment lacking proof of intent to
defraud the creditors of the defendant.

Petitioners contended that in Civil Case No. 21761, Branch 11 had
ruled that the loan for which the mortgage was executed was contracted in good
faith, as it was necessary for them to continue their business operations even
after respondent Aboitiz had stopped giving them financial aid.

Petitioners also contended that respondent Judge exceeded his
jurisdiction when he issued the Order of December 12, 1983, without first
hearing the parties on the motion for attachment and the motion to dissolve the
attachment. Moreover, they argued that
respondent Judge gravely abused his discretion in proceeding with the case,
notwithstanding that his attention had been called with regard to the pendency
of G.R. No. 63225 in this Court.

As prayed for by petitioners, we issued a temporary restraining
order on January 6, 1984 “enjoining the respondents from enforcing or
implementing the writs of preliminary attachment against the property of
petitioners, all dated September 26, 1983 and issued in Civil Cases Nos. CEB
1185 and 1186” (Rollo, p. 118).

II

The resolution of this case centers on the issue of the legality
of the writ of attachment issued by respondent Judge in the consolidated cases
for collection of sums of money.

The affidavit submitted by respondent Aboitiz in support of its
prayer for the writ of attachment does not meet the requirements of Rule 57 of
the Revised Rules of Court regarding the allegations on impending fraudulent
removal, concealment and disposition of defendant’s property. As held in Carpio v. Macadaeg,
9 SCRA 552 (1963), to justify a preliminary attachment, the removal or disposal
must have been made with intent to defraud defendant’s creditors. Proof of fraud is mandated by paragraphs (d)
and (e) of Section 1, Rule 57 of the Revised Rules of Court on the grounds upon
which attachment may issue. Thus, the
factual basis on defendant’s intent to defraud must be clearly alleged in the
affidavit in support of the prayer for the writ of attachment if not so specifically
alleged in the verified complaint. The
affidavit submitted by respondent Aboitiz states:

“REPUBLIC OF THE
PHILIPPINES)

CITY OF CEBU……………)
S.S.

I, ROMAN S. RONQUILLO, of legal age, married and a resident of Cebu
City, after being sworn in accordance with law, hereby depose and say:

That I am the Vice-President of the plaintiff corporation in the
above-entitled case;

That a sufficient cause of action exists against the defendants
named therein because the said defendants are indebted to the plaintiffs in the
amount of P13,430,259.14 exclusive of interests thereon and damages claimed;

That the defendants have removed or disposed of their properties
with intent to defraud the plaintiff, their creditor, because on May 27, 1982
they executed a real estate mortgage in favor of Philippine Commercial and
Industrial Bank (PCIB) covering eleven (11) of their fifteen (15) parcels of
land in Cebu to secure a P1,100,000.00 loan with the same bank;

That this action is one of those specifically mentioned in Section
1, Rule 57 of the Rules of Court, whereby a writ preliminary attachment may
lawfully issue because the action therein is one against parties who have
removed or disposed of their properties with intent to defraud their creditor,
plaintiff herein;

That there is no sufficient security for the claims sought to be
enforced by the present action;

That the total amount due to the plaintiff in the above-entitled
case is P13,430,259.14, excluding interests and claim for damages and is as
much the sum for which an order of attachment is herein sought to be granted;
above all legal counter-claims on the part of the defendants.

IN VIEW WHEREOF, I hereunto set my hand this 24th day of August
1983 at Cebu City, Philippines.

(Sgd.)

RAMON S. RONQUILLO

Affiant”

(Rollo, pp. 171-172)

It is evident from said affidavit that the prayer for attachment
rests on the mortgage by petitioners of 11 parcels of land in Cebu, which
encumbrance respondent Aboitiz considered as fraudulent concealment of property
to its prejudice. We find, however, that
there is no factual allegation which may constitute as a valid basis for the
contention that the mortgage was in fraud of respondent Aboitiz. As this Court said in Jardine-Manila Finance,
Inc. v. Court of
Appeals, 171 SCRA 636 (1989), “[T]he 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.”

Bare allegation that an encumbrance of a property is in fraud of
the creditor does not suffice. Factual
bases for such conclusion must be clearly averred.

The execution of a mortgage in favor of another creditor is not
conceived by the Rules as one of the means of fraudulently disposing of one’s
property. By mortgaging a piece of
property, a debtor merely subjects it to a lien but ownership thereof is not
parted with.

Furthermore, the inability to pay one’s creditors is not
necessarily synonymous with fraudulent intent not to honor an obligation
(Insular Bank of Asia & America, Inc. v. Court of Appeals, 190 SCRA 629
[1990]).

Consequently, when petitioners filed a motion for the
reconsideration of the order directing the issuance of the writ of attachment,
respondent Judge should have considered it as a motion for the discharge of the
attachment and should have conducted a hearing or required submission of
counter-affidavits from the petitioners, if only to gather facts in support of
the allegation of fraud (Jopillo, Jr. v. Court of Appeals, 167 SCRA 247
[1988]). This is what Section 13 of
Rule 57 mandates.

This procedure should be followed because, as the Court has time
and again said, attachment is a harsh, extraordinary and summary remedy and the
rules governing its issuance must be construed strictly against the
applicant. Verily, a writ of attachment
can only be granted on concrete and specific grounds and not on general
averments quoting perfunctorily the words of the Rules (D.P. Lub Oil Marketing
Center, Inc. v. Nicolas, 191 SCRA 423 [1990]).

The judge before whom the application is made exercises full
discretion in considering the supporting evidence proffered by the
applicant. One overriding consideration
is that a writ of attachment is substantially a writ of execution except that
it emanates at the beginning, instead of at the termination of the suit (Santos
v. Aquino, Jr., 205 SCRA 127 [1992]; Tay Chun Suy v. Court of Appeals, 212 SCRA
713 [1992]).

We need not discuss the issue of whether or not Civil Cases Nos.
CEB-1185 and CEB-1186 constituted undue interference with the proceedings in
G.R. No. 63225 in view of the entry of judgment in the latter case.

WHEREFORE, the petition is GRANTED and the Temporary
Restraining Order issued on January 6, 1984 is made PERMANENT. Respondent Judge or whoever is the presiding
judge of the Regional Trial Court, Branch 6, Cebu City, is DIRECTED to PROCEED
with the resolution of Civil Cases Nos. CEB-1185 and CEB-1186 with deliberate
dispatch.

SO ORDERED.

Cruz, (Chairman), Davide, Jr., Bellosillo, and Kapunan, JJ., concur.