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G.R. No. L-34589 June 29, 1988 ENGINEERING CONSTRUCTION INCORPORATED, petitioner, vs. NATIONAL POWER CORPORATION and COURT OF APPEALS, respondents. G.R. No. L-34656 June 29, 1988 MANILA ELECTRIC vs. COURT OF APPEALS CORPORATION, respondents. FERNAN, J.: In these related petitions for review under Rule 45 of the Rules of Court, the Engineering Construction, Inc. [ECI] and the Manila Electric Company [MERALCO] question the decision of the Court of Appeals in CA-G.R. No. 47528-R which set aside the orders of the trial court directing execution pending appeal of a judgment for P1,108,985.31 in damages in favor of ECI. Petitioners also question the resolution of said court holding them liable for restitution of the garnished funds to the National Power Corporation [NPC]. On August 29, 1968, ECI filed a complaint for damages against the NPC in the then Court of First Instance of Manila, Branch 15, alleging that it suffered damages to its facilities and equipment due to the inundation of its campsite in Ipo, Norzagaray, Bulacan, as a direct result of the improper and careless opening by NPC of the spillway gates of Angat Dam at the height of typhoon "Welming" on November 1 4,1967. On December 23, 1970, the trial court found NPC guilty of gross negligence and rendered its judgment, thus: WHEREFORE, judgment is rendered in favor of plaintiff and against defendant as follows: 1. Ordering defendant to pay plaintiff actual or compensatory damages in the amount of P675,785.31; 2. Ordering defendant to pay consequential damages in the amount of P233,200.00; * 3. Ordering defendant to pay plaintiff the amount of P50,000 as and by way of exemplary damages; and 4. Ordering defendant to pay plaintiff the amount of P50,000 as and for 2 attorney's fees ... NPC filed a notice of appeal from that decision but before it could perfect its appeal, ECI moved for and was granted execution pending appeal upon posting a covering bond of P200,000 which it later increased to P1,109,000 to fully answer for whatever damages NPC might incur by reason of the premature execution of the 3 lower court's decision. COMPANY, petitioner, and NATIONAL POWER

In granting said motion for the exceptional writ over the strong opposition of the NPC, the trial court adopted the grounds adduced by movant ECI. 1. x x x. 2. That the substantial portion of the award of damages refers to the actual or compensatory damages incurred by plaintiff, which are supported by voluminous documentary evidence, the genuineness and due execution of which were admitted and further, no evidence whatever was presented to contest the same; 3. That this case has been pending for years, as the plaintiff and the Honorable Court were led to believe that the matter in dispute would be settled amicably; 4. That an appeal by defendant would obviously be for purposes of delay; 5. That on appeal, the case would certainly drag on for many years, and in the meantime, the actual loss and damages sustained by plaintiff, who because of such loss have become heavily obligated and financially distressed, would remain uncompensated and unsatisfied 6. That also, plaintiff is willing and able to file a bond to answer for any damage which defendant may suffer as a result of an execution 4 pending appeal. Subsequently, Deputy Sheriff Restituto R. Quemada who was assigned to enforce the writ of execution, garnished in favor of ECI all amounts due and payable to NPC which were then in possession of MERALCO and sufficient to cover the judgment sum of 5 P1,108,985.31. Attempts to lift the order of execution having proved futile and the offer of a supersedeas bond having been rejected by the lower 6 court, NPC filed with the Appellate Court a petition for certiorari. In its challenged decision of October 20, 1971, the Court of Appeals granted NPCs petition and nullified the execution pending appeal of the judgment rendered by the trial court on December 28, 1970, as well as all issued writs and processes in connection with the execution. One 7 justice dissented. On November 11, 1971, MERALCO sought from the Appellate Court a clarification and reconsideration of the aforesaid decision on the ground, among others, that the decision was being used by NPC to compel MERALCOto return the amount of P1,114,545.23 (inclusive of sheriff's fees) in two checks which it had already entrusted to the deputy sheriff on February 23, 1971, who then indorsed and delivered the same to ECI. Whereupon, in its resolution of January 7, 1972, the Appellate Court held the sheriff, MERALCO and ECI liable to restore to NPC the amount due to NPC which MERALCO had earlier turned over 8 to the sheriff for payment to ECI. Their two motions for reconsideration having been denied, ECI and MERALCO filed separate petitions for review before this Court: Nos. L-34589 and 34656, the very petitions before us for adjudication. In this connection, it must be made clear that we are not
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concemed with the main appeal. For the present, we limit our discussion to the correctness of the extraordinary writ of execution pending appeal and the ordered restitution of the garnished funds--two collateral matters which have greatly exacerbated the existing dispute between the parties. We shall deal first with the propriety of the execution pending appeal. Section 2, Rule 39 of the Rules of Court provides: Execution pending appeal. On motion of the prevailing party with notice to the adverse party the court may, in its discretion, order execution to issue even before the expiration of the time to appeal, upon good reasons to be stated in a special order. If a record on appeal is filed thereafter, the motion and the special order shall be included thereon. While the rule gives the court the discretionary power to allow immediate execution, the following requisites must be satisfied for its valid exercise: (a) There must be a motion by the prevailing party with notice to the adverse party; (b) There must be a good reasons for issuing the execution; and (c) The good reasons must be stated in a special order. In its assailed decision, the Appellate Court, through Justice Salvador V. Esguerra, observe that NPC, as defendant in the civil case for damages, was being ordered to pay the amount of P 1,108,985.31 pending appeal when practically 40% thereof was made up of awards of damages based on the court's sole and untrammeled discretion. Such amount might greatly be reduced by the superior court, especially the items for consequential and exemplary damages and attorney's fees which by themselves would amount to the "staggering" sum of P433,220.00 The Appellate Court noted the many instances when on review, the amounts for attorney's fees and exemplary and moral damages were drastically cut or eliminated altogether in the absence of proof that the losing party acted with malice, evident bad faith or in an oppressive manner. Inasmuch as the list submitted by ECI of the estimated losses and damages to its tunnel project caused by the instant flooding on November 4, 1967 was duly supported by vouchers presented in evidence, and considering that NPC, for its part, failed to submit proofs to refute or contradict such documentary evidence, we are constrained to sustain the order of execution pending appeal by the trial court but only as far as the award for actual or compensatory damages is concemed. We are not prepared to disagree with the lower court on this point since it was not sufficiently shown that it abused or exceeded its authority. With respect to the consequential and exemplary damages as well as attorney's fees, however, we concur with the Appellate Court in holding that the lower court had exceeded the limits of its discretion. Execution should have been postponed until such time as the merits of the case have been finally determined in the regular appeal.
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In the fairly recent case of RCPI, et al vs. Lantin Nos. L-59311 and 59320, January 31, 1985 , 134 SCRA 395, 400-401, the Court said: The execution of any award for moral and exemplary damages is dependent on the outcome of the main case. Unlike actual damages for which the petitioners may clearly be held liable if they breach a specific contract and the amounts of which are fixed and certain, liabilities with respect to moral and exemplary damages as well as the exact amounts remain uncertain and indefinite pending resolution by the Intermediate Appellate Court and eventually the Supreme Court. The existence of the factual bases of these types of damages and their casual relation to petitioners' act will have to be determined in the light of the assignments or errors on appeal. It is possible that the petitioners, after all, while liable for actual damages may not be liable for moral and exemplary damages. Or as in some cases elevated to the Supreme Court, the awards may be reduced. Indeed, as later events would show, the Appellate Court was proven right when it postulated that it is not beyond the realm of probability that NPCs appeal from the lower court's judgment could result in the substantial reduction of the consequential damages and attorney's fees and the deletion of exemplary damages. We take judicial notice of the fact that on August 24, 1987, the Court of 9 Appeals rendered a decision on the main appeal. It affirmed the trial court's conclusion that NPC was guilty of negligence but differred in the award of damages. While it upheld the court a quo's award of P675,785.31 as actual damages, it reduced the consequential damages from P333,200.00 to P19,200.00 and the attorney's fees from P50,000 to P30,000.00 The grant of P50,000 as exemplary damages was eliminated. Altogether, the award of damages was modified from P1,108,985.31 to P724,985.31. From that decision, both 10 the ECI and NPC filed their separate appeals to this Court. Finally, on May 16, 1988, the Court promulgated its judgment affirming in all respects the Appellate Court's decision in CA-G.R. No. 49955-R, thus putting to rest the question of negligence and NPCs liability for damages. The point that the Court wishes to emphasize is this: Courts look with disfavor upon any attempt to execute a judgment which has not acquired a final character. Section 2, Rule 39, authorizing the premature execution of judgments, being an exception to the general rule, must be restrictively construed. It would not be a sound rule to allow indiscriminately the execution of a money judgment, even if there is a sufficient bond. "The reasons allowing execution must constitute superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a 11 reversal of the judgment."' We come now to the second issue of whether petitioners, including the sheriff, are bound to restore to NPC the judgment amount which has been delivered to ECI in compliance with the writ of garnishment. In line with our pronouncement that we are sanctioning in this particular instance the execution pending appeal of actual but not consequential and exemplary damages and attorney's fees which must necessarily depend on the final resolution of the main cases, i.e., Nos. L-47379 and 47481, the direct consequence would be to
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authorizeNPC to proceed against the covering bond filed by ECI but only to the extent of the difference between the amount finally adjudicated by this Court in the main cases [P724,985.31] and the amount originally decreed by the trial court relating to the consequential and exemplary damages and attorney's fees [P1,108.985.31]. In other words,ECIs bond is held answerable to NPC for P384,000. But while partial restitution is warranted in favor of NPC, we find that the Appellate Court erred in not absolvingMERALCO, the garnishee, from its obligations to NPC with respect to the payment to ECI of P1,114,543.23, thus in effect subjecting MERALCO to double liability. MERALCO should not have been faulted for its prompt obedience to a writ of garnishment. Unless there are compelling reasons such as: a defect on the face of the writ or actual knowledge on the part of the garnishee of lack of entitlement on the part of the garnisher, it is not incumbent upon the garnishee to inquire or to judge for itself whether or not the order for the advance execution of a judgment is valid. Section 8, Rule 57 of the Rules of Court provides, Effect of attachment of debts and credits.-All persons having in their possession or under their control any credits or other similar personal property belonging to the party against whom attachment is issued, or owing any debts to the same, at the time of service upon them of a copy of the order of attachment and notice as provided in the last preceding section, shall be liable to the applicant for the amount of such credits, debts or other property, until the attachment be discharged, or any judgment recovered by him be satisfied, unless such property be delivered or transferred, or such debts be paid, to the clerk, sheriff or other proper officer of the court issuing the attachment. Garnishment is considered as a specie of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. Under the above-cited rule, the garnishee [the third person] is obliged to deliver the credits, etc. to the proper officer issuing the writ and "the law exempts from liability the person having in his possession or under his control any credits or other personal property be, longing to the defendant, ..., if such property be delivered or transferred, ..., to the clerk, sheriff, or other officer of the 12 court in which the action is pending." Applying the foregoing to the case at bar, MERALCO, as garnishee, after having been judicially compelled to pay the amount of the judgment represented by funds in its possession belonging to the judgment debtor or NPC, should be released from all responsibilities over such amount after delivery thereof to the sheriff. The reason for the rule is self-evident. To expose garnishees to risks for obeying court orders and processes would only undermine the administration of justice. WHEREFORE, the Court in disposing of the two side issues of execution pending appeal and petitioners' liability for restitution, hereby MODIFIES the Court of Appeals' decision and resolution under review, and rules as follows:

[a] NPC is authorized to proceed against the P1,109,000 bond filed by ECI to the extent of P384,000 which corresponds to the difference between the awards for consequential and exemplary damages and attorney's fees upheld by the Court in the main cases (Nos. L-47379 and 47481) and those decreed for the same items by the trial court; [b] MERALCO is declared absolved from any and all responsibilities in connection with the amount of P1,114,545.23 representing the NPC garnished funds and therefore relieved from the burden of restoring the same to NPC. SO ORDERED .

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G.R. No. L-34548 November 29, 1988 RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. THE HONORABLE PACIFICO P. DE CASTRO and PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION,respondents Meer, Meer & Meer for petitioner. The Solicitor General for respondents. CORTES, J.: The crux of the instant controversy dwells on the liability of a bank for releasing its depositor's funds upon orders of the court, pursuant to a writ of garnishment. If in compliance with the court order, the bank delivered the garnished amount to the sheriff, who in turn delivered it to the judgment creditor, but subsequently, the order of the court directing payment was set aside by the same judge, should the bank be held solidarily liable with the judgment creditor to its depositor for reimbursement of the garnished funds? The Court does not think so. In Civil Case No. Q-12785 of the Court of First Instance of Rizal, Quezon City Branch IX entitled "Badoc Planters, Inc. versus Philippine Virginia Tobacco Administration, et al.," which was an action for recovery of unpaid tobacco deliveries, an Order (Partial Judgment) was issued on January 15, 1970 by the Hon. Lourdes P. San Diego, then Presiding Judge, ordering the defendants therein to pay jointly and severally, the plaintiff Badoc Planters, Inc. (hereinafter referred to as "BADOC") within 48 hours the aggregate amount of P206,916.76, with legal interests thereon. On January 26,1970, BADOC filed an Urgent Ex-Parte Motion for a Writ of Execution of the said Partial Judgment which was granted on the same day by the herein respondent judge who acted in place of the Hon. Judge San Diego who had just been elevated as a Justice of the Court of Appeals. Accordingly, the Branch Clerk of Court on the very same day, issued a Writ of Execution addressed to Special Sheriff Faustino Rigor, who then issued a Notice of Garnishment addressed to the General Manager and/or Cashier of Rizal Commercial Banking Corporation (hereinafter referred to as RCBC), the petitioner in this case, requesting a reply within five (5) days to said garnishment as to any property which the Philippine Virginia Tobacco Administration (hereinafter referred to as "PVTA") might have in the possession or control of petitioner or of any debts owing by the petitioner to said defendant. Upon receipt of such Notice, RCBC notified PVTA thereof to enable the PVTA to take the necessary steps for the protection of its own interest [Record on Appeal, p. 36] Upon an Urgent Ex-Parte Motion dated January 27, 1970 filed by BADOC, the respondent Judge issued an Order granting the Ex-Parte Motion and directing the herein petitioner "to deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff Rigor in turn is ordered to cash the check and deliver the amount to the plaintiff's representative and/or counsel on record." [Record on Appeal, p. 20; Rollo, p. 5.] In compliance with said Order, petitioner delivered to Sheriff Rigor a certified check in the sum of P 206,916.76. Respondent PVTA filed a Motion for Reconsideration dated February 26,1970 which was granted in an Order dated April 6,1970, setting aside the Orders of Execution and of Payment and the Writ of Execution and ordering petitioner and BADOC "to restore, jointly and severally, the account of PVTA with the said bank in the same condition and state it was before the issuance of the aforesaid Orders by reimbursing the PVTA of the amount of P 206, 916.76 with interests at the legal rate from January 27, 1970 until fully paid to the account of
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the PVTA This is without prejudice to the right of plaintiff to move for the execution of the partial judgment pending appeal in case the motion for reconsideration is denied and appeal is taken from the said partial judgment." [Record on Appeal, p. 58] The Motion for Reconsideration of the said Order of April 6, 1970 filed by herein petitioner was denied in the Order of respondent judge dated June 10, 1970 and on June 19, 1970, which was within the period for perfecting an appeal, the herein petitioner filed a Notice of Appeal to the Court of Appeals from the said Orders. This case was then certified by the Court of Appeals to this Honorable Court, involving as it does purely questions of law. The petitioner raises two principal queries in the instant case: 1) Whether or not PVTA funds are public funds not subject to garnishment; and 2) Whether or not the respondent Judge correctly ordered the herein petitioner to reimburse the amount paid to the Special Sheriff by virtue of the execution issued pursuant to the Order/Partial Judgment dated January 15, 1970. The record reveals that on February 2, 1970, private respondent PVTA filed a Motion for Reconsideration of the Order/ Partial Judgment of January 15, 1970. This was granted and the aforementioned Partial Judgment was set aside. The case was set for hearings on November 4, 9 and 11, 1970 [Rollo, pp. 205-207.] However, in view of the failure of plaintiff BADOC to appear on the said dates, the lower court ordered the dismissal of the case against PVTA for failure to prosecute [Rollo, p. 208.] It must be noted that the Order of respondent Judge dated April 6, 1970 directing the plaintiff to reimburse PVTA t e amount of P206,916.76 with interests became final as to said plaintiff who failed to even file a motion for reconsideration, much less to appeal from the said Order. Consequently, the order to restore the account of PVTA with RCBC in the same condition and state it was before the issuance of the questioned orders must be upheld as to the plaintiff, BADOC. However, the questioned Order of April 6, 1970 must be set aside insofar as it ordered the petitioner RCBC, jointly and severally with BADOC, to reimburse PVTA. The petitioner merely obeyed a mandatory directive from the respondent Judge dated January 27, 1970, ordering petitioner 94 "to deliver in check the amount garnished to Sheriff Faustino Rigor and Sheriff Rigor is in turn ordered to cash the check and deliver the amount to the plaintiffs representative and/or counsel on record." [Record on Appeal, p. 20.] PVTA however claims that the manner in which the bank complied with the Sheriffs Notice of Garnishment indicated breach of trust and dereliction of duty on the part of the bank as custodian of government funds. It insistently urges that the premature delivery of the garnished amount by RCBC to the special sheriff even in the absence of a demand to deliver made by the latter, before the expiration of the five-day period given to reply to the Notice of Garnishment, without any reply having been given thereto nor any prior authorization from its depositor, PVTA and even if the court's order of January 27, 1970 did not require the bank to immediately deliver the garnished amount constitutes such lack of prudence as to make it answerable jointly and severally with the plaintiff for the wrongful release of the money from the deposit of the PVTA. The respondent Judge in his controverted Order sustained such contention and blamed RCBC for the supposed "hasty release of the amount from the deposit of the PVTA without giving PVTA a chance to take proper steps by informing it of the action
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being taken against its deposit, thereby observing with prudence the five-day period given to it by the sheriff." [Rollo, p. 81.] Such allegations must be rejected for lack of merit. In the first place, it should be pointed out that RCBC did not deliver the amount on the strength solely of a Notice of Garnishment; rather, the release of the funds was made pursuant to the aforesaid Order of January 27, 1970. While the Notice of Garnishment dated January 26, 1970 contained no demand of payment as it was a mere request for petitioner to withold any funds of the PVTA then in its possession, the Order of January 27, 1970 categorically required the delivery in check of the amount garnished to the special sheriff, Faustino Rigor. In the second place, the bank had already filed a reply to the Notice of Garnishment stating that it had in its custody funds belonging to the PVTA, which, in fact was the basis of the plaintiff in filing a motion to secure delivery of the garnished amount to the sheriff. [See Rollo, p. 93.] Lastly, the bank, upon the receipt of the Notice of Garnishment, duly informed PVTA thereof to enable the latter to take the necessary steps for the protection of its own interest [Record on Appeal, p. 36] It is important to stress, at this juncture, that there was nothing irregular in the delivery of the funds of PVTA by check to the sheriff, whose custody is equivalent to the custody of the court, he being a court officer. The order of the court dated January 27, 1970 was composed of two parts, requiring: 1) RCBC to deliver in check the amount garnished to the designated sheriff and 2) the sheriff in turn to cash the check and deliver the amount to the plaintiffs representative and/or counsel on record. It must be noted that in delivering the garnished amount in check to the sheriff, the RCBC did not thereby make any payment, for the law mandates that delivery of a check does not produce the effect of payment until it has been cashed. [Article 1249, Civil Code.] Moreover, by virtue of the order of garnishment, the same was placed in custodia legis and therefore, from that time on, RCBC was holding the funds subject to the orders of the court a quo. That the sheriff, upon delivery of the check to him by RCBC encashed it and turned over the proceeds thereof to the plaintiff was no longer the concern of RCBC as the responsibility over the garnished funds passed to the court. Thus, no breach of trust or dereliction of duty can be attributed to RCBC in delivering its depositor's funds pursuant to a court order which was merely in the exercise of its power of control over such funds. ... The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court [De Leon v. Salvador, G.R. Nos. L-30871 and L-31603, December 28,1970, 36 SCRA 567, 574.] The respondent judge however, censured the petitioner for having released the funds "simply on the strength of the Order of the court which. far from ordering an immediate release of the amount involved, merely serves as a standing authority to make the release at the proper time as prescribed by the rules." [Rollo, p. 81.] This argument deserves no serious consideration. As stated earlier, the order directing the bank to deliver the amount to the sheriff was distinct and separate from the order directing the sheriff to encash the said check. The bank had no choice but to comply with the order demanding delivery of the garnished amount in check. The very tenor of the order called for immediate compliance therewith. On the other hand, the bank cannot be held liable for the subsequent encashment of
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the check as this was upon order of the court in the exercise of its power of control over the funds placed in custodia legis by virtue of the garnishment. In a recent decision [Engineering Construction Inc., v. National Power Corporation, G.R. No. L-34589, June 29, 1988] penned by the now Chief Justice Marcelo Fernan, this Court absolved a garnishee from any liability for prompt compliance with its order for the delivery of the garnished funds. The rationale behind such ruling deserves emphasis in the present case: But while partial restitution is warranted in favor of NPC, we find that the Appellate Court erred in not absolving MERALCO, the garnishee, from its obligations to NPC with respect to the payment of ECI of P 1,114,543.23, thus in effect subjecting MERALCO to double liability. MERALCO should not have been faulted for its prompt obedience to a writ of garnishment. Unless there are compelling reasons such as: a defect on the face of the writ or actual knowledge on the part of the garnishee of lack of entitlement on the part of the garnisher, it is not incumbent upon the garnishee to inquire or to judge for itself whether or not the order for the advance execution of a judgment is valid. Section 8, Rule 57 of the Rules of Court provides: Effect of attachment of debts and [Link] persons having in their possession or under their control any credits or other similar personal property belonging to the party against whom attachment is issued, or owing any debts to the same, all the time of service upon them of a copy of the order of attachment and notice as provided in the last preceding section, shall be liable to the applicant for the amount of such credits, debts or other property, until the attachment be discharged, or any judgment recovered by him be satisfied, unless such property be delivered or transferred, or such debts be paid, to the clerk, sheriff or other proper officer of the court issuing the attachment. Garnishment is considered as a specie of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. Under the above-cited rule, the garnishee [the third person] is obliged to deliver the credits, etc. to the proper officer issuing the writ and "the law exempts from liability the person having in his possession or under his control any credits or other personal property belonging to the defendant, ..., if such property be delivered or transferred, ..., to the clerk, sheriff, or other officer of the court in which the action is pending. [3 Moran, Comments on the Rules of Court 34 (1970 ed.)] Applying the foregoing to the case at bar, MERALCO, as garnishee, after having been judicially compelled to pay the amount of the judgment represented by funds in its possession belonging to the judgment debtor or NPC, should be released from all responsibilities over such amount after delivery thereof to the sheriff. The reason for the rule is self-evident. To expose garnishees to risks for obeying court orders and processes would only undermine the administration of justice. [Emphasis supplied.] The aforequoted ruling thus bolsters RCBC's stand that its immediate compliance with the lower court's order should not have been met with the harsh penalty of joint and several liability. Nor can its liability to reimburse PVTA of the amount delivered in check be premised upon the subsequent declaration of nullity of the order of delivery. As correctly pointed out by the petitioner: xxx xxx xxx That the respondent Judge, after his Order was enforced, saw fit to recall said Order and decree its nullity, should not prejudice one who
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dutifully abided by it, the presumption being that judicial orders are valid and issued in the regular performance of the duties of the Court" [Section 5(m) Rule 131, Revised Rules of Court]. This should operate with greater force in relation to the herein petitioner which, not being a party in the case, was just called upon to perform an act in accordance with a judicial flat. A contrary view will invite disrespect for the majesty of the law and induce reluctance in complying with judicial orders out of fear that said orders might be subsequently invalidated and thereby expose one to suffer some penalty or prejudice for obeying the same. And this is what will happen were the controversial orders to be sustained. We need not underscore the danger of this as a precedent. xxx xxx xxx [ Brief for the Petitioner, Rollo, p. 212; Emphasis supplied.] From the foregoing, it may be concluded that the charge of breach of trust and/or dereliction of duty as well as lack of prudence in effecting the immediate payment of the garnished amount is totally unfounded. Upon receipt of the Notice of Garnishment, RCBC duly informed PVTA thereof to enable the latter to take the necessary steps for its protection. However, right on the very next day after its receipt of such notice, RCBC was already served with the Order requiring delivery of the garnished amount. Confronted as it was with a mandatory directive, disobedience to which exposed it to a contempt order, it had no choice but to comply. The respondent Judge nevertheless held that the liability of RCBC for the reimbursement of the garnished amount is predicated on the ruling of the Supreme Court in the case of Commissioner of Public Highways v. Hon. San Diego [G.R. No. L-30098, February 18, 1970, 31 SCRA 616] which he found practically on all fours with the case at bar. The Court disagrees. The said case which reiterated the rule in Republic v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899] that government funds and properties may not be seized under writs of execution or garnishment to satisfy such judgment is definitely distinguishable from the case at bar. In the Commissioner of Public Highways case [supra], the bank which precipitately allowed the garnishment and delivery of the funds failed to inform its depositor thereof, charged as it was with knowledge of the nullity of the writ of execution and notice of garnishment against government funds. In the aforementioned case, the funds involved belonged to the Bureau of Public Highways, which being an arm of the executive branch of the government, has no personality of its own separate from the National Government. The funds involved were government fundscovered by the rule on exemption from execution. This brings us to the first issue raised by the petitioner: Are the PVTA funds public funds exempt from garnishment? The Court holds that they are not. Republic Act No. 2265 created the PVTA as an ordinary corporation with all the attributes of a corporate entity subject to the provisions of the Corporation Law. Hence, it possesses the power "to sue and be sued" and "to acquire and hold such assets and incur such liabilities resulting directly from operations authorized by the provisions of this Act or as essential to the proper conduct of such operations." [Section 3, Republic Act No. 2265.] Among the specific powers vested in the PVTA are: 1) to buy Virginia tobacco grown in the Philippines for resale to local bona fide tobacco manufacturers and leaf tobacco dealers [Section 4(b), R.A. No. 2265]; 2)
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to contracts of any kind as may be necessary or incidental to the attainment of its purpose with any person, firm or corporation, with the Government of the Philippines or with any foreign government, subject to existing laws [Section 4(h), R.A. No. 22651; and 3) generally, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent with the provisions of this Act [Section 4(k), R.A. No. 2265.] From the foregoing, it is clear that PVTA has been endowed with a personality distinct and separate from the government which owns and controls it. Accordingly, this Court has heretofore declared that the funds of the PVTA can be garnished since "funds of public corporation which can sue and be sued were not exempt from garnishment" [Philippine National Bank v. Pabalan, G.R. No. L-33112, June 15, 1978, 83 SCRA 595, 598.] In National Shipyards and Steel Corp. v. CIR [G.R. No. L-17874, August 31, 1964, 8 SCRA 781], this Court held that the allegation to the effect that the funds of the NASSCO are public funds of the government and that as such, the same may not be garnished, attached or levied upon is untenable for, as a government-owned or controlled corporation, it has a personality of its own, distinct and separate from that of the government. This court has likewise ruled that other govemmentowned and controlled corporations like National Coal Company, the National Waterworks and Sewerage Authority (NAWASA), the National Coconut Corporation (NACOCO) the National Rice and Corn Corporation (NARIC) and the Price Stabilization Council (PRISCO) which possess attributes similar to those of the PVTA are clothed with personalities of their own, separate and distinct from that of the government [National Coal Company v. Collector of Internal Revenue, 46 Phil. 583 (1924); Bacani and Matoto v. National Coconut Corporation et al., 100 Phil. 471 (1956); Reotan v. National Rice & Corn Corporation, G.R. No. L-16223, February 27, 1962, 4 SCRA 418.] The rationale in vesting it with a separate personality is not difficult to find. It is wellsettled that when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation [Manila Hotel Employees' Association v. Manila Hotel Co. and CIR, 73 Phil. 734 (1941).] Accordingly, as emphatically expressed by this Court in a 1978 decision, "garnishment was the appropriate remedy for the prevailing party which could proceed against the funds of a corporate entity even if owned or controlled by the government" inasmuch as "by engaging in a particular business thru the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations" [Philippine National Bank v. CIR, G.R No. L-32667, January 31, 1978, 81 SCRA 314, 319.] Furthermore, in the case of PVTA, the law has expressly allowed it funds to answer for various obligations, including the one sought to be enforced by plaintiff BADOC in this case (i.e. for unpaid deliveries of tobacco). Republic Act No. 4155, which discounted the erstwhile support given by the Central Bank to PVTA, established in lieu thereof a "Tobacco Fund" to be collected from the proceeds of fifty per centum of the tariff or taxes of imported leaf tobacco and also fifty per centum of the specific taxes on locally manufactured Virginia type cigarettes. Section 5 of Republic Act No. 4155 provides that this fund shall be expended for the support or payment of: 1. Indebtedness of the Philippine Virginia Tobacco Administration and the former Agricultural Credit and Cooperative Financing
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Administration to FACOMAS and farmers and planters regarding Virginia tobacco transactions in previous years; 2. Indebtedness of the Philippine Virginia Tobacco Administration and the former Agricultural Credit and Cooperative Financing Administration to the Central Bank in gradual amounts regarding Virginia tobacco transactions in previous years; 3. Continuation of the Philippine Virginia Tobacco Administration support and subsidy operationsincluding the purchase of locally grown and produced Virginia leaf tobacco, at the present support and subsidy prices, its procurement, redrying, handling, warehousing and disposal thereof, and the redrying plants trading within the purview of their contracts; 4. Operational, office and field expenses, and the establishment of the Tobacco Research and Grading Institute. [Emphasis supplied.] Inasmuch as the Tobacco Fund, a special fund, was by law, earmarked specifically to answer obligations incurred by PVTA in connection with its proprietary and commercial operations authorized under the law, it follows that said funds may be proceeded against by ordinary judicial processes such as execution and garnishment. If such funds cannot be executed upon or garnished pursuant to a judgment sustaining the liability of the PVTA to answer for its obligations, then the purpose of the law in creating the PVTA would be defeated. For it was declared to be a national policy, with respect to the local Virginia tobacco industry, to encourage the production of local Virginia tobacco of the qualities needed and in quantities marketable in both domestic and foreign markets, to establish this industry on an efficient and economic basis, and to create a climate conducive to local cigarette manufacture of the qualities desired by the consuming public, blending imported and native Virginia leaf tobacco to improve the quality of locally manufactured cigarettes [Section 1, Republic Act No. 4155.] The Commissioner of Public Highways case is thus distinguishable from the case at bar. In said case, the Philippine National Bank (PNB) as custodian of funds belonging to the Bureau of Public Highways, an agency of the government, was chargeable with knowledge of the exemption of such government funds from execution and garnishment pursuant to the elementary precept that public funds cannot be disbursed without the appropriation required by law. On the other hand, the same cannot hold true for RCBC as the funds entrusted to its custody, which belong to a public corporation, are in the nature of private funds insofar as their susceptibility to garnishment is concerned. Hence, RCBC cannot be charged with lack of prudence for immediately complying with the order to deliver the garnished amount. Since the funds in its custody are precisely meant for the payment of lawfully-incurred obligations, RCBC cannot rightfully resist a court order to enforce payment of such obligations. That such court order subsequently turned out to have been erroneously issued should not operate to the detriment of one who complied with its clear order. Finally, it is contended that RCBC was bound to inquire into the legality and propriety of the Writ of Execution and Notice of Garnishment issued against the funds of the PVTA deposited with said bank. But the bank was in no position to question the legality of the garnishment since it was not even a party to the case. As correctly pointed out by the petitioner, it had neither the personality nor the interest to assail or controvert the orders of respondent Judge. It had no choice but to obey the same inasmuch as it had no standing at all to impugn the validity of the partial judgment rendered in favor of the plaintiff or of the processes issued in execution of such judgment.
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RCBC cannot therefore be compelled to make restitution solidarily with the plaintiff BADOC. Plaintiff BADOC alone was responsible for the issuance of the Writ of Execution and Order of Payment and so, the plaintiff alone should bear the consequences of a subsequent annulment of such court orders; hence, only the plaintiff can be ordered to restore the account of the PVTA. WHEREFORE, the petition is hereby granted and the petitioner is ABSOLVED from any liability to respondent PVTA for reimbursement of the funds garnished. The questioned Order of the respondent Judge ordering the petitioner, jointly and severally with BADOC, to restore the account of PVTA are modified accordingly. SO ORDERED.

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G.R. No. 107282 March 16, 1994 THE MANILA REMNANT CO., INC., petitioner, vs. HON. COURT OF APPEALS, AND SPS. OSCAR C. VENTANILLA AND CARMEN GLORIA DIAZ, respondents. Tabalingcos & Associates Law Office for petitioner. Oscar C. Ventanilla, Jr. and Augusto Garmaitan for private respondents. CRUZ, J.: The present petition is an offshoot of our decision in Manila Remnant Co., Inc., (MRCI) v. Court of Appeals, promulgated on November 22, 1990. That case involved parcels of land in Quezon City which were owned by petitioner MRCI and became the subject of its agreement with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in the development and sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision, manage the sale of the lots, execute contracts and issue official receipts to the lot buyers. At the time of the agreement, the president of both MRCI and AUVCI was Artemio U. Valencia. Pursuant to the above agreement, AUVCI executed two contracts to sell dated March 3, 1970, covering Lots 1 and 2, Block 17, in favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66,571.00, payable monthly in ten years. After ten days and without the knowledge of the Ventanilla couple, Valencia, as president of MRCI, resold the same parcels to Carlos Crisostomo, one of his sales agents, without any consideration. Upon orders of Valencia, the monthly payments of the Ventanillas were remitted to the MRCI as payments of Crisostomo, for which receipts were issued in his name. The receipts were kept by Valencia without the knowledge of the Ventanillas and Crisostomo. The Ventanillas continued paying their monthly installments. On May 30, 1973, MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's collections and remittances. On June 6, 1973, Valencia was removed by the board of directors of MRCI as its president. On November 21, 1978, the Ventanilla spouses, having learned of the supposed sale of their lots to Crisostomo, commenced an action for specific performance, annulment of deeds, and damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc., and Carlos Crisostomo. It was docketed as Civil Case No. 26411 in the Court of First Instance of Quezon City, Branch 7-B. On November 17, 1980, the trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and subsisting, and annulling the contract to sell in favor of Crisostomo. It ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas, free from all liens and encumbrances. Damages and attorney's fees in the total amount of P210,000.00 were also awarded to the Ventanillas for which the MRCI, AUVCI, and Crisostomo were held solidarily liable. The lower court ruled further that if for any reason the transfer of the lots could not be effected, the defendants would be solidarily liable to the Ventanillas for reimbursement of the sum of P73,122.35, representing the amount paid for the two lots, and legal interest thereon from March 1970, plus the decreed damages and attorney's fees. Valencia was also held liable to MRCI for moral and exemplary damages and attorney's fees.
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From this decision, separate appeals were filed by Valencia and MRCI. The appellate court, however, sustained the trial court in toto. MRCI then filed before this Court a petition for certiorari to review the portion of the decision of the Court of Appeals upholding the solidary liability of MRCI, AUVCI and Carlos Crisostomo for the payment of moral and exemplary damages and attorney's fees to the Ventanillas. On November 22, 1990, this Court affirmed the decision by the Court of Appeals and declared the judgment of the trial court immediately executory. The Present Case On January 25, 1991, the spouses Ventanilla filed with the trial court a motion for the issuance of a writ of execution in Civil Case No. 26411. The writ was issued on May 3, 1991, and served upon MRCI on May 9, 1991. In a manifestation and motion filed by MRCI with the trial court on May 24, 1991, the petitioner alleged that the subject properties could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez on February 7, 1990, while their petition was pending in this Court. Nevertheless, MRCI offered to reimburse the amount paid by the respondents, including legal interest plus the aforestated damages. MRCI also prayed that its tender of payment be accepted and all garnishments on their accounts lifted. The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale to Samuel Marquez was void, fraudulent, and in contempt of court and that no claim of ownership over the properties in question had ever been made by Marquez. On July 19, 1991, Judge Elsie Ligot-Telan issued the following order: To ensure that there is enough amount to cover the value of the lots involved if transfer thereof to plaintiff may no longer be effected, pending litigation of said issue, the garnishment made by the Sheriff upon the bank account of Manila Remnant may be lifted only upon the deposit to the Court of the amount of P500,000.00 in cash. MRCI then filed a manifestation and motion for reconsideration praying that it be ordered to reimburse the Ventanillas in the amount of P263,074.10 and that the garnishment of its bank deposit be lifted. This motion was denied by the trial court in its order dated September 30, 1991. A second manifestation and motion filed by MRCI was denied on December 18, 1991. The trial court also required MRCI to show cause why it should not be cited for contempt for disobedience of its judgment. These orders were questioned by MRCI in a petition for certiorari before the respondent court on the ground that they were issued with grave abuse of discretion. The Court of Appeals ruled that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate execution of the judgment. Furthermore, the cash bond fixed by the trial court for the lifting of the garnishment was fair and reasonable because the value of the lot in question had increased considerably. The appellate court also set aside the show-cause order and held that the trial court should have proceeded under Section 10, Rule 39 of the Rules of Court 1 and not Section 9 thereof. In the petition now before us, it is submitted that the trial court and the Court of Appeals committed certain reversible errors to the prejudice of MRCI. The petitioner contends that the trial court may not enforce it garnishment order after the monetary judgment for damages had
8

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already been satisfied and the amount for reimbursement had already been deposited with the sheriff. Garnishment as a remedy is intended to secure the payment of a judgment debt when a well-founded belief exists that the erring party will abscond or deliberately render the execution of the judgment nugatory. As there is no such situation in this case, there is no need for a garnishment order. It is also averred that the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond for the lifting of the garnishment order at P500,000.00. MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a legal impediment to the execution of the absolute deed of sale to the Ventanillas. At the time of the sale to Marquez, the issue of the validity of the sale to the Ventanillas had not yet been resolved. Furthermore, there was no specific injunction against the petitioner reselling the property. Lastly, the petitioner insists that Marquez was a buyer in good faith and had a right to rely on the recitals in the certificate of title. The subject matter of the controversy having passed to an innocent purchaser for value, the respondent court erred in ordering the execution of the absolute deed of sale in favor of the Ventanillas. For their part, the respondents argue that the validity of the sale to them had already been established even while the previous petition was still pending resolution. That petition only questioned the solidary liability of MRCI to the Ventanillas. The portion of the decision ordering the MRCI to execute an absolute deed of sale in favor of the Ventanillas became final and executory when the petitioner failed to appeal it to the Supreme Court. There was no need then for an order enjoining the petitioner from re-selling the property in litigation. They also point to the unusual lack of interest of Marquez in protecting and asserting his right to the disputed property, a clear indication that the alleged sale to him was merely a ploy of the petitioner to evade the execution of the absolute deed of sale in their favor. The petition must fail. The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties. Even in the previous petition, the recognition of that contract was not assigned as error of either the trial court or appellate court. The fact that the MRCI did not question the legality of the award for damages to the Ventanillas also shows that it even then already acknowledged the validity of the contract to sell in favor of the private respondents. On top of all this, there are other circumstances that cast suspicion on the validity, not to say the very existence, of the contract with Marquez. First, the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from the rendition of the judgment of the trial court upholding the sale to the Ventanillas. Second, the petitioner did not invoke the contract with Marquez during the hearing on the motion for the issuance of the writ of execution filed by the private respondents. It disclosed the contract only after the writ of execution had been served upon it. Third, in its manifestation and motion dated December 21, 1990, the petitioner said it was ready to deliver the titles to the Ventanillas provided that their counterclaims against private respondents were paid or offset first. There was no mention of the contract to sell with Marquez on February 7, 1990. Fourth, Marquez has not intervened in any of these proceedings to assert and protect his rights to the subject property as an alleged purchaser in good faith.
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At any rate, even if it be assumed that the contract to sell in favor of Marquez is valid, it cannot prevail over the final and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the Ventanillas. No less importantly, the records do not show that Marquez has already paid the supposed balance amounting to 2 P616,000.00 of the original price of over P800,000.00. The Court notes that the petitioner stands to benefit more from the supposed contract with Marquez than from the contract with the Ventanillas with the agreed price of only P66,571.00. Even if it paid the P210,000.00 damages to the private respondents as decreed by the trial court, the petitioner would still earn more profit if the Marquez contract were to be sustained. We come now to the order of the trial court requiring the posting of the sum of P500,000.00 for the lifting of its garnishment order. While the petitioners have readily complied with the order of the trial court for the payment of damages to the Ventanillas, they have, however, refused to execute the absolute deed of sale. It was for the purpose of ensuring their compliance with this portion of the judgment that the trial court issued the garnishment order which by its term could be lifted only upon the filling of a cash bond of P500,000.00. The petitioner questions the propriety of this order on the ground that it has already partially complied with the judgment and that it has always expressed its willingness to reimburse the amount paid by the respondents. It says that there is no need for a garnishment order because it is willing to reimburse the Ventanillas in lieu of execution of the absolute deed of sale. The alternative judgment of reimbursement is applicable only if the conveyance of the lots is not possible, but it has not been shown that there is an obstacle to such conveyance. As the main obligation of the petitioner is to execute the absolute deed of sale in favor of the Ventanillas, its unjustified refusal to do so warranted the issuance of the garnishment order. Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the 3 litigation. It is an attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person or money owed by such third person or garnishee to the 4 defendant. The rules on attachment also apply to garnishment proceedings. A garnishment order shall be lifted if it established that: (a) the party whose accounts have been garnished has posted a 5 counterbond or has made the requisite cash deposit; 6 (b) the order was improperly or irregularly issued as where there is no 7 ground for garnishment or the affidavit and/or bond filed therefor are 8 defective or insufficient; (c) the property attached is exempt from execution, hence exempt 9 from preliminary attachment or (d) the judgment is rendered against the attaching or garnishing 10 creditor. Partial execution of the judgment is not included in the above enumeration of the legal grounds for the discharge of a garnishment order. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary. As for the counterbond, the lower court did not err when it fixed the same at P500,000.00. As correctly pointed out by the respondent court, that amount corresponds to the current fair market value of the property in litigation and was a reasonable basis for determining the amount of the counterbond.
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Regarding the refusal of the petitioner to execute the absolute deed of sale, Section 10 of Rule 39 of the Rules of Court reads as follows: Sec. 10. Judgment for specific act; vesting title If a judgment directs a party to execute a conveyance of land, or to deliver deeds or other documents, or to perform any other specific act, and the party fails to comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. If real or personal property is within the Philippines, the court in lieu of directing a conveyance thereof may enter judgment divesting the title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance executed in due form of law. Against the unjustified refusal of the petitioner to accept payment of the balance of the contract price, the remedy of the respondents is consignation, conformably to the following provisions of the Civil Code: Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. . . Art. 1258. Consignation shall be made by depositing the things due at the disposal of the judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases. The consignation having been made, the interested parties shall also be notified thereof. Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation. Accordingly, upon consignation by the Ventanillas of the sum due, the trial court may enter judgment canceling the title of the petitioner over the property and transferring the same to the respondents. This judgment shall have the same force and effect as conveyance duly executed in accordance with the requirements of the law. In sum, we find that: 1. No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of sale of the subject property in favor of the respondent Ventanillas; and 2. The lower court did not abuse its discretion when it required the posting of a P500,000.00 cash bond for the lifting of the garnishment order. WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto, with costs against the petitioner. It is so ordered.

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G.R. Nos. 112438-39 December 12, 1995 CHEMPHIL EXPORT & IMPORT CORPORATION (CEIC), petitioner, vs. THE HONORABLE COURT OF APPEALS JAIME Y. GONZALES, as Assignee of the Bank of the Philippine Islands (BPI), RIZAL COMMERCIAL BANKING CORPORATION (RCBC), LAND BANK OF THE PHILIPPINES (LBP), PHILIPPINE COMMERCIAL & INTERNATIONAL BANK (PCIB) and THE PHILIPPINE INVESTMENT SYSTEM ORGANIZATION (PISO), respondents. G.R. No. 113394 December 12, 1995 PHILIPPINE COMMERCIAL INDUSTRIAL BANK (AND ITS ASSIGNEE JAIME Y. GONZALES) petitioner, vs. HONORABLE COURT OR APPEALS and CHEMPHIL EXPORT AND IMPORT CORPORATION (CEIC),respondents. KAPUNAN, J.: Before us is a legal tug-of-war between the Chemphil Export and Import Corporation (hereinafter referred to as CEIC), on one side, and the PISO and Jaime Gonzales as assignee of the Bank of the Philippine Islands (BPI), Rizal Commercial Banking Corporation (RCBC), Land Bank of the Philippines (LBP) and Philippine Commercial International Bank (PCIB), on the other (hereinafter referred to as the consortium), over 1,717,678 shares of stock (hereinafter referred to as the "disputed shares") in the Chemical Industries of the Philippines (Chemphil/CIP). Our task is to determine who is the rightful owner of the disputed shares. Pursuant to our resolution dated 30 May 1994, the instant case is a consolidation of two petitions for review filed before us as follows: In G.R. Nos. 112438-39, CEIC seeks the reversal of the decision of the Court of Appeals (former Twelfth Division) promulgated on 30 June 1993 and its resolution of 29 October 1993, denying petitioner's motion for reconsideration in the consolidated cases entitled "Dynetics, Inc., et al. v. PISO, et al." (CA-G.R. No. 20467) and "Dynetics, Inc., et al. v. PISO, et al.; CEIC, Intervenor-Appellee" (CA-G.R. CV No. 26511). The dispositive portion of the assailed decision reads, thus: WHEREFORE, this Court resolves in these consolidated cases as follows: 1. The Orders of the Regional Trial Court, dated March 25, 1988, and May 20, 1988, subject of CA-G.R. CV No. 10467, are SET ASIDE and judgment is hereby rendered in favor of the consortium and against appellee Dynetics, Inc., the amount of the judgment, to be determined by Regional Trial Court, taking into account the value of assets that the consortium may have already recovered and shall have recovered in accordance with the other portions of this decision. 2. The Orders of the Regional Trial Court dated December 19, 1989 and March 5, 1990 are hereby REVERSED and SET ASIDE and judgment is hereby rendered confirming the ownership of the consortium over the Chemphil shares of stock, subject of CA-G.R. CV No. 26511, and the Order dated September 4, 1989, is reinstated. No pronouncement as to costs. 1 SO ORDERED. In G.R. No. 113394, PCIB and its assignee, Jaime Gonzales, ask for the annulment of the Court of Appeals' decision (former Special Ninth Division) promulgated on 26 March 1993 in "PCIB v. Hon. Job B. Madayag & CEIC" (CA-G.R. SP NO. 20474) dismissing the petition for certiorari, prohibition and mandamus filed by PCIB and of said court's resolution dated 11 January 1994 denying their motion for 2 reconsideration of its decision.
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The antecedent facts leading to the aforementioned controversies are as follows: On September 25, 1984, Dynetics, Inc. and Antonio M. Garcia filed a complaint for declaratory relief and/or injunction against the PISO, BPI, LBP, PCIB and RCBC or the consortium with the Regional Trial Court of Makati, Branch 45 (Civil Case No. 8527), seeking judicial declaration, construction and interpretation of the validity of the surety agreement that Dynetics and Garcia had entered into with the consortium and to perpetually enjoin the latter from claiming, collecting and enforcing any purported obligations which Dynetics and Garcia might have 3 undertaken in said agreement. The consortium filed their respective answers with counterclaims alleging that the surety agreement in question was valid and binding and that Dynetics and Garcia were liable under the terms of the said agreement. It likewise applied for the issuance of a writ of preliminary 4 attachment against Dynetics and Garcia. Seven months later, or on 23 April 1985, Dynetics, Antonio Garcia and Matrix Management & Trading Corporation filed a complaint for declaratory relief and/or injunction against the Security Bank & Trust Co. (SBTC case) before the Regional Trial Court of Makati, Branch 135 5 docketed as Civil Case No. 10398. On 2 July 1985, the trial court granted SBTC's prayer for the issuance of a writ of preliminary attachment and on 9 July 1985, a notice of garnishment covering Garcia's shares in CIP/Chemphil (including the disputed shares) was served on Chemphil through its then President. The notice of garnishment was duly annotated in the stock and transfer 6 books of Chemphil on the same date. On 6 September 1985, the writ of attachment in favor of SBTC was 7 lifted. However, the same was reinstated on 30 October 1985. In the meantime, on 12 July 1985, the Regional Trial Court in Civil Case No. 8527 (the consortium case) denied the application of Dynetics and Garcia for preliminary injunction and instead granted the consortium's prayer for a consolidated writ of preliminary attachment. Hence, on 19 July 1985, after the consortium had filed the required bond, a writ of attachment was issued and various real and personal properties of Dynetics and Garcia were garnished, including the disputed 8 shares. This garnishment, however, was not annotated in Chemphil's stock and transfer book. On 8 September 1987, PCIB filed a motion to dismiss the complaint of Dynetics and Garcia for lack of interest to prosecute and to submit its counterclaims for decision, adopting the evidence it had adduced at the 9 hearing of its application for preliminary attachment. On 25 March 1988, the Regional Trial Court dismissed the complaint of Dynetics and Garcia in Civil Case No. 8527, as well as the counterclaims of the consortium, thus: Resolving defendant's, Philippine Commercial International Bank, MOTION TO DISMISS WITH MOTION TO SUBMIT DEFENDANT PCIBANK's COUNTERCLAIM FOR DECISION, dated September 7, 1987: (1) The motion to dismiss is granted; and the instant case is hereby ordered dismissed pursuant to Sec. 3, Rule 17 of the Revised Rules of Court, plaintiff having failed to comply with the order dated July 16, 1987, and having not taken further steps to prosecute the case; and (2) The motion to submit said defendant's counterclaim for decision is denied; there is no need; said counterclaim is likewise dismissed under the authority of Dalman vs. City Court of Dipolog City, L-63194, January 21, 1985, wherein the Supreme Court stated that if the civil case is dismissed, so also is the counterclaim filed therein. "A person cannot 10 eat his cake and have it at the same time" (p. 645, record, Vol. I).
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The motions for reconsideration filed by the consortium were, likewise, denied by the trial court in its order dated 20 May 1988: The Court could have stood pat on its order dated 25 March 1988, in regard to which the defendants-banks concerned filed motions for reconsideration. However, inasmuch as plaintiffs commented on said motions that: "3). In any event, so as not to unduly foreclose on the rights of the respective parties to refile and prosecute their respective causes of action, plaintiffs manifest their conformity to the modification of this Honorable Court's order to indicate that the dismissal of the complaint and the counterclaims is without prejudice." (p. 2, plaintiffs' COMMENT etc. dated May 20, 1988). The Court is inclined to so modify the said order. WHEREFORE , the order issued on March 25, 1988, is hereby modified in the sense that the dismissal of the complaint as well as of the counterclaims of defendants RCBC, LBP, PCIB and BPI shall be 11 considered as without prejudice (p. 675, record, Vol. I). Unsatisfied with the aforementioned order, the consortium appealed to the Court of Appeals, docketed as CA-G.R. CV No. 20467. On 17 January 1989 during the pendency of consortium's appeal in CAG.R. CV No. 20467, Antonio Garcia and the consortium entered into a Compromise Agreement which the Court of Appeals approved on 22 May 1989 and became the basis of its judgment by compromise. Antonio Garcia was dropped as a party to the appeal leaving the 12 consortium to proceed solely against Dynetics, Inc. On 27 June 1989, 13 entry of judgment was made by the Clerk of Court. Hereunder quoted are the salient portions of said compromise agreement: xxx xxx xxx 3. Defendants, in consideration of avoiding an extended litigation, having agreed to limit their claim against plaintiff Antonio M. Garcia to a principal sum of P145 Million immediately demandable and to waive all other claims to interest, penalties, attorney's fees and other charges. The aforesaid compromise amount of indebtedness of P145 Million shall earn interest of eighteen percent (18%) from the date of this Compromise. 4. Plaintiff Antonio M. Garcia and herein defendants have no further claims against each other. 5. This Compromise shall be without prejudice to such claims as the parties herein may have against plaintiff Dynetics, Inc. 6. Plaintiff Antonio M. Garcia shall have two (2) months from date of this Compromise within which to work for the entry and participation of his other creditor, Security Bank and Trust Co., into this Compromise. Upon the expiration of this period, without Security Bank and Trust Co. having joined, this Compromise shall be submitted to the Court for its 14 information and approval (pp. 27, 28-31,rollo, CA-G.R. CV No. 10467). It appears that on 15 July 1988, Antonio Garcia under a Deed of Sale transferred to Ferro Chemicals, Inc. (FCI) the disputed shares and other properties for P79,207,331.28. It was agreed upon that part of the purchase price shall be paid by FCI directly to SBTC for whatever judgment credits that may be adjudged in the latter's favor and against 15 Antonio Garcia in the aforementioned SBTC case. On 6 March 1989, FCI, through its President Antonio M. Garcia, issued a Bank of America Check No. 860114 in favor of SBTC in the amount of 16 P35,462,869.62. SBTC refused to accept the check claiming that the amount was not sufficient to discharge the debt. The check was thus consigned by Antonio Garcia and Dynetics with the Regional Trial Court 17 as payment of their judgment debt in the SBTC case.
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On 26 June 1989, FCI assigned its 4,119,614 shares in Chemphil, which included the disputed shares, to petitioner CEIC. The shares were registered and recorded in the corporate books of Chemphil in CEIC's 18 name and the corresponding stock certificates were issued to it. Meanwhile, Antonio Garcia, in the consortium case, failed to comply with the terms of the compromise agreement he entered into with the consortium on 17 January 1989. As a result, on 18 July 1989, the consortium filed a motion for execution which was granted by the trial court on 11 August 1989. Among Garcia's properties that were levied upon on execution were his 1,717,678 shares in Chemphil (the disputed 19 shares) previously garnished on 19 July 1985. On 22 August 1989, the consortium acquired the disputed shares of stock at the public auction sale conducted by the sheriff for 20 P85,000,000.00. On same day, a Certificate of Sale covering the disputed shares was issued to it. 21 On 30 August 1989, the consortium filed a motion (dated 29 August 1989) to order the corporate secretary of Chemphil to enter in its stock and transfer books the sheriff's certificate of sale dated 22 August 1989, and to issue new certificates of stock in the name of the banks concerned. The trial court granted said motion in its order dated 4 September 1989, thus: For being legally proper, defendant's MOTION TO ORDER THE CORPORATE SECRETARY OF CHEMICAL INDUSTRIES OF THE PHILS., INC. (CHEMPIL) TO ENTER IN THE STOCK AND TRANSFER BOOKS OF CHEMPHIL THE SHERIFF'S CERTIFICATE OF SALE DATED AUGUST 22, 1989 AND TO ISSUE NEW CERTIFICATES OF STOCK IN THE NAME OF THE DEFENDANT BANKS, dated August 29, 1989, is hereby granted. WHEREFORE, the corporate secretary of the aforesaid corporation, or whoever is acting for and in his behalf, is hereby ordered to (1) record and/or register the Certificate of Sale dated August 22, 1989 issued by Deputy Sheriff Cristobal S. Jabson of this Court; (2) to cancel the certificates of stock of plaintiff Antonio M. Garcia and all those which may have subsequently been issued in replacement and/or in substitution thereof; and (3) to issue in lieu of the said shares new shares of stock in the name of the defendant Banks, namely, PCIB, BPI, RCBC, LBP and PISO bank in such proportion as their respective claims 22 would appear in this suit (p. 82, record, Vol. II). On 26 September 1989, CEIC filed a motion to intervene (dated 25 September 1989) in the consortium case seeking the recall of the abovementioned order on grounds that it is the rightful owner of the 23 disputed shares. It further alleged that the disputed shares were previously owned by Antonio M. Garcia but subsequently sold by him on 15 July 1988 to Ferro Chemicals, Inc. (FCI) which in turn assigned the same to CEIC in an agreement dated 26 June 1989. On 27 September 1989, the trial court granted CEIC's motion allowing it to intervene, but limited only to the incidents covered by the order dated 4 September 1989. In the same order, the trial court directed Chemphil's corporate secretary to temporarily refrain from implementing the 4 September 1989 24 order. On 2 October 1989, the consortium filed their opposition to CEIC's motion for intervention alleging that their attachment lien over the disputed shares of stocks must prevail over the private sale in favor of the CEIC considering that said shares of stock were garnished in the 25 consortium's favor as early as 19 July 1985. On 4 October 1989, the consortium filed their opposition to CEIC's motion to set aside the 4 September 1989 order and moved to lift the 26 27 September 1989 order.
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On 12 October 1989, the consortium filed a manifestation and motion to lift the 27 September 1989 order, to reinstate the 4 September 1989 order and to direct CEIC to surrender the disputed stock certificates of Chemphil in its possession within twenty-four (24) hours, failing in which the President, Corporate Secretary and stock and transfer agent of Chemphil be directed to register the names of the banks making up the consortium as owners of said shares, sign the new certificates of stocks evidencing their ownership over said shares and to immediately 27 deliver the stock certificates to them. Resolving the foregoing motions, the trial court rendered an order dated 19 December 1989, the dispositive portion of which reads as follows: WHEREFORE, premises considered, the Urgent Motion dated September 25, 1989 filed by CEIC is hereby GRANTED. Accordingly, the Order of September 4, 1989, is hereby SET ASIDE, and any and all acts of the Corporate Secretary of CHEMPHIL and/or whoever is acting for and in his behalf, as may have already been done, carried out or implemented pursuant to the Order of September 4, 1989, are hereby nullified. PERFORCE, the CONSORTIUM'S Motions dated October 3, 1989 and October 11, 1989, are both hereby denied for lack of merit. The Cease and Desist Order dated September 27, 1989, is hereby AFFIRMED and made PERMANENT. 28 SO ORDERED. In so ruling, the trial court ratiocinated in this wise: xxx xxx xxx After careful and assiduous consideration of the facts and applicable law and jurisprudence, the Court holds that CEIC's Urgent Motion to Set Aside the Order of September 4, 1989 is impressed with merit. The CONSORTIUM has admitted that the writ of attachment/garnishment issued on July 19, 1985 on the shares of stock belonging to plaintiff Antonio M. Garcia was not annotated and registered in the stock and transfer books of CHEMPHIL. On the other hand, the prior attachment issued in favor of SBTC on July 2, 1985 by Branch 135 of this Court in Civil Case No. 10398, against the same CHEMPHIL shares of Antonio M. Garcia, was duly registered and annotated in the stock and transfer books of CHEMPHIL. The matter of non-recording of the Consortium's attachment in Chemphil's stock and transfer book on the shares of Antonio M. Garcia assumes significance considering CEIC's position that FCI and later CEIC acquired the CHEMPHIL shares of Antonio M. Garcia without knowledge of the attachment of the CONSORTIUM. This is also important as CEIC claims that it has been subrogated to the rights of SBTC since CEIC's predecessor-in-interest, the FCI, had paid SBTC the amount of P35,462,869.12 pursuant to the Deed of Sale and Purchase of Shares of Stock executed by Antonio M. Garcia on July 15, 1988. By reason of such payment, sale with the knowledge and consent of Antonio M. Garcia, FCI and CEIC, as party-in-interest to FCI, are subrogated by operation of law to the rights of SBTC. The Court is not unaware of the citation in CEIC's reply that "as between two (2) attaching creditors, the one whose claims was first registered on the books of the corporation enjoy priority." (Samahang Magsasaka, Inc. vs. Chua Gan, 96 Phil. 974.) The Court holds that a levy on the shares of corporate stock to be valid and binding on third persons, the notice of attachment or garnishment must be registered and annotated in the stock and transfer books of the corporation, more so when the shares of the corporation are listed and traded in the stock exchange, as in this case. As a matter of fact, in the CONSORTIUM's motion of August 30, 1989, they specifically move
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to "order the Corporate Secretary of CHEMPHIL to enter in the stock and transfer books of CHEMPHIL the Sheriff's Certificate of Sale dated August 22, 1989." This goes to show that, contrary to the arguments of the CONSORTIUM, in order that attachment, garnishment and/or encumbrances affecting rights and ownership on shares of a corporation to be valid and binding, the same has to be recorded in the stock and transfer books. Since neither CEIC nor FCI had notice of the CONSORTIUM's attachment of July 19, 1985, CEIC's shares of stock in CHEMPHIL, legally acquired from Antonio M. Garcia, cannot be levied upon in execution to satisfy his judgment debts. At the time of the Sheriff's levy on execution, Antonio M. Garcia has no more in CHEMPHIL which could be levied 29 upon. xxx xxx xxx On 23 January 1990, the consortium and PCIB filed separate motions for reconsideration of the aforestated order which were opposed by petitioner 30 CEIC. On 5 March 1990, the trial court denied the motions for 31 reconsideration. On 16 March 1990, the consortium appealed to the Court of Appeals (CA-G.R. No. 26511). In its Resolution dated 9 August 1990, the Court of 32 Appeals consolidated CA-G.R. No. 26511 with CA-G.R. No. 20467. The issues raised in the two cases, as formulated by the Court of Appeals, are as follows: I WHETHER OR NOT, UNDER THE PECULIAR CIRCUMSTANCES OF THE CASE, THE TRIAL COURT ERRED IN DISMISSING THE COUNTERCLAIMS OF THE CONSORTIUM IN CIVIL CASE NO. 8527; II WHETHER OR NOT THE DISMISSAL OF CIVIL CASE NO. 8527 RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT ISSUED THEREIN EVEN AS THE CONSORTIUM APPEALED THE ORDER DISMISSING CIVIL CASE NO. 8527; III WHETHER OR NOT THE JUDGMENT BASED ON COMPROMISE RENDERED BY THIS COURT ON MAY 22, 1989 HAD THE EFFECT OF DISCHARGING THE ATTACHMENTS ISSUED IN CIVIL CASE NO. 8527; IV WHETHER OR NOT THE ATTACHMENT OF SHARES OF STOCK, IN ORDER TO BIND THIRD PERSONS, MUST BE RECORDED IN THE STOCK AND TRANSFER BOOK OF THE CORPORATION; AND V WHETHER OR NOT FERRO CHEMICALS, INC. (FCI), AND ITS SUCCESSORIN-INTEREST, CEIC, WERE SUBROGATED TO THE RIGHTS OF SECURITY BANK & TRUST COMPANY (SBTC) IN A SEPARATE CIVIL ACTION. (This issue appears to be material as SBTC is alleged to have obtained an earlier attachment over the same Chemphil shares that the consortium 33 seeks to recover in the case at bar). On 6 April 1990, the PCIB separately filed with the Court of Appeals a petition for certiorari, prohibition andmandamus with a prayer for the issuance of a writ of preliminary injunction (CA-G.R. No. SP-20474), likewise, assailing the very same orders dated 19 December 1989 and 5 34 March 1990, subject of CA-G.R. No. 26511. On 30 June 1993, the Court of Appeals (Twelfth Division) in CA-G.R. No. 26511 and CA-G.R. No. 20467 rendered a decision reversing the orders of the trial court and confirming the ownership of the consortium over
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the disputed shares. CEIC's motion for reconsideration was denied on 35 29 October 1993. In ruling for the consortium, the Court of Appeals made the following 36 ratiocination: On the first issue, it ruled that the evidence offered by the consortium in support of its counterclaims, coupled with the failure of Dynetics and Garcia to prosecute their case, was sufficient basis for the RTC to pass upon and determine the consortium's counterclaims. The Court of Appeals found no application for the ruling in Dalman v. City Court of Dipolog, 134 SCRA 243 (1985) that "a person cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed therein" because the factual background of the present action is different. In the instant case, both Dynetics and Garcia and the consortium presented testimonial and documentary evidence which clearly should have supported a judgment on the merits in favor of the consortium. As the consortium correctly argued, the net atrocious effect of the Regional Trial Court's ruling is that it allows a situation where a party litigant is forced to plead and prove compulsory counterclaims only to be denied those counterclaims on account of the adverse party's failure to prosecute his case. Verily, the consortium had no alternative but to present its counterclaims in Civil Case No. 8527 since its counterclaims are compulsory in nature. On the second issue, the Court of Appeals opined that unless a writ of attachment is lifted by a special order specifically providing for the discharge thereof, or unless a case has been finally dismissed against the party in whose favor the attachment has been issued, the attachment lien subsists. When the consortium, therefore, took an appeal from the Regional Trial Court's orders of March 25, 1988 and May 20, 1988, such appeal had the effect of preserving the consortium's attachment liens secured at the inception of Civil Case No. 8527, invoking the rule in Olib v. Pastoral,188 SCRA 692 (1988) that where the main action is appealed, the attachment issued in the said main case is also considered appealed. Anent the third issue, the compromise agreement between the consortium and Garcia dated 17 January 1989 did not result in the abandonment of its attachment lien over his properties. Said agreement was approved by the Court of Appeals in a Resolution dated 22 May 1989. The judgment based on the compromise agreement had the effect of preserving the said attachment lien as security for the satisfaction of said judgment (citing BF Homes, Inc. v. CA, 190 SCRA 262, [1990]). As to the fourth issue, the Court of Appeals agreed with the consortium's position that the attachment of shares of stock in a corporation need not be recorded in the corporation's stock and transfer book in order to bind third persons. Section 7(d), Rule 57 of the Rules of Court was complied with by the consortium (through the Sheriff of the trial court) when the notice of garnishment over the Chemphil shares of Garcia was served on the president of Chemphil on July 19, 1985. Indeed, to bind third persons, no law requires that an attachment of shares of stock be recorded in the stock and transfer book of a corporation. The statement attributed by the Regional Trial Court to the Supreme Court in Samahang Magsasaka, [Link]. Gonzalo Chua Guan, G.R. No. L-7252, February 25, 1955 (unreported), to the effect that "as between two attaching creditors, the one whose claim was registered first on the books of the corporation enjoys priority," is an obiter dictum that does not modify the procedure laid down in Section 7(d), Rule 57 of the Rules of Court.
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Therefore, ruled the Court of Appeals, the attachment made over the Chemphil shares in the name of Garcia on July 19, 1985 was made in accordance with law and the lien created thereby remained valid and subsisting at the time Garcia sold those shares to FCI (predecessor-ininterest of appellee CEIC) in 1988. Anent the last issue, the Court of Appeals rejected CEIC's subrogation theory based on Art. 1302 (2) of the New Civil Code stating that the obligation to SBTC was paid by Garcia himself and not by a third party (FCI). The Court of Appeals further opined that while the check used to pay SBTC was a FCI corporate check, it was funds of Garcia in FCI that was used to pay off SBTC. That the funds used to pay off SBTC were funds of Garcia has not been refuted by FCI or CEIC. It is clear, therefore, that there was an attempt on the part of Garcia to use FCI and CEIC as convenient vehicles to deny the consortium its right to make itself whole through an execution sale of the Chemphil shares attached by the consortium at the inception of Civil Case No. 8527. The consortium, therefore, is entitled to the issuance of the Chemphil shares of stock in its favor. The Regional Trial Court's order of September 4, 1989, should, therefore, be reinstated in toto. Accordingly, the question of whether or not the attachment lien in favor of SBTC in the SBTC case is superior to the attachment lien in favor of the consortium in Civil Case No. 8527 becomes immaterial with respect to the right of intervenor-appellee CEIC. The said issue would have been relevant had CEIC established its subrogation to the rights of SBTC. On 26 March 1993, the Court of Appeals (Special Ninth Division) in CAG.R. No. SP 20474 rendered a decision denying due course to and dismissing PCIB's petition for certiorari on grounds that PCIB violated the rule against forum-shopping and that no grave abuse of discretion was committed by respondent Regional Trial Court in issuing its assailed orders dated 19 December 1989 and 5 March 1990. PCIB's 37 motion for reconsideration was denied on 11 January 1994. On 7 July 1993, the consortium, with the exception of PISO, assigned without recourse all its rights and interests in the disputed shares to 38 Jaime Gonzales. On 3 January 1994, CEIC filed the instant petition for review docketed as G.R. Nos. 112438-39 and assigned the following errors: I. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SETTING ASIDE AND REVERSING THE ORDERS OF THE REGIONAL TRIAL COURT DATED DECEMBER 5, 1989 AND MARCH 5, 1990 AND IN NOT CONFIRMING PETITIONER'S OWNERSHIP OVER THE DISPUTED CHEMPHIL SHARES AGAINST THE FRIVOLOUS AND UNFOUNDED CLAIMS OF THE CONSORTIUM. II. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED: (1) In not holding that the Consortium's attachment over the disputed Chemphil shares did not vest any priority right in its favor and cannot bind third parties since admittedly its attachment on 19 July 1985 was not recorded in the stock and transfer books of Chemphil, and subordinate to the attachment of SBTC which SBTC registered and annotated in the stock and transfer books of Chemphil on 2 July 1985, and that the Consortium's attachment failed to comply with Sec. 7(d), Rule 57 of the Rules as evidenced by the notice of garnishment of the deputy sheriff of the trial court dated 19 July 1985 (annex "D") which the sheriff served on a certain Thelly Ruiz who was neither President nor managing agent of Chemphil;
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(2) In not applying the case law enunciated by this Honorable Supreme Court inSamahang Magsasaka, Inc. vs. Gonzalo Chua Guan, 96 Phil. 974 that as between two attaching creditors, the one whose claim was registered first in the books of the corporation enjoys priority, and which respondent Court erroneously characterized as mere obiter dictum; (3) In not holding that the dismissal of the appeal of the Consortium from the order of the trial court dismissing its counterclaim against Antonio M. Garcia and the finality of the compromise agreement which ended the litigation between the Consortium and Antonio M. Garcia in the Dynetics case had ipso jure discharged the Consortium's purported attachment over the disputed shares. III. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT CEIC HAD BEEN SUBROGATED TO THE RIGHTS OF SBTC SINCE CEIC'S PREDECESSOR IN INTEREST HAD PAID SBTC PURSUANT TO THE DEED OF SALE AND PURCHASE OF STOCK EXECUTED BY ANTONIO M. GARCIA ON JULY 15, 1988, AND THAT BY REASON OF SUCH PAYMENT, WITH THE CONSENT AND KNOWLEDGE OF ANTONIO M. GARCIA, FCI AND CEIC, AS PARTY IN INTEREST TO FCI, WERE SUBROGATED BY OPERATION OF LAW TO THE RIGHTS OF SBTC. IV. THE RESPONDENT COURT OF APPEALS GRAVELY ERRED AND MADE UNWARRANTED INFERENCES AND CONCLUSIONS, WITHOUT ANY SUPPORTING EVIDENCE, THAT THERE WAS AN ATTEMPT ON THE PART OF ANTONIO M. GARCIA TO USE FCI AND CEIC AS CONVENIENT VEHICLES TO DENY THE CONSORTIUM ITS RIGHTS TO MAKE ITSELF WHOLE THROUGH AN EXECUTION OF THE CHEMPHIL SHARES 39 PURPORTEDLY ATTACHED BY THE CONSORTIUM ON 19 JULY 1985. On 2 March 1994, PCIB filed its own petition for review docketed as G.R. No. 113394 wherein it raised the following issues: I. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE BY FINDING RESPONDENT CEIC AS HAVING BEEN SUBROGATED TO THE RIGHTS OF SBTC BY THE PAYMENT BY FCI OF GARCIA'S DEBTS TO THE LATTER DESPITE THE FACT THAT A. FCI PAID THE SBTC DEBT BY VIRTUE OF A CONTRACT BETWEEN FCI AND GARCIA, THUS, LEGAL SUBROGATION DOES NOT ARISE; B. THE SBTC DEBT WAS PAID BY GARCIA HIMSELF AND NOT BY FCI, HENCE, SUBROGATION BY PAYMENT COULD NOT HAVE OCCURRED; C. FCI DID NOT ACQUIRE ANY RIGHT OVER THE DISPUTED SHARES AS SBTC HAD NOT YET LEVIED UPON NOR BOUGHT THOSE SHARES ON EXECUTION. ACCORDINGLY, WHAT FCI ACQUIRED FROM SBTC WAS SIMPLY A JUDGMENT CREDIT AND AN ATTACHMENT LIEN TO SECURE ITS SATISFACTION. II. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN SUSTAINING THE ORDERS OF THE TRIAL COURT DATED DECEMBER 19, 1989 AND MARCH 5, 1990 WHICH DENIED PETITIONER'S OWNERSHIP OVER THE DISPUTED SHARES NOTWITHSTANDING PROVISIONS OF LAW AND EXTANT JURISPRUDENCE ON THE MATTER THAT PETITIONER AND THE CONSORTIUM HAVE PREFERRED SENIOR RIGHTS THEREOVER. III. RESPONDENT COURT OF APPEAL COMMITTED SERIOUS ERROR IN CONCLUDING THAT THE DISMISSAL OF THE COMPLAINT AND THE COUNTERCLAIM IN CIVIL CASE NO. 8527 ALSO RESULTED IN THE DISCHARGE OF THE WRIT OF ATTACHMENT DESPITE THE RULINGS OF THIS HONORABLE COURT IN BF HOMES VS. COURT OF APPEALS, G.R. NOS. 76879 AND 77143, OCTOBER 3, 1990, 190 SCRA 262, AND IN OLIB
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VS. PASTORAL, G.R. NO. 81120, AUGUST 20, 1990, 188 SCRA 692 TO THE CONTRARY. IV. RESPONDENT COURT OF APPEALS EXCEEDED ITS JURISDICTION IN RULING ON THE MERITS OF THE MAIN CASE NOTWITHSTANDING THAT THOSE MATTERS WERE NOT ON APPEAL BEFORE IT. V. RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT PETITIONER IS GUILTY OF FORUM SHOPPING DESPITE THE FACT THAT SC CIRCULAR NO. 28-91 WAS NOT YET IN FORCE AND EFFECT AT THE TIME THE PETITION WAS FILED BEFORE RESPONDENT APPELLATE COURT, AND THAT ITS COUNSEL AT THAT TIME HAD ADEQUATE BASIS TO BELIEVE THAT CERTIORARI AND NOT AN APPEAL 40 OF THE TRIAL COURT'S ORDERS WAS THE APPROPRIATE RELIEF. As previously stated, the issue boils down to who is legally entitled to the disputed shares of Chemphil. We shall resolve this controversy by examining the validity of the claims of each party and, thus, determine whose claim has priority. CEIC's claim CEIC traces its claim over the disputed shares to the attachment lien obtained by SBTC on 2 July 1985 against Antonio Garcia in Civil Case No. 10398. It avers that when FCI, CEIC's predecessor-in-interest, paid SBTC the due obligations of Garcia to the said bank pursuant to the 41 Deed of Absolute Sale and Purchase of Shares of Stock, FCI, and later CEIC, was subrogated to the rights of SBTC, particularly to the latter's aforementioned attachment lien over the disputed shares. CEIC argues that SBTC's attachment lien is superior as it was obtained on 2 July 1985, ahead of the consortium's purported attachment on 19 July 1985. More importantly, said CEIC lien was duly recorded in the stock and transfer books of Chemphil. CEIC's subrogation theory is unavailing. By definition, subrogation is "the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts; this is the subrogation referred to in article 1302. Conventional subrogation is that which takes place by agreement of the parties . . 42 ." CEIC's theory is premised on Art. 1302 (2) of the Civil Code which states: Art. 1302. It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge; (2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor; (3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share. (Emphasis ours.) Despite, however, its multitudinous arguments, CEIC presents an erroneous interpretation of the concept of subrogation. An analysis of the situations involved would reveal the clear inapplicability of Art. 1302 (2). Antonio Garcia sold the disputed shares to FCI for a consideration of P79,207,331.28. FCI, however, did not pay the entire amount to Garcia as it was obligated to deliver part of the purchase price directly to SBTC pursuant to the following stipulation in the Deed of Sale: Manner of Payment Payment of the Purchase Price shall be made in accordance with the following order of preferenceprovided that in no instance shall the total amount paid by the Buyer exceed the Purchase Price:
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a. Buyer shall pay directly to the Security Bank and Trust Co. the amount determined by the Supreme Court as due and owing in favor of the said bank by the Seller. The foregoing amount shall be paid within fifteen (15) days from the date the decision of the Supreme Court in the case entitled "Antonio M. Garcia, et al. vs. Court of Appeals, et al." G.R. Nos. 82282-83 43 becomes final and executory. (Emphasis ours.) Hence, when FCI issued the BA check to SBTC in the amount of P35,462,869.62 to pay Garcia's indebtedness to the said bank, it was in effect paying with Garcia's money, no longer with its own, because said amount was part of the purchase price which FCI owed Garcia in payment for the sale of the disputed shares by the latter to the former. The money "paid" by FCI to SBTC, thus properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC but through a third party FCI. It is, therefore, of no consequence that what was used to pay SBTC was a corporate check of FCI. As we have earlier stated, said check no longer represented FCI funds but Garcia's money, being as it was part of FCI's payment for the acquisition of the disputed shares. The FCI check should not be taken at face value, the attendant circumstances must also be considered. The aforequoted contractual stipulation in the Deed of Sale dated 15 July 1988 between Antonio Garcia and FCI is nothing more but an arrangement for the sake of convenience. Payment was to be effected in the aforesaid manner so as to prevent money from changing hands needlessly. Besides, the very purpose of Garcia in selling the disputed shares and his other properties was to "settle certain civil suits filed 44 against him." Since the money used to discharge Garcia's debt rightfully belonged to him, FCI cannot be considered a third party payor under Art. 1302 (2). It was but a conduit, or as aptly categorized by respondents, merely an agent as defined in Art. 1868 of the Civil Code: Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. FCI was merely fulfilling its obligation under the aforementioned Deed of Sale. Additionally, FCI is not a disinterested party as required by Art. 1302 (2) since the benefits of the extinguishment of the obligation would 45 redound to none other but itself. Payment of the judgment debt to SBTC resulted in the discharge of the attachment lien on the disputed shares purchased by FCI. The latter would then have a free and "clean" title to said shares. In sum, CEIC, for its failure to fulfill the requirements of Art. 1302 (2), was not subrogated to the rights of SBTC against Antonio Garcia and did not acquire SBTC's attachment lien over the disputed shares which, in turn, had already been lifted or discharged upon satisfaction by 46 Garcia, through FCI, of his debt to the said bank. The rule laid down in the case of Samahang Magsasaka, Inc. v. Chua 47 Guan, that as between two attaching creditors the one whose claim was registered ahead on the books of the corporation enjoys priority, clearly has no application in the case at bench. As we have amply discussed, since CEIC was not subrogated to SBTC's right as attaching creditor, which right in turn, had already terminated after Garcia paid his debt to SBTC, it cannot, therefore, be categorized as an attaching creditor in the present controversy. CEIC cannot resurrect and claim a right which no longer exists. The issue in the instant case, then, is priority between an attaching creditor (the consortium) and a
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purchaser (FCI/CEIC) of the disputed shares of stock and not between two attaching creditors the subject matter of the aforestated Samahang Magsasaka case. CEIC, likewise, argues that the consortium's attachment lien over the disputed Chemphil shares is null and void and not binding on third parties due to the latter's failure to register said lien in the stock and transfer books of Chemphil as mandated by the rule laid down by 48 the Samahang Magsasaka v. Chua Guan. The attachment lien acquired by the consortium is valid and effective. Both the Revised Rules of Court and the Corporation Code do not require annotation in the corporation's stock and transfer books for the attachment of shares of stock to be valid and binding on the corporation and third party. Section 74 of the Corporation Code which enumerates the instances where registration in the stock and transfer books of a corporation provides: Sec. 74. Books to be kept; stock transfer agent. xxx xxx xxx Stock corporations must also keep a book to be known as the stock and transfer book, in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any settlement; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days. (Emphasis ours.) xxx xxx xxx Section 63 of the same Code states: Sec. 63. Certificate of stock and transfer of shares. The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (Emphasis ours.) Are attachments of shares of stock included in the term "transfer" as provided in Sec. 63 of the Corporation Code? We rule in the negative. 49 As succinctly declared in the case of Monserrat v. Ceron, "chattel mortgage over shares of stock need not be registered in the corporation's stock and transfer book inasmuch as chattel mortgage over shares of stock does not involve a "transfer of shares," and that only absolute transfers of shares of stock are required to be recorded in the corporation's stock and transfer book in order to have "force and effect as against third persons." xxx xxx xxx
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The word "transferencia" (transfer) is defined by the "Diccionario de la Academia de la Lengua Castellana" as "accion y efecto de transfeir" (the act and effect of transferring); and the verb "transferir", as "ceder or renunciar en otro el derecho o dominio que se tiene sobre una cosa, haciendole dueno de ella" (to assign or waive the right in, or absolute ownership of, a thing in favor of another, making him the owner thereof). In the Law Dictionary of "Words and Phrases", third series, volume 7, p. 5867, the word "transfer" is defined as follows: "Transfer" means any act by which property of one person is vested in another, and "transfer of shares", as used in Uniform Stock Transfer Act (Comp. St. Supp. 690), implies any means whereby one may be divested of and another acquire ownership of stock. (Wallach vs. Stein [N.J.], 136 A., 209, 210.) xxx xxx xxx In the case of Noble vs. Ft. Smith Wholesale Grocery Co. (127 Pac., 14, 17; 34 Okl., 662; 46 L.R.A. [N.S.], 455), cited in Words and Phrases, second series, vol. 4, p. 978, the following appears: A "transfer" is the act by which the owner of a thing delivers it to another with the intent of passing the rights which he has in it to the latter, and a chattel mortgage is not within the meaning of such term. 50 xxx xxx xxx. Although the Monserrat case refers to a chattel mortgage over shares of stock, the same may be applied to the attachment of the disputed shares of stock in the present controversy since an attachment does not constitute an absolute conveyance of property but is primarily used as a means "to seize the debtor's property in order to secure the debt 51 or claim of the creditor in the event that a judgment is rendered." Known commentators on the Corporation Code expound, thus: xxx xxx xxx Shares of stock being personal property, may be the subject matter of pledge and chattel mortgage. Such collateral transfers are however not covered by the registration requirement of Section 63, since our Supreme Court has held that such provision applies only to absolute transfers thus, the registration in the corporate books of pledges and 52 chattel mortgages of shares cannot have any legal effect. (Emphasis ours.) xxx xxx xxx The requirement that the transfer shall be recorded in the books of the corporation to be valid as against third persons has reference only to absolute transfers or absolute conveyance of the ownership or title to a share. Consequently, the entry or notation on the books of the corporation of pledges and chattel mortgages on shares is not necessary to their validity (although it is advisable to do so) since they do not involve absolute alienation of ownership of stock (Monserrat vs. Ceron, 58 Phil. 469 [1933]; Chua Guan vs. Samahang Magsasaka, Inc., 62 Phil. 472 [1935].) To affect third persons, it is enough that the date and description of the shares pledged appear in a public instrument. (Art. 2096, Civil Code.) With respect to a chattel mortgage constituted on shares of stock, what is necessary is its registration in the Chattel 53 Mortgage Registry. (Act No. 1508 and Art. 2140, Civil Code.) CEIC's reliance on the Samahang Magsasaka case is misplaced. Nowhere in the said decision was it categorically stated that annotation of the attachment in the corporate books is mandatory for its validity and for the purpose of giving notice to third persons. The only basis, then, for petitioner CEIC's claim is the Deed of Sale under which it purchased the disputed shares. It is, however, a settled
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rule that a purchaser of attached property acquires it subject to an 54 attachment legally and validly levied thereon. Our corollary inquiry is whether or not the consortium has indeed a prior valid and existing attachment lien over the disputed shares. Jaime Gonzales' /Consortium's Claim Is the consortium's attachment lien over the disputed shares valid? CEIC vigorously argues that the consortium's writ of attachment over the disputed shares of Chemphil is null and void, insisting as it does, that the notice of garnishment was not validly served on the designated officers on 19 July 1985. To support its contention, CEIC presented the sheriff's notice of 55 garnishment dated 19 July 1985 which showed on its face that said notice was received by one Thelly Ruiz who was neither the president nor managing agent of Chemphil. It makes no difference, CEIC further avers, that Thelly Ruiz was the secretary of the President of Chemphil, for under the above-quoted provision she is not among the officers so authorized or designated to be served with the notice of garnishment. We cannot subscribe to such a narrow view of the rule on proper service of writs of attachment. A secretary's major function is to assist his or her superior. He/she is in effect an extension of the latter. Obviously, as such, one of her duties is to receive letters and notices for and in behalf of her superior, as in the case at bench. The notice of garnishment was addressed to and was actually received by Chemphil's president through his secretary who 56 formally received it for him. Thus, in one case, we ruled that the secretary of the president may be considered an "agent" of the corporation and held that service of summons on him is binding on the corporation. Moreover, the service and receipt of the notice of garnishment on 19 July 1985 was duly acknowledged and confirmed by the corporate secretary of Chemphil, Rolando Navarro and his successor Avelino Cruz 57 through their respective certifications dated 15 August 1989 and 21 58 August 1989. We rule, therefore, that there was substantial compliance with Sec. 7(d), Rule 57 of the Rules of Court. Did the compromise agreement between Antonio Garcia and the consortium discharge the latter's attachment lien over the disputed shares? CEIC argues that a writ of attachment is a mere auxiliary remedy which, upon the dismissal of the case, dies a natural death. Thus, when the 59 consortium entered into a compromise agreement, which resulted in the termination of their case, the disputed shares were released from garnishment. We disagree. To subscribe to CEIC's contentions would be to totally disregard the concept and purpose of a preliminary attachment. A writ of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor 60 against the defendant. (Emphasis ours.) Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the movable property of the
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defendant, or so much thereof may be sufficient to satisfy the plaintiff's 61 demands . . . (Emphasis ours.) The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of 62 creditors. (Emphasis ours.) We reiterate the rule laid down in BF Homes, Inc. v. CA 63 that an attachment lien continues until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in the same manner provided by law. We expounded in said case that: The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed. xxx xxx xxx As we ruled in Government of the Philippine Islands v. Mercado: Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in some manner provided by law. It has been held that the lien obtained by attachment stands upon as high equitable grounds as a mortgage lien: The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien, and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (Corpus Juris Secundum, 433, and authorities therein cited.) xxx xxx xxx The case at bench admits of a peculiar character in the sense that it involves a compromise agreement. Nonetheless, the rule established in the aforequoted cases still applies, even more so since the terms of the agreement have to be complied with in full by the parties thereto. The parties to the compromise agreement should not be deprived of the protection provided by an attachment lien especially in an instance where one reneges on his obligations under the agreement, as in the
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case at bench, where Antonio Garcia failed to hold up his own end of the deal, so to speak. Moreover, a violation of the terms and conditions of a compromise agreement entitles the aggrieved party to a writ of execution. 64 In Abenojar & Tana v. CA, et al., we held: The non-fulfillment of the terms and conditions of a compromise agreement approved by the Court justifies execution thereof and the issuance of the writ for said purpose is the Court's ministerial duty enforceable by mandamus. 65 Likewise we ruled in Canonizado v. Benitez: A judicial compromise may be enforced by a writ of execution. If a party fails or refuses to abide by the compromise, the other party may enforce the compromise or regard it as rescinded and insist upon his original demand. If we were to rule otherwise, we would in effect create a back door by which a debtor can easily escape his creditors. Consequently, we would be faced with an anomalous situation where a debtor, in order to buy time to dispose of his properties, would enter into a compromise agreement he has no intention of honoring in the first place. The purpose of the provisional remedy of attachment would thus be lost. It would become, in analogy, a declawed and toothless tiger. From the foregoing, it is clear that the consortium and/or its assignee Jaime Gonzales have the better right over the disputed shares. When CEIC purchased the disputed shares from Antonio Garcia on 15 July 1988, it took the shares subject to the prior, valid and existing attachment lien in favor of and obtained by the consortium. Forum Shopping in G.R. No. 113394 We uphold the decision of the Court of Appeals finding PCIB guilty of 66 forum-shopping. The Court of Appeals opined: True it is, that petitioner PCIB was not a party to the appeal made by the four other banks belonging to the consortium, but equally true is the rule that where the rights and liabilities of the parties appealing are so interwoven and dependent on each other as to be inseparable, a reversal of the appealed decision as to those who appealed, operates as a reversal to all and will inure to the benefit of those who did not join the appeal (Tropical Homes vs. Fortun, 169 SCRA 80, p. 90, citing Alling vs. Wenzel, 133 111. 264-278; 4 C.J. 1206). Such principal, premised upon communality of interest of the parties, is recognized in this jurisdiction (Director of Lands vs. Reyes, 69 SCRA 415). The four other banks which were part of the consortium, filed their notice of appeal under date of March 16, 1990, furnishing a copy thereof upon the lawyers of petitioner. The petition for certiorari in the present case was filed on April 10, 1990, long after the other members of the consortium had appealed from the assailed order of December 19, 1989. We view with skepticism PCIB's contention that it did not join the consortium because it "honestly believed thatcertiorari was the more 67 efficacious and speedy relief available under the circumstances." Rule 65 of the Revised Rules of Court is not difficult to understand. Certiorari is available only if there is no appeal or other plain, speedy and adequate remedy in the ordinary course of law. Hence, in instituting a separate petition for certiorari, PCIB has deliberately resorted to forum-shopping. PCIB cannot hide behind the subterfuge that Supreme Court Circular 28-91 was not yet in force when it filed thecertiorari proceedings in the Court of Appeals. The rule against forum-shopping has long been 68 established. Supreme Court Circular 28-91 merely formalized the
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prohibition and provided the appropriate penalties against transgressors. It alarms us to realize that we have to constantly repeat our warning against forum-shopping. We cannot over-emphasize its ill-effects, one of which is aptly demonstrated in the case at bench where we are confronted with two divisions of the Court of Appeals issuing 69 contradictory decisions one in favor of CEIC and the other in favor of the consortium/Jaime Gonzales. Forum-shopping or the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable 70 disposition, has been characterized as an act of malpractice that is prohibited and condemned as trifling with the Courts and abusing their processes. It constitutes improper conduct which tends to degrade the administration of justice. It has also been aptly described as deplorable because it adds to the congestion of the already heavily burdened dockets of the 71 courts. WHEREFORE, premises considered the appealed decision in G.R. Nos. 112438-39 is hereby AFFIRMED and the appealed decision in G.R. No. 113394, insofar as it adjudged the CEIC the rightful owner of the disputed shares, is hereby REVERSED. Moreover, for wantonly resorting to forum-shopping, PCIB is hereby REPRIMANDED and WARNED that a repetition of the same or similar acts in the future shall be dealt with more severely. SO ORDERED.

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G.R. No. 104133 April 18, 1995 SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA, petitioners, vs. THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO and FLORENTINA RAMIRO, respondents. QUIASON, J.: This is a petition for review on ceitiorari under Rule 45 of the Revised Rules of Court of the Decision dated December 27, 1991 and the Resolution dated February 11, 1992 of the Court of Appeals in CA-G.R. SP No. 24683. I On October 10, 1987, petitioners executed a Deed of Sale with Right to Repurchase in favor of private respondents, involving a residential house located at No. 346 Algeciras St., Sampaloc, Manila. Due to serious financial and business reverses, petitioners were not able to redeem the property within four months as agreed upon. On October 24, 1989, private respondents filed a complaint for ejectment in the Metropolitan Trial Court of the City of Manila, docketed as Civil Case No. 130352-CV against petitioners. On December 27, 1989, the parties, assisted by their counsels, executed a compromise agreement. In an order dated March 15, 1990, the Metropolitan Trial Court approved the compromise agreement. The order reproduced the agreement as follows: 1. That defendants [petitioners herein] agree to pay plaintiffs [private respondents herein] in the amounts and on the dates specifically indicated herein below: a. P50,000.00 on Jan. 31, 1990; b. 10,000.00 on Feb. 28, 1990; c. 10,000.00 on March 31, 1990; d. 10,000.00 on April 30, 1990; e. 10,000.00 on May 31, 1990; f. 10,000.00 on June 30, 1990; g. 10,000.00 on July 31,1990; h. 10,000.00 on August 31, 1990; i. 10,000.00 on September 30, 1990; 2. That failure on the part of the defendants to pay three (3) consecutive payments, plaintiffs will be entitled to a writ of execution, unless the parties agree to extend the period of entitlement to a writ of execution in writing to be submitted and/or approved by this Honorable Court; . . . (Rollo, p. 53). On April 15, 1990, private respondents filed a motion for execution on the ground that petitioners failed to pay the first three installments stipulated in the compromise agreement, to wit: P50,000.00 on January 31, 1990; P10,000.00 on February 28, 1990; and P10,000.00 on March 31, 1990. On April 6, 1990, petitioners filed an "Urgent Ex-Parte Motion for Reconsideration and/or Correct Order of this Court" calling attention to a typographical error in the Order dated March 15, 1990, and asking that the amount of P10.000.00 payable on September 30, 1990 be corrected and changed to the agreed amount of P50,000.
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On April 25, 1990, the Metropolitan Trial Court issued an order granting the motion for correction of the typographical error in the decision. On August 17, 1990, petitioners filed a motion asking that the check payments previously deposited by them with the court, be accepted and be given to respondents in compliance with their compromise agreement. On August 23, 1990, respondents opposed petitioners' ex-parte motion and stated that they would not renew the compromise agreement with petitioners. The Metropolitan Trial Court denied private respondents' motion for execution dated April 15, 1990 and another similar motion dated June 26, 1990. On October 12, 1990, respondents filed a petition for mandamus with us (G.R. No. 95470). In a resolution dated November 5, 1990, we referred the case to the Executive Judge of the Regional Trial Court, Manila. petitioners moved to dismiss the petition for mandamus. On March 14, 1991 the Regional Trial Court denied the motion to dismiss and issued the assailed resolution commanding the Metropolitan Trial Court to issue a writ of execution of the decision approving the compromise agreement in Civil Case No. 130352-CV. In compliance with the said resolution, the Metropolitan Trial Court issued an order dated March 27, 1991 directing the issuance of a writ of execution to enforce the compromise agreement entered into by the parties. On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was served on petitioner. Petitioners then filed a petition for certiorari with a prayer for the issuance of a temporary restraining order and a writ of injunction with the Court of Appeals (CA-G.R. SP No. 24683). On December 27, 1991, the Court of Appeals dismissed the petition. Likewise, the said court denied the motion for reconsideration filed by petitioner. II Petitioners contend that both the Regional Trial Court and Metropolitan Trial Court acted with grave abuse of discretion, the former in issuing a resolution directing the Metropolitan Trial Court to issue a writ of execution against petitioners herein, and the latter, in issuing said writ of execution. III A compromise agreement is a contract between the parties, which if not contrary to law, morals or public policy, is valid and enforceable between them (Municipal Board of Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 [1975]). There are two kinds of compromise agreements, the judicial, which puts an end to a pending litigation, and the extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art. 2028; Caguioa, VI Commentaries and Cases, on Civil Law 292 [1970]). As a contract, a compromise agreement is perfected by mutual consent (Rovero v. Amparo, 91 Phil. 228 [1952]). A judicial compromise, however, while binding between the parties upon its execution, is not executory until it is approved by the court and reduced to a judgment. Article 2037 of the Civil Code of the Philippines provides: A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. The non-fulfillment of the terms and conditions of a compromise agreement approved by the court justifies execution thereof and the issuance of the writ for said purpose is the court's ministerial duty
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enforceable by mandamus (Maceda, Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 [1991]). In the compromise agreement, petitioners obligated themselves to pay private respondents the amount of P50,000.00 on January 31, 1990, P10,000.00 on February 28, 1990, and P10,000.00 on March 31, 1990. Petitioners received a copy of the decision of the Metropolitan Trial Court approving the compromise agreement on March 26, 1990. Clearly, there was a breach, for it was only on August 17, 1990 that petitioners attempted to pay by means of nine postdated checks the amounts agreed upon. In effect, the first installment payment of P50,000.00 due on January 31, 1990 was moved to August 31, 1990, the second installment of P10,000.00 due on February 28, 1990 was moved to September 30, 1990 and so forth, thereby making the last installment of P5,000.00 due on September 30, 1990 moved to April 30, 1991. This is tantamount to novating the original agreement entered into by the parties without the consent of private respondents. Inasmuch as a judicial compromise becomes binding between the parties upon its execution, petitioners should have paid the installments falling due even before the approval thereof by the trial court. But assuming that a judicial compromise is not perfected until it is approved by the court, still petitioner should have paid the compromise agreement installments due on March 31, 1990, together with the installments due on January 31 and February 28, 1990 on or before March 31, 1990. Petitioners also assail the validity of the issuance by the Deputy Sheriff of the notice to voluntarily vacate the premises by way of enforcing the decision approving the compromise agreement. They maintain that their obligation is monetary in nature and the applicable rule should have been Section 15, Rule 39 and not Section 13, Rule 39 of the Revised Rules of Court. Petitioners contention has merit. When the parties entered into a compromise agreement, the original action for ejectment was set aside and the action was changed to a monetary obligation. A perusal of the compromise agreement signed by the parties and approved by the inferior court merely provided that in case the defendants (petitioners herein) failed to pay three monthly installments, the plaintiffs (private respondents herein) would be entitled to a writ of execution, without specifying what the subject of execution would be. Said agreement did not state that petitioners would be evicted from the premises subject of the suit in case of any default in complying with their obligation thereunder. This was the result of the careless drafting thereof for which only private respondents were to be blamed. A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority (Sydnor v. Roberts, 12 Tex. 598). An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised Rules of Court 641 [1966]; Kramer v. Montgomery, 206 Okla.190, 242 p. 2d 414 [1952]). There should not be a substantial variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is fatally defective if the judgment was for a sum of money and the writ of execution was for the sale of mortgaged property (Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]). As petitioners' obligation under the compromise agreement as approved by the court was monetary in nature, private respondents
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can avail only of the writ of execution provided in Section 15, Rule 39 of the Revised Rules of Court, and not that provided in Section 13. Section 15, Rule 39 provides: Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real and personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if there be sufficient, and selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. Any excess in the proceeds over the judgment and accruing costs must be delivered to the judgment debtor, unless otherwise directed by the judgment or order of the court. When there is more property of the judgment debtor than is sufficient to satisfy the judgment and accruing costs, within the view of the officer, he must levy only on such part of the property as is amply sufficient to satisfy the judgment and costs. Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. On the other hand, Section 13, Rule 39 provides: How execution for the delivery or restitution of property enforced. The officer must enforce an execution for the delivery or restitution of property by ousting therefrom the person against whom the judgment is rendered and placing the judgment creditor in possession of such property, and by levying as hereinafter provided upon so much of the property of the judgment debtor as will satisfy the amount of the judgment and costs included in the writ of execution. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the Sheriff is directed to enforce the execution only of the money judgment in accordance with Section 15, Rule 39 of the Revised Rules of Court. SO ORDERED.

G.R. No. L-30982

January 31, 1930

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THE PHILIPPINE NATIONAL BANK, plaintiff-appellant, vs. OLUTANGA LUMBER COMPANY, defendant-appellee. Camus and Delgado for appellant. Jose Erquiaga for defendant-appellee. Araneta and Zaragoza for appellee Bank of the Philippine Islands. VILLA-REAL, J.: This appeal is taken by the Philippine National Bank from an order of the Court of First Instance of Manila, the dispositive part of which is as follows: The Philippine National Bank having appeared as an ordinary creditor in the involuntary insolvency of the Olutanga Lumber Company, civil case No. 33048 of this court, claiming the sum attached by the sheriff, it thereby renounced its preferred right acquired through garnishment issued in the present case; and for that reason, the motion of the Bank of the Philippine Islands is hereby granted, and the sheriff of the City of Manila is hereby ordered to return to it the sum deposited by virtue of the garnishment, after deducting therefrom his legal fees to which he has a perfect right notwithstanding the result arrived at. In support of its appeal, the appellant assigns the following alleged errors committed by the trial court in its judgment, to wit: 1. The lower court erred in holding, in its said order of March 31, 1928, that appellant the Philippine National Bank had waived its lien acquired by garnishment in the present case by joining as an unsecured creditor the petition for the involuntary insolvency of the Olutanga Lumber Company. 2. The lower court erred in holding, in its said order of March 31, 1928, that the garnishment issued in the present case referred only to P16,656.30, and in ordering the difference between said sum and the amount of P30,092.11 deposited with the sheriff of Manila to be returned to the Bank of the Philippine Islands after deducting the sheriff's fees therefrom. 3. The lower court erred in denying the motion of the appellant of November 14, 1928. The following facts are necessary and pertinent to resolve the questions raised in the present appeal: In civil case entitled the Bank of the Philippine Islands, plaintiff and appellee, vs. Olutanga Lumber Company, defendant and appellant, G. 1 R. No. 27045, said plaintiff and appellee was ordered by this court to pay to the aforesaid defendant and appellant a certain sum amounting to P31,242.11, Philippine currency. Upon the return of the case to the Court of First Instance of Zamboanga, the corresponding writ of execution was issued, which was complied with by the sheriff of said province by presenting it to the manager of the branch of the Bank of the Philippine Islands in the City of Zamboanga, on January 10, 1928, but without levying execution on any property belonging to the execution debtor. On the same date, the aforesaid sheriff addressed to the central office of said bank at Manila the following telegram: Execution Bank Philippine Islands versus Olutanga Lumber Company served today manager Zamboanga branch. Please authorize him pay amount due defendant Olutanga Lumber plus sheriff fees otherwise levy will be made on your Zamboaga office. LUIS PANAGUITON, Provincial Sheriff. On the same date, January 10, 1928, before receiving the foregoing telegram, the central office of the Bank of the Philippine Islands in Manila was notified by the sheriff of the City of Manila that all the credits and debts contracted by it with the Olutanga Lumber Company,
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amounting to P16,656.30, plus the interest at the rate of 12 per cent per annum from April 19, 1922 until fully paid, were levied upon in the name of the Philippine National Rank by virtue of a writ of attachment issued in civil case No. 32936 of the Court of First Instance of Manila. On the following day, January 11, 1928, the Bank of the Philippine Islands, in reply to said notice, addressed a letter to the sheriff of the City of Manila, notifying the latter that, pursuant to his notice of attachment, it retained at the disposal of said sheriff the aforesaid sum of P16,656.30, plus interest at the rate of 12 per cent per annum from April 19, 1922 until such date as may be designated. On the same date, January 11, 1928, the sheriff of the City of Manila sent a letter to the Bank of the Philippine Islands at Manila, requiring the latter to deliver to him the sum of P32,109,45, theretofore attached, belonging to the Olutanga Lumber Company. After the delivery to the sheriff of the City of Manila of the amount of the judgment in favor of the Olutanga Lumber Company, rendered in civil case No. 1176 of the Court of First Instance of Zamboanga, G. R. No. 27045 of this court, the Bank of the Philippine Islands notified the provincial sheriff of Zamboanga by telegram, on January 12, 1928, that the amount of the judgment in favor of the Olutanga Lumber Company against said bank had been delivered to the sheriff of the City of Manila, and that any question on that subject should be taken up with him. On January 14, 1928, the provincial sheriff of Zamboanga sent a communication to the manager of the Bank of the Philippine Islands in said city, notifying him that all the money he had in his possession or control, belonging to the Bank of the Philippine Islands, was levied upon by virtue of an order of execution issued by the Court of First Instance of Zamboanga in civil case No. 1176, entitled Bank of the Philippine Islands vs. Olutanga Lumber Company, G. R. No. 27045 of this court, copy of which order of execution was served upon him on January 10, 1928. On January 14, 1928, the sheriff of the City of Manila sent a telegram to the sheriff of the Province of Zamboanga, telling him that the amount of the judgment against the Bank of the Philippine Islands and in favor of the Olutanga Lumber Company, which had been attached by virtue of two writs of attachment issued by the Philippine National Bank and the Standard Oil company of New York against the Olutanga Lumber Company, had been deposited with him by said Bank of the Philippine Islands. Notwithstanding the fact that the provincial sheriff of Zamboanga had been duly informed of the levy made by the sheriff of the City of Manila upon the funds of the Olutanga Lumber Company in possession of the herein appellee, the Bank of the Philippine Islands, and of the delivery of said funds to said judicial officer of the City of Manila, he attempted to collect from the branch of said Bank of the Philippine Islands at Zamboanga the amount of the judgment in favor of the Olutanga Lumber Company, threatening to levy, and in fact did levy, an attachment against said branch. In view of this act of the provincial sheriff of Zamboanga, the herein appellee, the Bank of the Philippine Islands, had to file a petition for prohibition with this court against the Judge of the Court of First Instance of Zamboanga, the provincial sheriff of said province and the Olutanga Lumber Company, docketed as G. R. No. 29043 of this court. Upon hearing said petition, this court entered the following resolution on February 9, 1928: Upon consideration of the petition filed in case G. R. No. 29043, Banco de las Islas Filipinas vs. J. Horilleno et al., and of the answer interposed
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by the respondents in connection with the arguments adduced by both parties in their memoranda and during the hearing of said case, and it appearing that the writ of execution complained of was issued and served upon the petitioner before the latter received notice by the garnishment, and two days before he was required by the sheriff of Manila to deliver the amount mentioned in the said garnishment proceedings, wherefore, the respondent judge did not exceed its jurisdiction in issuing the aforesaid writ of execution, it is ordered that the petition for a writ of prohibition be and is hereby denied, with costs against the petitioner. Mr. Justice Street took no part. On February 10, 1928, the clerk of this court sent the following telegram to the provincial sheriff of Zamboanga: Supreme Court denied writ of prohibition requested by Bank Philippine Islands to stop execution judgment in favor Olutanga Lumber Company you may proceed with execution forthwith. Upon receipt of the foregoing telegram, the provincial sheriff of Zamboanga sent the following letter to the manager of the Bank of the Philippine Islands at Zamboanga: SIR: With reference to the levy made by the undersigned on your office on January 14, 1928, in the sum of thirty-two thousand pesos (P32,000), Philippine currency, to cover the amount claimed in the order of execution issued by the Court of First Instance of Zamboanga in civil case No. 1176, "The Bank of the Philippine Islands vs. Olutanga Lumber Company," and R. G. No. 27045, which levy has been suspended by order of the Honorable Supreme Court by virtue of the writ of prohibition filed by the Bank of the Philippine Islands against the undersigned and others, I have the honor to inform you that said writ of prohibition has been denied by the Supreme Court as per telegram received by the undersigned, a copy of which is herewith inclosed. In view thereof, and in pursuance of the order of execution above referred to, you are hereby ordered to deliver to the undersigned, immediately upon your receipt hereof, the sum of thirty-one thousand five hundred ninety-six pesos and eighty-three centavos (P31,596.83), Philippine currency, which is the amount recovered by the Olutanga Lumber company in the Supreme Court including interests, costs and sheriff's fees. Zamboanga, Zamboanga, February 11, 1928. (Sgd.) LUIS PANAGUITON Provincial Sheriff In view of this urgent and peremptory demand of the provincial sheriff of Zamboanga, the manager of the Bank of the Philippine Islands at Zamboanga had no other remedy than to deliver to the sheriff of Zamboanga the sum of P31,596.83. The only question necessary to be decided in this appeal is whether the funds placed by the Bank of the Philippine Islands in possession of the sheriff of the City of Manila, which had been attached in the name of the Philippine National Bank and against the Olutanga Lumber Company, had been released from said attachment when the aforesaid Bank of the Philippine Islands, by judicial order, paid the judgment rendered by this court against the said Bank of the Philippine Islands and in favor of the Olutanga Lumber Company. We have seen that after the central office of the Bank of the Philippine Islands in the City of Manila had deposited with the sheriff of the City of Manila the sum of P32,109.45, by virtue of a demand made upon it by the latter in compliance with an order of attachment issued by the Court of First Instance of Manila in civil case No. 32936, wherein the Philippine National Bank was and still is the plaintiff and the Olutanga Lumber Company was and still is the defendant, which sum of
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P32,109.45 was the amount of the judgment rendered in civil case No. 1176 of the Court of First Instance of Zamboanga, G. R. No. 27045 of this court, in favor of the Olutanga Lumber Company and against the Bank of the Philippine Islands, said central office of the Bank of the Philippine Islands notified the provincial sheriff of Zamboanga of said consignation; but the latter, notwithstanding the attachment of said amount by the sheriff of the City of Manila, tried to collect from the branch office in Zamboanga of the Bank of the Philippine Islands the amount of said judgment. Under the circumstances the Zamboanga branch had to resort to this court for a remedy to prevent execution of said judgment. This court denied the remedy prayed for, and upon receipt of notice of said denial the provincial sheriff of Zamboanga insisted in collecting from the Zamboanga branch of the Bank of the Philippine Islands the amount of said judgment, which said bank had to pay. The general rule is that, where attached properties belonging to the principal debtor are taken out of the hands of a person by legal process, after he had been notified of the order of attachment, said person cannot be made to answer for the properties in a proceeding to carry out said attachment (28 Corpus Juris, paragraph 362, page 264). In the present case, the fact that the funds attached in the possession of the Bank of the Philippine Islands, belonging to the Olutanga Lumber Company, had been deposited with the sheriff of the City of Manila by order of said officer, does not change the juridical situation of said funds as attached in the possession of the Bank of the Philipine Islands, and, according to the above-quoted rule, the aforesaid Bank of the Philippine Islands, having been judicially compelled to pay the amount of the judgment represented by said funds to the Olutanga Lumber Company, after having employed all the legal means to avoid it, is released from all responsibility to the Philippine National Bank in whose favor the writ of attachment was issued. For the foregoing considerations, we are of the opinion, and so hold, that when a person has funds in his possession belonging to a debtor, and said funds are attached by a creditor of the latter, said person is relieved from all responsibility to said creditor if he is judicially compelled to deliver said funds to the aforesaid debtor. Wherefore, the dispositive part of the order appealed from is affirmed in so far as it grants the motion of the Bank of the Philippine Islands, and the sheriff of the City of Manila is hereby ordered to return to said bank the amount deposited by virtue of the writ of attachment, after deducting his legal fees, with costs against the appellant. So ordered.

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G.R. No. L-60887 November 13, 1991 PERLA COMPANIA DE SEGUROS, INC., petitioner, vs. HON. JOSE R. RAMOLETE, PRIMITIVA Y. PALMES, HONORATO BORBON, SR., OFFICE OF THE PROVINCIAL SHERIFF, PROVINCE OF CEBU, respondents. Hector L. Fernandez for petitioner. Domingo Quibranza and Vicente A. Quibranza for private respondents. FELICIANO, J.:p The present Petition for Certiorari seeks to annul: (a) the Order dated 6 August 1979 1 which ordered the Provincial Sheriff to garnish the thirdparty liability insurance policy issued by petitioner Perla Compania de Seguros, Inc. ("Perla") in favor of Nelia Enriquez, judgment debtor in Civil Case No. R-15391; (b) the Order dated 24 October 1979 2 which denied the motion for reconsideration of the 6 August 1979 Order; and (c) the Order dated 8 April 1980 3 which ordered the issuance of an alias writ of garnishment against petitioner. In the afternoon of 1 June 1976, a Cimarron PUJ owned and registered in the name of Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City to Danao City. While passing through Liloan, Cebu, the Cimarron PUJ collided with a private jeep owned by the late Calixto Palmes (husband of private respondent Primitiva Palmes) who was then driving the private jeep. The impact of the collision was such that the private jeep was flung away to a distance of about thirty (30) feet and then fell on its right side pinning down Calixto Palmes. He died as a result of cardio-respiratory arrest due to a crushed chest. 4 The accident also caused physical injuries on the part of Adeudatus Borbon who was then only two (2) years old. On 25 June 1976, private respondents Primitiva Palmes (widow of Calixto Palmes) and Honorato Borbon, Sr. (father of minor Adeudatus Borbon) filed a complaint 5 against Cosme Casas and Nelia Enriquez (assisted by her husband Leonardo Enriquez) before the then Court of First Instance of Cebu, Branch 3, claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of private respondent Honorato Borbon, Sr., being distinct and separate from that of co-plaintiff Primitiva Palmes, and the amount thereof falling properly within the jurisdiction of the inferior court, respondent Judge Jose R. Ramolete ordered the Borbon claim excluded from the complaint, without prejudice to its being filed with the proper inferior court. On 4 April 1977, the Court of First Instance rendered a Decision 6 in favor of private respondent Primitiva Palmes, ordering common carrier Nelia Enriquez to pay her P10,000.00 as moral damages, P12,000.00 as compensatory damages for the death of Calixto Palmes, P3,000.00 as exemplary damages, P5,000.00 as actual damages, and P1,000.00 as attorney's fees. The judgment of the trial court became final and executory and a writ of execution was thereafter issued. The writ of execution was, however, returned unsatisfied. Consequently, the judgment debtor Nelia Enriquez was summoned before the trial court for examination on 23 July 1979. She declared under oath that the Cimarron PUJ registered in her name was covered by a third-party liability insurance policy issued by petitioner Perla. Thus, on 31 July 1979, private respondent Palmes filed a motion for garnishment 7 praying that an order of garnishment be issued against the insurance policy issued by petitioner in favor of the judgment debtor. On 6 August 1979, respondent Judge issued an
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Order 8 directing the Provincial Sheriff or his deputy to garnish the third-party liability insurance policy. Petitioner then appeared before the trial court and moved for reconsideration of the 6 August 1979 Order and for quashal of the writ of garnishment, 9 alleging that the writ was void on the ground that it (Perla) was not a party to the case and that jurisdiction over its person had never been acquired by the trial court by service of summons or by any process. The trial court denied petitioner's motion.10 An Order for issuance of an alias writ of garnishment was subsequently issued on 8 April 1980. 11 More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court on 25 June 1982 alleging grave abuse of discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance contract issued by petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed forthwith for having been filed way out of time but, for reasons which do not appear on the record, was nonetheless entertained. In this Petition, petitioner Perla reiterates its contention that its insurance contract cannot be subjected to garnishment or execution to satisfy the judgment in Civil Case No. R-15391 because petitioner was not a party to the case and the trial court did not acquire jurisdiction over petitioner's person. Perla further argues that the writ of garnishment had been issued solely on the basis of the testimony of the judgment debtor during the examination on 23 July 1979 to the effect that the Cimarron PUJ was covered by a third-party liability insurance issued by Perla, without granting it the opportunity to set up any defenses which it may have under the insurance contract; and that the proceedings taken against petitioner are contrary to the procedure laid down in Economic Insurance Company, Inc. v. Torres, et al., 12 which held that under Rule 39, Section 45, the Court "may only authorize" the judgment creditor to institute an action against a third person who holds property belonging to the judgment debtor. We find no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge Ramolete in ordering the garnishment of the judgment debtor's third-party liability insurance. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable to a judgment debtor. 13 In legal contemplation, it is a forced novation by the substitution of creditors: 14the judgment debtor, who is the original creditor of the garnishee is, through service of the writ of garnishment, substituted by the judgment creditor who thereby becomes creditor of the garnishee. Garnishment has also been described as a warning to a person having in his possession property or credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiff's suit. 15 In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the trial court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the judgment debtor is service upon him of the writ of garnishment. The Rules of Court themselves do not require that the garnishee be served with summons or impleaded in the case in order to make him liable. Rule 39, Section 15 provides: Sec. 15. Execution of money judgments. The officer must enforce an execution of a money judgment by levying on all the property, real or
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personal of every name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution . . . Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied on in like manner and with like effect as under a writ of attachment. (Emphasis supplied). Rule 57, Section 7(e) in turn reads: Sec. 7. Attachment of real and personal property; recording thereof. Properties shall be attached by the officer executing the order in the following manner: xxx xxx xxx (e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the person owing such debts, or having his possession or under his control such credits or other personal property, or with his agent, a copy of the order, and notice that the debts owing by him to the party against whom attachment is issued, and the credits and other personal property in his possession, or under his control, belonging to said party, are attached in pursuance of such order; xxx xxx xxx (Emphasis supplied) Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court. In Bautista v. Barredo, 16 the Court, through Mr. Justice Bautista Angelo, held: While it is true that defendant Jose M. Barredo was not a party in Civil Case No. 1636 when it was instituted by appellant against the Philippine Ready Mix Concrete Company, Inc., however, jurisdiction was acquired over him by the court and he became a virtual party to the case when, after final judgment was rendered in said case against the company, the sheriff served upon him a writ of garnishment in behalf of appellant. Thus, as held by this Court in the case of Tayabas Land Company vs. Sharruf, 41 Phil. 382, the proceeding by garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation. By means of the citation, the stranger becomes a forced intervenor; and the court, having acquired jurisdiction over him by means of the citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. (Emphasis supplied). In Rizal Commercial Banking Corporation v. De Castro, 17 the Court stressed that the asset or credit garnished is thereupon subjected to a specific lien: The garnishment of property to satisfy a writ of execution operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ. It is brought into custodia legis, under the sole control of such court. 18 (Emphasis supplied) In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla when it was served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of judgment debtor Nelia Enriquez. Perla cannot successfully evade liability thereon by such a contention.
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Every interest which the judgment debtor may have in property may be subjected to execution.19 In the instant case, the judgment debtor Nelia Enriquez clearly had an interest in the proceeds of the third-party liability insurance contract. In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is liable. 20 The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise. From the moment that the insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished like any other credit. 21 Petitioner also contends that in order that it may be held liable under the third-party liability insurance, a separate action should have been commenced by private respondents to establish petitioner's liability. Petitioner invokesEconomic Insurance Company, Inc. vs. Torres, 22 which stated: It is clear from Section 45, Rule 39 that if a persons alleged to have property of the judgment debtor or to be indebted to him claims an interest in the property adverse to him or denies the debt, the court may only authorize the judgment creditor to institute an action against such person for the recovery of such interest or debt. Said section does not authorize the court to make a finding that the third person has in his possession property belonging to the judgment debtor or is indebted to him and to order said third person to pay the amount to the judgment creditor. It has been held that the only power of the court in proceedings supplemental to execution is to niake an order authorizing the creditor to sue in the proper court to recover an indebtedness due to the judgment debtor. The court has no jurisdiction to try summarily the question whether the third party served with notice of execution and levy is indebted to defendant when such indebtedness is denied. To make an order in relation to property which the garnishee claimed to own in his own right, requiring its application in satisfaction of judgment of another, would be to deprive the garnishee of property upon summary proceeding and without due process of law. (Emphasis supplied) But reliance by petitioner on the case of Economic Insurance Company, Inc. v. Torres (supra) is misplaced. The Court there held that a separate action needs to be commenced when the garnishee "claims an interest in the property adverse to him (judgment debtor) or denies the debt." In the instant case, petitioner Perla did not deny before the trial court that it had indeed issued a third-party liability insurance policy in favor of the judgment debtor. Petitioner moreover refrained from setting up any substantive defense which it might have against the insured-judgment debtor. The only ground asserted by petitioner in its "Motion for Reconsideration of the Order dated August 6, 1979 and to Quash Notice of Garnishment" was lack of jurisdiction of the trial court for failure to implead it in the case by serving it with summons. Accordingly, Rule 39, Section 45 of the Rules of Court is not applicable in the instant case, and we see no need to require a separate action against Perla: a writ of garnishment suffices to hold petitioner answerable to the judgment creditor. If Perla had any substantive defenses against the judgment debtor, it is properly deemed to have waived them by laches. WHEREFORE, the Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and for lack of merit. The assailed Orders of the trial court are hereby AFFIRMED. Costs against petitioner. This Decision is immediately executory. SO ORDERED.

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G.R. No. L-9802 February 5, 1916 TEC BI & CO., plaintiff-appelle, vs. THE CHARTERED BANK OF INDIA, AUSTRALIA & CHINA, defendantappellant. Gibbs, McDonough and Blanco for appellant. Herrero and Masigan for appellee. CARSON, J.: The following statement of the facts upon which this case was submitted in the court below is taken literally from the brief of counsel for the appellant: This is an action to recover from the defendant bank the sum of P11,572.96, the amount of a judgment recovered by the plaintiff against "La Urania Cigar Factory (Ltd.)," and for which the plaintiff seeks to hold the defendant liable by virtue of an attempted levy of attachment upon certain leaf tobacco in the possession of the defendant bank under a pledge executed by the said "La Urania Cigar Factory (Ltd.)." The Tobacco being pledged for an amount largely in excess of its value, the bank refused to deliver it to the sheriff, and the pledge having become due, sold the tobacco and applied the proceeds on account of the indebtedness, previous to the time when the plaintiff finally secured judgment against "La Urania Cigar Factory (Ltd.)." and issued execution thereon. The case was submitted upon a stipulation of facts as follows: It is hereby agreed that all the facts contained in paragraphs 1, 2, 3, and 4 of the complaint are true, with the exception of that part of the first five lines of paragraph 2, which alleges that the plaintiff had notice that some of the bales of tobacco in leaf which were sold to the "La Urania Cigar Factory (Ltd.)," were attempted to be sold for the manifest purpose of defrauding the plaintiff. Referring to the answer of defendant corporation it stipulated that the allegations of paragraphs 2, 3, 4, 5, and 6 are true. The defendant corporation offers in evidence the original contract of pledge marked Exhibit 1, as part of this stipulation. With reference to the admission of the contents of paragraph 3 of the answer, it is understood that the word "neutral" is eliminated. From the allegations of the complain and answer admitted to be true in conformity with the foregoing stipulation, it appears: (1) That on the 7th of November 1912, the plaintiff sold to the "La Urania Cigar Factory (Ltd.)," a quantity of leaf tobacco. (Paragraph 1 of complaint.) (2) That on the 16th January, 1913, the "La Urania Cigar Factory (Ltd.)," pledged to the defendant corporation as security for the payment of an indebtedness of P25,000 the bales of tobacco described in Exhibit A of the answer, the original of which has been offered in evidence in connection with the stipulation of facts as Exhibit 1. (3) That the bales of tobacco thus pledged and described in Exhibit 1 were stored in the bodega of a third person, that is to say, in the bodega of Messrs. Sprungli & Co., situated at No. 42 (now No. 214) of Calle David, Manila. (Paragraph 3 of answer.) (4) That on or about the 1st day of February, 1913, the defendant corporation demanded of the obtained from Messrs. Sprungli & Co. the keys to the said bodega, and discovered that of the 436 bales of tobacco described in Exhibit 1 there remained only those set forth in paragraph 4 of the answer. (Paragraph 4 of answer.) (5) That the defendant bank did not know and had been unable to ascertain whether "La Urania Cigar Factory (Ltd.)," misrepresented the quantity of the tobacco in the said warehouse at the time of the
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execution of said document of pledge, or whether the difference between the amount described in the document of pledge and that found on hand on the 1st of February, 1913, and in the meantime been disposed of by "La Urania Cigar Factory (Ltd.)," in collusion with Messrs. Sprungli & Co., but that if such disposition was made it was without the knowledge or consent of the defendant bank. (Paragraph 5 of answer.) (6) That from said 1st day of February, 1913, the defendant corporation had been in the absolute and exclusive possession of the tobacco described in the fourth paragraph of the answer and in Exhibit 1 of the stipulation of facts, until the 15th of May, 1913, when same was sold under and by virtue of the document of pledge Exhibit 1 by the defendant bank for the sum of P12,722.36 which was applied on account of said loan, the entire amount of which was then past due and unpaid, leaving a large balance thereof still due and unpaid. (Paragraph 6 of answer.) (7) That on the 22nd day of April, 1913, the plaintiff Tec Bi & Co., filed a complaint in the Court of First Instance of Manila against "La Urania Cigar Factory (Ltd.)," claiming the payment of the sum of P11,572.96 as the balance of the unpaid purchase price of the tobacco referred to in paragraph 2. (Paragraph 1 of complaint.) (8) That on the 5th day of May, 1913, Tec Bi & Co. asked for and obtained from the Court of First Instance an attachment against the said bales of tobacco, but inasmuch as the bodega was locked and the sheriff was informed that the keys were in the possession of the bank, he demanded the delivery thereof from the latter, which demand was refused by the bank, alleging that it held possession of the tobacco under a pledge. (Paragraph 2 of complaint.) (9) That in view of the statement of the bank, the sheriff notified it that the bales of tobacco identified in Exhibit A of the complaint were attached subject to the results of the complaint were attached subject to the results of the complaint filed by Tec Bi & Co. against "La Urania Cigar Factory (Ltd.)," (Paragraph 2 of complaint.) (10) That on the 8th day of May, 1913, the bank answered the notification of the sheriff, confirming the fact that it had in its possession the bales of tobacco specified in the notification, as security for the payment of a loan and that it intended to sell the same; that the sheriff communicated the answer of the bank to the attorneys to Tec Bi & Co., who replied insisting upon the levy of the attachment. (Paragraph 3 of complaint.) (11) That on the 19th day of May, 1913, the Court of First Instance rendered judgment in said case against "La Urania Cigar Factory (Ltd.)," in favor of Tec Bi & Co., for the sum of P11,572.96, with legal interest from April 22, 1913, and costs. (Paragraph 4 of complaint.) (12) That on the 22d day of May, 1913, the sheriff attempted to execute the judgment upon the bales of tobacco attached and in the possession of the defendant corporation, but was unable to do so due to the statement of the agent of said corporation, that the tobacco had been sold and that the proceeds of the sale had been applied upon the payment of the amount due to from "La Urania Cigar Factory (Ltd.)," (Paragraph 4 of complaint.) The case having been submitted on the foregoing stipulation of facts, the Court of First Instance found that the plaintiff's claim was a preferred credit under the provisions of paragraph 1 of article 1922 of the Civil Code; that the pledge executed by "La Urania Cigar Factory (Ltd.)," in favor of the defendant corporation (Exhibit 1) was not binding upon the plaintiff for the reason that it was not set forth in a public instrument as required by article 1865 of the Civil Code in order to be effective against, third person, and rendered judgment in favor of
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the plaintiff and against the defendant for the amount of the former's judgment against "La Urania Cigar Factory (Ltd.)," with interest and costs. (Pages 17 to 23, inclusive, bill of exceptions.) From this judgment the defendant corporation appeals, assigning the following errors: ASSIGNMENT OF ERRORS I. The court erred in holding that the plaintiff's claim as vendor of the tobacco was entitled to preference over that of the defendant bank secured by a pledge on the same tobacco. II. The court erred in applying article 1865 of the Civil Code to the defendant's pledge, and in holding that such pledge was ineffective as to the plaintiff. III. The court erred in holding that the plaintiff was a third person as contemplated by that term in article 1865 of the Civil Code. IV. Assuming that article 1865 is applicable to the transaction in question, the court erred in holding that the plaintiff did not waive any defect in the private instrument of pledge by expressly admitting its genuineness and the correctness of its date by stipulation, and by failure to object to its introduction in evidence. V. The court erred in rendering judgment in favor of the plaintiff and against the defendant, and in denying the latter's motion for a new trial. It will readily be seen that our disposition of this appeal must turn upon the force and effect which should be given the instrument referred to in the statement of facts as the "original contract of pledge marked Exhibit 1." Plaintiff's contention is that under the provisions of clause 1 of article 1922, his right as a preferred creditor for the amount of the purchase price of the tobacco was not prejudice and could not be prejudiced by the pledge of the tobacco to the defendant, since the date of the contract of pledge is not evidenced by a public document; and, further, that he had a perfect right to attach the tobacco in the course of judicial proceedings for the recovery of his claim against the pledgor, for the purchase price of the tobacco pledged to the defendant bank. The defendant bank, on the other hand, contends that under the provisions of clause 2 of article 1922 of the Civil Code read together with clause 1 of section 1926, the right of preference in favor of the bank, to which the tobacco had been pledged by the common debtor, excluded the preference in favor of the plaintiff; and that plaintiff could not rely on the provisions of article 1865 of the Code, because he was not a "third person" in the sense in which these words are used in that article. Clauses 1 and 2 of article 1922 of the Civil Code are as follows: 1922. With regard to the specified personal property of the debtor, the following are preferred: 1. Credits for the construction, repair, preservation, or for the amount of the sale of personal property which may be in the possession of the debtor to the extent of the value of the same. 2. Those secured by a pledge which may be in the possession of the creditor, with regard to the thing pledged and to the extent of its value. Clause 1 of article 1926 of the Civil Code is as follows: 1926. Credits which enjoy preference with regard to certain personal property, exclude all the other to the extent of the value of the personal property to which the preference refers. When two or more, creditors claim preference with regard to certain personal property, the following rules shall be observed as to priority of payment:
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1. Credits secured by a pledge exclude all other to the extent of the value of the thing given in pledge. Article 1865 of the Civil Code is as follows: A pledge shall not be effective against a third person, when evidence of its date does not appear in a public instrument. Under these provisions of the Code there can be no doubt that had the date of the contract of pledge been evidenced by a public document, the preferential right of the pledgee would have been superior to and excluded all and any preferential rights of the vendor. We so held in Macke and Macke vs. Rubert (11 Phil., 480). The pledge contract (Exhibit 1) is before us, however, and it is admitted that the date is not evidenced by a public instrument. It cannot therefore be permitted to prejudice the rights of the vendor of the tobacco if he is a "third person: in the sense in which that term is used in the above-cited article 1865 of the code. It cannot be doubted that with relation to the pledgor and the pledgee the original vendor of the goods was a third person. The words are not susceptible of any possible explanation which would exclude him. He had no privity with either of the parties to the pledge contract. He had no knowledge of the execution of that contract. He did not participate in it in any way whatever. His rights so far as they affected the pledged property, were adverse to both pledgor and pledgee. In a word he was as to them a third person. It necessarily follows that since the execution of the pledge in favor of the defendant bank without the date of execution being evidenced by a public instrument could have no effect as again the plaintiff, he was strictly within his rights in asserting his claims as a preferred creditor and in levying an attachment against the tobacco; and the defendant bank could not lawfully assert any right as a pledgee or preferred creditor which adversely affected the rights of the plaintiff in the premises. To these conclusions a number of objections have been raised, none of which, however, will bear close inspection. It is said that even though the date of the defendant bank's pledge is not evidenced in a public document, still the delivery of the tobacco into the possession of the bank defeated the right of the plaintiff to a preference. This contention is based on the provision of article 1922 which limits the preference for the purchase price of goods sold to the time during which they continue in the possession of the purchaser. To this contention there are two sufficient answers. First. While the contract of pledge and the delivery of the tobacco undoubtedly created a valid pledge as between the pledgor and the pledgee, so that the pledgor himself could not disturb the possession of the pledgee; still, with relation to third person, the possession of the bank must be deemed to be that of the purchaser of the tobacco, since under the provisions of article 1865 of the Code, the execution of the pledge could not affect the right of third person. As to third persons the pledge and the pledged property must be treated as if the pledge never had been executed. Second. Even if it were true that the plaintiff had lost his statutory right of preference as a result of the execution of the pledge and the delivery of possession to the bank, still he had a perfect right to levy an attachment on the tobacco pending his action to recover the amount of the pledgor's indebtedness, unless the execution of the pledge had the effect of depriving him of that right. But it is very clear that under the express provisions of article 1865 of the code no such effect could be given the pledge.
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Much is made in the brief of the appellant of the fact that one of the allegations of the answer set forth that at the date of the issuance of the attachment the defendant bank was in the absolute and exclusive possession of the tobacco in question; and that the truth of this allegation was admitted in the agreed statement of facts. The defendant's answer contains a series of allegations setting forth the precise nature and character of the possession of the tobacco by the bank, and of all the circumstances under the by virtue of which the bank came into possession; and there is attached to the answer, as an exhibit a copy of the pledge contract itself. We have shown that accepting these allegations as true, the possession of the bank was not absolute and exclusive in the sense that it could in any wise affect the right of another credit of the common debtor, a "third person" with relation to the pledge contract, to levy an attachment upon the tobacco. We must conclude therefore that the stipulation as to the truth of the allegation of the answer that the possession of the tobacco by the bank was "absolute and exclusive" was intended only to mean that it was "absolute and exclusive" so far as the pledgor himself was concerned; or else that the stipulation as to the truth of the allegations of the answer did not include this averment as to the "absolute and exclusive" possession of the tobacco by the bank it being merely a conclusion of law, based upon the other allegations of facts alleged by the pleader. A general admission of the truth of the allegations set forth in a pleading is not an admission of the truth of an impossible conclusion of fact drawn from other facts set out in the pleading, nor of a wrong conclusion of law based on the allegations of fact well pleaded, nor of the truth of a general averment of facts contradicted by more specific averments. Thus, if a pleader alleges that two pesos were borrowed on one day and two more borrowed on another making five Pin all, a stipulation of the truth of the allegations in the pleading does not amount to an admission by the opposing party that twice two make five. Again if a pleader alleges that one hundred pesos were loaned without interest for one year and had not been paid, and that the borrower is indebted to the lender in the sum of one hundred and ten pesos, that being the amount of the capital together with interest for the year for which the money was loaned, a stipulation as to the truth of the allegation set forth in the pleadings is not an admission of the truth of the conclusion of law as to the interest due by the borrower. These elementary principles have been quite fully developed in a great variety of cases arising on demurrers, and sufficiently dispose of the attempt of counsel to fix the attention of the court upon this single averment of the answer, apart from the context and to the exclusion of the specific allegations of fact, the truth of which, as stipulated by the 1 2 parties, cannot be questioned. (Cf. 144 U.S., 75 ; 97 Ala., 491 ; 31 Cyc., 333-337; 6 Encyc. Pl. & Pr., 334-338.) One other contention of counsel for the appellant remains to be considered. It is that on which his fourth assignment of error is based. Counsel insist that "assuming that article 1865 is applicable to the transaction in question, the court erred in holding that the plaintiff did not waive any defect in the private instrument of pledge by expressly admitting its genuineness and the correctness of its date by stipulation, and by failure to object to its introduction in evidence." This contention rests on a misconception of the real purpose and object of the provisions of article 1865 of the code. This article is not a mere rule of adjective law, prescribing the mode whereby proof may be made of the date of a contract of pledge. It is a rule of substantive law,
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prescribing a condition without which the execution of a pledge contract cannot affect third person adversely. The plaintiff in this action does not question the truth of the bank's allegations that the pledge contract was executed on the day on which it purports on its face to have been signed and delivered. There is no suggestion of bad faith or sharp practice on the part of either the pledgor or pledgee in the execution of the pledge. Under the circumstances plaintiff had no reason to object to the introduction of evidence which tended direct to establish his claim that although the pledge had been executed as alleged by the defendant bank, it could not affect his rights on the premises. On the contrary he must have welcomed the introduction of this evidence, which conclusively established the very point upon which his whole case necessarily turns. Plaintiff stands strictly on the rule of substantive law laid down in this article of the code which declared that this rights, as a "third person," cannot be adversely affected by a pledge the date of which is not evidenced in a public document. His right so to do cannot be successfully challenged; and indeed we are inclined to think that the equities of the case, as far as they appear from the record, are with the vendor of a large quantity of tobacco, in his effort to recover the unpaid purchase price, rather than the creditor, who succeeded in having the debtor who had failed to pay the purchase price of this tobacco, bought on credit, turn it over to him by way of a pledge to secure the payment of a preexisting debt. What has been said would seem to dispose of all the contentions of the appellant; but at the risk of extending this opinion to an undue length, we here insert the comment of a learned Spanish commentator (Manresa) on the provisions of article 1865 of the code, because he seems to have anticipated every contention of appellant in this case, and the citation demonstrates quite conclusively that the plaintiff is entitled to rely on his rights in the premises as a "third person," who cannot be adversely affected by the execution of a pledge in the manner and form in which the pledge to the defendant bank was made. Article 1865. A pledge will not be valid against a third party if the certainty of the date is not expressed in a public instrument. This article, the precept of which did not exist in our old law, answers the necessity for not disturbing the relationship or the status of the ownership of things with hidden or simulated contract of pledge, in the same way and for the identical reasons that were taken into account by the mortgage law in order to suppress the implied and legal mortgages which produced so much instability in real property. Considering the effects of a contract of pledge, it is easily understood that, without this warranty demanded by law, the case may happen wherein a debtor in bad faith from the moment that he sees his movable property in danger of execution may attempt to withdraw the same from the action of justice and the reach of his creditors by simulating, through criminal confabulations, anterior and fraudulent alterations in his possession by means of feigned contract of this nature; and, with the object of avoiding or preventing such abuses, almost all the foreign writers advise that for the effectiveness of the pledge, it be demanded as a precise condition that in every case the contract be executed in a public writing, for, otherwise, the determination of its date will be rendered difficult and its proof more so, even in cases in which it is executed before witnesses, due to the difficulty to be encountered in seeking those before whom it was executed.
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Our code has not gone so far, for it does not demand in express terms that in all cases the pledge be constituted or formalized in a public writing, nor even in private document, but only that the certainty of the date be expressed in the first of the said class of instruments in order that it may be valid against a third party; and, in default of any express provision of law, in the cases where no agreement requiring the execution in a public writing exists, it should be subjected to the general rule, especially to that established in the last paragraph of article 1280, according to which all contracts not included in the foregoing cases of the said article should be made in writing even though it be private, whenever the amount of the prestation of one or of the two contracting parties exceeds 1,500 pesetas. The pledge, therefore, can be constituted in whatever form, as all other contracts, and the one formalized in that way will be valid and will produce its natural and legal consequences in the juridical order with respect to the contracting parties and to their assigns; but it will not have effect with respect to a third party if the certainty of the date is not evidenced in a public writing, by which means the legislator has tried to render impossible the existence of the fraudulent confabulations which we have hereinbefore indicated as otherwise possible. That is to say, what the law wishes in the precept that we are examining is to impose the existence, not only of an efficacious and authentic means of proof of the constitution of a pledge, but also of a security of its certainty and the reality of the pledge in order to avoid frauds and damages to the creditors, arising from the bad faith of the debtor; something like the inscription of the mortgage in the Registry of Property, as has been said by an author, although with less warranties than this one. Some authors criticise the limitations in the wording of the article insofar as it does not demand an identical expression respecting the other essential circumstances of the contract, they upholding the necessity or at lest the convenience of expressing in the public instrument principally the debt for the security of which the pledge is constituted, the date of debt, the designation of the thing pledged, the period during which the accessory obligation is contracted form, with all the other stipulations which constitute the essence of the contract. But his should not be imposed by the law but by the private interest which is the only one affected, and for the same reason, a like determination should be demanded in all contracts. The only thing in this case that could interest or concern the legislator would be to prevent or to make impossible any simulation or fraud, supposing the existence of fraudulent pledged to be to the prejudice of third parties and to that end, it is sufficient that the date of its constitution be evidenced with all certainty in a public instrument. Any thing else would amount to an attempt against the principle of liberty with which contract of the modern legislation are inspired, placing obstacles to it by demanding the execution in every case of a public writing, a thing which though it constitutes a worthy and just aspiration, yet, ca not take precedence over the will and the freedom of the contracting parties. Hence, any one who may wish to constitute a pledge in a private document or verbally, if the prestations of the parties do not exceed 1,500 pesetas, can validly make it; but the contract celebrated will not prejudice a third party while the requisite of the execution of a public instrument referred to in the article is not complied with. There exists another reason which justifies the precept we are discussing. In fact, from the contract of pledge arises the preference
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established in No. 2 of article 1922, respecting the credits guaranteed by the thing pledged which is in the possession of the creditor, up to the amount of its value, which preference may be opposed against third parties; and, in order that the latter may not be prejudiced, it is necessary that the date of the contract be expressed in a true, indubitable and authentic manner and that it be certain to the end that even the bare possibility of fraud and of collusion between the creditor keeping the pledge and the debtor owner thereof may be excluded. What has been said necessitates the entry of judgment affirming the judgment entered in the court below, with the costs of this instance against the appellant. Let judgment be entered accordingly. So ordered.

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G.R. No. 73341 August 21, 1987 THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), CRISOSTOMO M. DE LOS REYES, AMANTE PERALTA, NESTOR ULET and LORENZO SAGA, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT, AMADO APOSTOL, CHENG KANG TARCE, NATION'S KNITTING ENTERPRISES, INC. and VICTORINO GANAL, respondents. C. M. De los Reyes & Associates for petitioners. Alberto R. de Joya for respondents. PARAS, J.: This is a petition to review and set aside the Decision * of the Intermediate Appellate Court, First Civil Cases Division dated October 11, 1985, in its AC-G.R. CV No. 01839, entitled "Amado Apostol et al. versus Crisostomo de los Reyes, et al.", which modified the decision rendered by the Regional Trial Court, Branch CXVI, Pasay City and the Resolution dated January 6, 1986 which denied the Motion for Reconsideration. Petitioner Consolidated Bank and Trust Corporation (Solid bank) is a banking corporation duly organized and existing under Philippine Laws, while petitioner Crisostomo de los Reyes is its legal counsel. The other petitioners Amante Peralta, Nestor Ulet and Lorenzo Saga were security guards employed by Solidbank. All the petitioners were the defendantsappellants in AC-G.R. CV No. 08139. Respondent Nation's Knitting Enterprises, Inc. (Knitting, for short) is a duly organized corporation under Philippine Laws, respondent Amado Apostol (now deceased) was its General Manager, respondent Cheng Kang Tarce was its Plant Manager and respondent Victorino Ganal was its driver. It appears that on January 16, 1974, Knitting, Inc. through its treasurer Kiok Lay, executed a Deed of Real Estate and Chattel Mortgage in favor of the Consolidated Bank and Trust Corporation (Solidbank) to secure a loan of P900,000.00. The mortgage was constituted on two (2) parcels of land covered by T.C.T. Nos. 18112 and 14985 and on the building and improvements existing thereon, as well as on various types of machineries. On April 30, 1979, Knitting again through its treasurer Kiok Lay, executed an Amendment to the Deed of Real Estate and Chattel Mortgage to secure additional credit facilities worth P2,500,000.00. Knitting thus obtained an additional loan of P2,500,000.00 for which it executed three (3) promissory notes all signed by Kiok Lay. The Amendment covered the same properties described in the first Deed of Mortgage and various types of machineries which might thereafter be acquired by Knitting. Letters of credit were extended to Knitting in June, 1980, September 16, 1980, August 12, 1980 and October 3, 1980, by virtue of which Solidbank paid P1,796,768.70 to various suppliers of Knitting on the basis of sight drafts which the suppliers issued. Knitting took possession of the goods delivered by the suppliers after executing trust receipts, binding itself to hold the goods covered by the receipts in favor of Solidbank, to sell them and deliver the proceed to Solidbank or to return the goods to it if not sold. In addition to the Deed of Real Estate and Chattel Mortgage, Kiok Lay and Manuel Kiok executed a continuing guaranty constituting themselves as sureties for the payment of the loan. Knitting defaulted in the payment of its obligations, for which reason, Solidbank asked the sheriff to foreclose the mortgage. The total
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obligation of Knitting as of November 1981 amounted to P4,108,831.00. To stop and prevent the ensuing foreclosure, Knitting, Kiok Lay and Manuel Kiok filed a Petition for injunction with the Court of First Instance of Pasay City. The case was docketed as Civil Case No. 9609-P and raffled to Judge Manuel V. Romillo, Jr. They alleged that the Deed of Real Estate and Chattel Mortgage executed on January 16, 1974 was null and void because Kiok Lay who negotiated for the loan was not authorized to do so, either under the Articles of Incorporation of Knitting or by its Board of Directors; that Kiok Lay had already paid the sum of P900,000.00 from his personal funds; that Solidbank extended the additional loan of P2,500,000.00 to Kiok Lay after the obligation secured by the first mortgage had been paid and despite knowledge of the fact that Kiok Lay was not authorized to enter into such contract. It was further alleged that Kiok Lay was allegedly and maliciously made to sign the Amendment to the Real Estate and Chattel Mortgage; that the said Deed of Mortgage could no longer be amended because it had already been fully paid for by Kiok Lay; that because of the false statement made under oath by Solidbank's comptroller Corazon R. Dayco, the Clerk of Court and the Sheriff of Pasay City were misled into issuing a Notice of Sheriff's Sale on November 21, 1981 which was published in the Nuevo Horizonte issues of November 14 and 21, 1981. On November 27, 1981, Judge Romillo issued a temporary restraining order enjoining Solidbank from further publishing the notice of sale and from proceeding with the sale. In due time, Solidbank filed its answer. It alleged that Kiok Lay was authorized by various resolutions of the board of directors of Knitting to negotiate loans with Solidbank, to sign documents and other papers in connection with such loans and particularly to mortgage corporate assets and to sign checks. It also claimed that Knitting benefited from the loans and therefore was estopped to deny them. As a counterclaim, Solidbank prayed that Knitting be ordered to pay compensatory, exemplary and/or liquidated damages as stipulated in the promissory notes because of the filing of a baseless and frivolous action and 10% of the amount due as attorney's fees. In the alternative, it asked the Knitting be ordered to pay P2,500,000.00 with interest at the rate of 3% per annum until the amount was fully paid and 10% of the amount due by way of attorney's fees; the sum of P1,796,768.78 covered by trust receipts with interest at the rate of 14% per annum plus 10% attorney's fees and 3% penalty agreed upon in case of litigation. Solidbank also prayed for the attachment of the properties of Knitting, as security for the satisfaction of its obligation on the ground that said Knitting together with Kiok Lay and Manuel Kiok were guilty of fraud in contracting the obligation and that there was no sufficient security for Solidbank's claims other than the properties sought to be attached. By virtue of Solidbank's alternative counterclaim, Judge Romillo in said Civil Case No. 9609-P, issued an order of attachment on December 17, 1981. The following day December 18, 1981 a writ of preliminary attachment was issued and upon Solidbank's posting of a good and sufficient bond the sheriff attached the properties of Knitting. However, on January 7, 1982, upon motion of Knitting, Judge Romillo issued the following Order: Pending resolution of the various incidents scheduled for hearing on January 18, 1982 at 8:30 o'clock in the morning, in order that the issues therein raised may not become moot and academic, it is necessary, that the present status quo be maintained.

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WHEREFORE, Deputy Sheriff Umberto C. Ramos is hereby ordered to desist from further enforcing the writ of preliminary attachment heretofore issued, until further orders from this Court. The following day, January 8, 1982, Atty. Crisostomo M. de los Reyes, counsel of Solidbank issued an instruction to the deputized Security Guards in the following tenor: All properties levied as of date hereof remain in custodia legis but no further enforcement of the order of attachment is allowed. With the status quo order, all levied properties shall remain guarded by you and no release to any party effected. Knitting, Amado Apostol, Cheng Kang Tarce and Victorino Ganal (herein private respondents) claiming to have been damaged as a consequence of the enforcement of the foregoing instruction of Atty. Crisostomo de los Reyes, filed on March 1, 1982, a complaint for damages against Solidbank, Crisostomo M. de los Reyes, Amante Peralta, Nestor Ulet and Lorenzo Zaga (herein petitioners) with the then Court of First Instance of Rizal, Pasay City. The case was raffled to Branch XXVII (now Branch CXVI of the Regional Trial Court) presided by Judge Dionisio N. Capistrano, and docketed as Civil Case No. 9837-P. Among others, it is alleged in the complaint that due to the enforcement of the instruction/directive of Atty. Crisostomo de los Reyes, Knitting was not able to ship its merchandise to its would-be customers here and abroad causing the eventual cessation of its business operations, loss of profits, credits, goodwill and good business reputation resulting in damages in the amount borne out by the evidence to be presented. Petitioners as the then defendants filed a Motion to Dismiss on April 19, 1982, on the following grounds: (a) pendency of Civil Case No. 9609-P; (b) the new parties are not parties in interest; (c) the incidents recited in the complaint should be resolved in Civil Case No. 9609-P; (d) present action is duplicatory of plaintiffs' application for damages upon the attachment bond and (e) filing of the present action is unethical and puerile. On June 18, 1982, petitioners filed a Supplemental Motion to Dismiss arguing that inasmuch as the causes of action stemmed from alleged acts committed as a consequence of the attachment proceedings, the relief therefrom can be threshed out only in Civil Case No. 9609-P, where the attachment writ was issued. These motions were resolved by Judge Capistrano in his Order dated April 20, 1983, "deferring resolution thereof until after the trial on the merits." On May 16, 1983, petitioners filed a Motion for Reconsideration stressing the ruling in the Rejuso vs. Estipona case (72 SCRA 513) that whatever relief a party may get by reason of erroneous attachment must be litigated in the same case where the attachment writ was issued. On May 18, 1983, petitioners filed a motion for extension of time to file answer, praying for 15 days to file the same to be counted from the receipt of the resolution on their motion for reconsideration. On June 23, 1983, Judge Capistrano issued his Resolution holding that petitioners' motion for reconsideration is considered as not filed and that the motion for extension to file the answer is not entitled to any consideration at all. Petitioners received copy of this resolution on June 30, 1983. On July 6, 1983, petitioners filed their answer with counterclaim. Meanwhile, however, on June 27, 1983, and upon motion of private respondents, Judge Capistrano declared petitioners in default and directed the private respondents as the then plaintiffs "to present their evidence ex-partetomorrow, June 28, 1983 at 8:30 in the morning."
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Private respondents thus presented their evidence ex-parte and thereafter on August 18, 1983, Judge Capistrano rendered his decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering either of the two defendants The Consolidated Bank and Trust Corporation Solidbank or Amante Peralta or Nestor Ulet or Nestor Saga to pay: A. To plaintiff Nation's Knitting Enterprises, Inc.: 1. P726,000.00 as actual damages for one (l) year due to loss of business with Chup Son Trading Co. of Hongkong; 2. P214,500.00 as actual damages for one (l) year due to loss of business with Rock-a-bye, Ltd., of England; 3. P3,758,812.00 as actual damages for the stocks-in-trade or finished products or merchandise which were not allowed to be shipped to David Trading Co., and K.P. Glory Corporation, both of Hongkong, which products eventually rotted and/or passed out of fashion; 4. P3,000,000.00 as actual damages for one (1) year for damage to and loss of credit reputation and goodwill, and forced cessation of operations; B. To plaintiff Amado Apostol, the sum of P250,000.00 and P100,000.00 as for actual or compensatory and moral damages, respectively; C. To plaintiff Cheng Kang Tarce, the sum of P200,000.00 as and for actual damages; D. To plaintiff Victoriano Ganal the sum of P50,000.00 as and for actual or compensatory damages; E. To all the plaintiffs, in the proportion fixed by the preceding awards above the total sum of P1,000,000.00 as and for exemplary or corrective damages and the further sum of P50,000.00 as and for attorney's fees; and F. The costs of the above-entitled suit. (pp. 108-109, Rollo) Petitioners appealed to the Intermediate Appellate Court which appeal was docketed as AC-G.R. CV No. 01839, contending that the lower court erred: (a) in not dismissing the complaint; (b) in denying petitioners' motion for extension of time to file answer; (c) in declaring petitioners in default; (d) in proceeding with the case without acting on the answer with counterclaim filed by petitioners, and (e) in rendering judgment by default and awarding huge amounts in the form of damages. In its now assailed Decision dated October 11, 1985, the Intermediate Appellate Court affirmed the lower court's decision with modification, as follows: WHEREFORE, PREMISES CONSIDERED, the decision appealed from is hereby AFFIRMED, with modification that actual damages in favor of Amado Apostol, Cheng Kang Tarce and Victoriano Ganal be deleted; and moral damages awarded in their favor he reduced as follows: P50,000.00 as moral damages in favor of Amado Apostol; P75,000.00 as moral damages in favor of Cheng Kang Tarce and P25,000.00 as moral damages in favor of Victoriano Ganal and exemplary damages reduced to P250,000.00 to be paid to all the plaintiffs in the proportion of the damages awarded to them. SO ORDERED. (p. 120, Rollo) Substantially the Court of Appeals ruled: (1) that Solidbank erred in asking for the dismissal of the damage suit against it because the cause of action therein is different from any prejudice that its attachment of Knitting's properties had or could have caused; (2) that for the same reason, both cases could not have been consolidated, and assuming the propriety of consolidation, still this was
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purely discretionary on the part of the court (the rule having used the word "may"): (3) that Solidbank had properly been declared in default for even its motion for extension of time to file an answer had been filed beyond the reglementary period; (4) and that Solidbank was not entitled to file a motion for reconsideration of the denial of its motion to dismiss. Petitioners' motion to reconsider the aforesaid decision having been denied, they now come before Us through the instant petition praying that it be given due course and after hearing judgment be rendered reversing and setting aside the assailed decision of respondent court and that the complaint in Civil Case No. 9837-P be ordered dismissed, or in the alternative, that this case be remanded to the court of origin, Branch CXVI, Regional Trial Court Pasay City, for further proceedings. The petition was given due course in the Resolution of the Second Division dated April 28, 1986 and the private respondents were required to file their answer which they did on June 23, 1986. The grounds now relied upon by petitioners are the same errors they assigned before the respondent court namely that the lower court should have dismissed this case because of the pendency of Civil Case No. 9609-P; or that the lower court should have consolidated this case with the said Civil Case No. 9609-P: that the lower court erred in declaring petitioners in default and that the damages awarded are not warranted by the evidence. Anent the issue of consolidation of this case with Civil Case No. 9609-P on the strength of the doctrine laid down in the case of Rejuso vs. Estipona (72 SCRA 509) that "any relief against such attachments could be disposed of only in that case", suffice it to state that this doctrine applies in the case at bar. The damages being claimed here are indirectly for damages resulting from the attachment because if the attachment had not been made, and the Order of Judge Romillo regarding the "status quo" at the time that partial attachment had already been made had not been issued, there would not have arisen the confusing and conflicting interpretations of said order. Otherwise stated, the action of damages was essentially the result of the attachment case or incident. Consolidation, being eminently proper, should have been done. Be it noted that the action of private respondents here for damages because of the attachment has already been terminated, the final judgments thereon being sufficiently clear that the action for damages would not lie for the simple reason that the attachment was proper. (This is evident in G.R. No. 72053 entitled Nation's Knitting Enterprises, Inc.; Kiok Lay alias Ching Yu Dee and Spouse; Manuel Kiok and Spouse and Honorable Manuel V. Romillo, Jr., as Judge of the Regional Trial Court, National Capital Judicial Region, Branch CX, Pasay City, Petitioners, versus The Consolidated Bank and Trust Corporation (Solidbank) and The Honorable Intermediate Appellate Court, Respondent (December 4, 1985) and G.R. No. 68440 entitled Nation's Knitting Enterprises, Inc.; Kiok Lay alias Ching Yu Dee and Spouse; and Manuel Kiok and Spouse, and Hon. Manuel V. Romillo, Jr., in his capacity as Judge, Regional Trial Court, National Capital Judicial Region, Br. CX, Pasay City, Petitioners versus The Consolidated Bank and Trust Corporation [Solidbank] and The Intermediate Appellate Court, Respondents (October 10, 1984) (which respectively denied 2 review of CA-G.R. SP-NO. 04915 1and CA-G.R. SP-NO. 01494 and both of which had held that the questioned attachment was proper). Suretly, res judicata bars Knitting's complaint. With respect, to the default judgment by the trial court, it should be emphasized that the trial court should have already decided the case,
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with Solidbank's Answer having been taken into consideration, said Answer being already before the Court. On the issue of damages, We find the various awards by the respondent court completely unfair and unwarranted. While as pointed out by the Court of Appeals actual damages may have been suffered by Knitting in view of its failure to profit from certain business transactions it had been accustomed to enter into, still this loss if it exists, is directly attributable to private respondents' fault. For instance, they could have immediately asked the trial court for a clearer order allegedly lifting the writ of preliminary attachment by saying so directly and expressly, and ordering the delivery of the properties already attached to the private respondents or resorted to appellate tribunals on the issue of said interpretations. Then again, to minimize any foreseen or unforeseen damage to it, Knitting could have tried to enter into substitute contracts. Upon the other hand let it be understood that the legal counsel of SOLIDBANK was correct in preventing the egress of properties already attached since the order of Judge Romillo mandated clearly the preservation of the "status quo". What was the "status quo" at that time? simply the continued holding of properties already attached, with no additional properties to be taken into custody. At any rate, if Knitting had any doubts about its meaning, it had the duty, as the alleged prejudiced entity to ask for judicial clarification as soon as possible. In the light of the environmental circumstances attendant in this case, the assailed decision of the respondent Court is hereby SET ASIDE, and a new one is hereby rendered dismissing the case filed by private respondents against petitioners. No [Link] ORDERED.

G.R. No. 76879 October 3, 1990

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BF HOMES, INCORPORATED, petitioner, vs. COURT OF APPEALS, ROSALINDA R. ROA and VICENTE MENDOZA, respondents. [Link]. 77143 October 3, 1990 ROSALINDA ROA and VICENTE MENDOZA, petitioners, vs. COURT OF APPEALS and BF HOMES, INCORPORATED, respondents. Espinosa, Cabrera & Associates for Rosalinda Roa, et al. Balgos & Perez for BF Homes, Inc. CRUZ, J.: Involved here are two petitions for review assailing the decision of the Court of Appeals in CA-G.R. No. Sp 05411, entitled BF Homes, Inc. v. Judge Tutaan, et al., dated June 6, 1986, as amended on October 22, 1986. BF Homes, Inc. is a domestic corporation previously engaged in the business of developing and selling residential lots and houses and other related realty matters. On July 19, 1984, BF contracted a loan from Rosalinda R. Roa and Vicente Mendoza in the amount of P250,000.00 with interest at the rate of 33% per annum payable after 32 days. The obligation was embodied in a promissory note and secured by two post-dated checks issued by BF in favor of the lenders. On September 25, 1984, BF filed a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments under Sec. 5(d) of P.D. No. 902-A with a prayer that upon the filing of the petition and in the meantime, all claims against it for any and all accounts or indebtedness be suspended, but allowing petitioner to continue with its normal operations. It also asked for the approval of the proposed rehabilitation plan. On October 17, 1984, Roa and Mendoza filed a complaint against BF with the Regional Trial Court of Quezon City, docketed as Civil Case No. Q-43104, for the recovery of the loan of P250,000.00, with interest and attorney's fees. The complaint also prayed for the issuance of a writ of preliminary attachment against the properties of BF. October 22, 1984, the trial court issued the writ against properties of BF sufficient to satisfy the principal claim in the amount of P257,333.33. In a motion dated October 25, 1984, BF moved for the dismissal of the case for lack of jurisdiction, or at least for its suspension in view of the pendency of SEC Case No. 002693. it also asked for the lifting of the writ of preliminary attachment. The trial court denied the motion to dismiss on November 20, 1984, and the motion for reconsideration on January 11, 1985. Citing the case 1 of DMRC Enterprises v. Este del Sol Mountain Reserves, Inc., the trial court held it had jurisdiction because what was involved was not an intra-corporate or partnership dispute but merely a determination of the rights of the parties arising out of the contract of loan. On February 13, 1985, BF filed with the Intermediate Appellate Court (now Court of Appeals) an original action forcertiorari with prayer for a writ of preliminary injunction against the regional trial court, Roa and Mendoza. On February 14, 1985, the Court of Appeals issued an order temporarily restraining proceedings in Civil Case No. Q-43104. On March 18, 1985, the SEC, finding an urgent need to rehabilitate BF issued an order creating a management committee and suspending all actions for claims against BF pending before any court, tribunal or board.
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On June 6, 1986, the Court of Appeals rendered a decision dismissing the complaint in Civil Case No. Q-43104 and declaring the writ of preliminary attachment null and void. But upon a motion for reconsideration filed by Roa and Mendoza, the decision was set aside and a new one was entered upholding the jurisdiction of the regional trial court over the case. At the same time, however, it suspended the proceedings therein until after the management committee shall have been impleaded as party defendant. The dissolution of the writ of preliminary attachment was maintained. Both parties filed separate motions for reconsideration, BF took exception to the amended decision insofar as it directed the continuation of proceedings in Civil Case No. Q-43104 until after the management committee shall have been impleaded. Roa and Mendoza faulted the Court of Appeals for ordering BF to be substituted by the management committee and for dissolving the writ of preliminary attachment without the filing of the necessary counter-bond by the defendant. In a resolution dated December 22, 1986, the Court of Appeals denied both motions for reconsideration, noting that the proceedings in the civil case could not remain suspended forever. The purpose of the suspension, it said, was to enable the management committee to substitute BF as party defendant and prosecute the defense to conclusion. Substitution was necessary to prevent collusion between the previous management and creditors it might seek to favor, to the prejudice of its other creditors. In sustaining the dissolution of the writ of preliminary attachment, the respondent court said that Roa and Mendoza were secured in the satisfaction of any judgment they might obtain against BF since all the properties of the latter were already in the custody of the management committee. Their motions for reconsideration having been denied, both parties filed their respective petitions for review before this Court. In G.R. No. 76879, entitled "BF Homes, Inc. v. Court of Appeals, Rosalinda R. Roa and Vicente Mendoza," the petitioner contends that the respondent court committed an error and violated Sec. 5(d) of P.D. No. 902-A when it authorized continuation of proceedings in Civil Case No. Q-43104 after the management committee created by the SEC shall have been impleaded. In G.R. No. 77143, entitled "Rosalinda R. Roa and Vicente Mendoza v. Court of Appeals and BF Homes, Inc.," the petitioners seek a review on the grounds that the management committee was not a proper party and should not have been ordered substituted as party defendant in the regional trial court and that the writ of preliminary attachment should not have been dissolved. These two petitions were ordered consolidated in the resolution of this Court dated August 17, 1987. On February 2, 1988, the SEC issued an order approving the proposed revised rehabilitation plan and dissolving the management committee earlier created. Atty. Florencio Orendain was appointed rehabilitation receiver. Now to the merits. The parties in both cases are agreed that the proceedings in the civil case for the recovery of a sum of money should be suspended. BF originally maintained that the action should be resumed only until after SEC Case No. 002693 shall have been adjudicated on the merits but now agrees with Roa and Mendoza, in line with the "assessment" of the Solicitor General, that the action should be suspended pending the outcome of the rehabilitation proceedings.
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The pertinent provision of law dealing with the suspension of actions for claims against the corporation is Sec. 6(c) of P.D. 902-A, as amended, which reads: Sec. 6. n order to effectively exercise such jurisdiction, the Commission shall possess the following powers: xxx xxx xxx (c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court, and in such other cases whenever necessary in order to preserve the rights of parties-litigants and/or protect the interest of the investing public and creditors: Provided, however, That the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: Provided, further, That the Commission may appoint a rehabilitation receiver of corporations, partnership or other associations supervised or regulated by other government agencies, such as banks and insurance companies, upon request of the government agency concerned: Provided, finally, That upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnership, or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. (As amended by P.D. Nos. 1653, 1758 and 1799; Emphasis supplied.) As will be noted, the duration of the suspension is not indicated in the law itself. And neither is it specified in the SEC order creating the management committee. The Court feels that the respondent court erred in ordering the resumption of the civil proceeding after the management committee shall have been impleaded as party defendant. The explanation that the only purpose of suspending the civil action was to enable the management committee to substitute BF as party defendant is not acceptable. The view of the respondent court is that the continuation of the action is necessary for the purpose of determining the extent of the liability of BF to Roa and Mendoza. The flaw in this theory is that even if such liability is determined, it still cannot be enforced by the trial court as 2 long as BF is under receivership. Moreover, it disregards the possibility that such determination would not be necessary at all should the rehabilitation receiver favorably consider and fully acknowledge the claims made by Roa and Mendoza. Under Sec. 6(d) of P.D. No. 902-A, the management committee or rehabilitation receiver is empowered to take custody and control of all existing assets and properties of such corporations under management; to evaluate the existing assets and liabilities, earnings and operations of such corporations; to determine the best way to salvage and protect the interest of investors and creditors; to study, review and evaluate the feasibility of continuing operations and restructure and rehabilitate such entities if determined to be feasible by the SEC. In light of these powers, the reason for suspending actions for claims against the corporation should not be difficult to discover. It is not really to enable the management committee or the rehabilitation receiver to substitute the defendant in any pending action against it before any court, tribunal, board or body. Obviously, the real justification is to enable the management committee or rehabilitation
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receiver to effectively exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the "rescue" of the debtor company. To allow such other action to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation instead of being directed toward its restructuring and rehabilitation. 3 In BF Homes, Inc. v. Hon. Fernando P. Agdamag et al., the Court of Appeals held: It must be emphasized that the suspension is only for a temporary period to prevent the irreversible collapse of the corporation and give the management committee or receiver the absolute tranquility to study the viability of the corporation. During this period, the law creates a wall around the corporation against all claims. 4 In Alemar's Sibal & Sons, Inc. v. Hon. Jesus M. Elbinias, et al., this Court, explaining the legal consequences of a receivership, said: . . . When a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them should be given any preference by paying one or some of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the corporation under receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their claims with the receiver who is a duly appointed officer of the SEC. (Emphasis supplied) Consequently, we feel that the trial court cannot at this point determine the extent of BF's liability, if any, to Roa and Mendoza. This is true whether it is retained as party defendant or substituted by the management committee (or the rehabilitation receiver) as directed by the respondent court. What Roa and Mendoza should do now is file their claims with the rehabilitation receiver and submit to him such evidence as they would otherwise have to adduce before the trial court to prove such claims. As the revised rehabilitation plan approved by the SEC is expected to be implemented within ten years, the proceedings in the Regional Trial Court of Quezon City should be suspended during that period, to begin from February 2, 1988, the date of its approval. This is without prejudice to the authority of the SEC to extend the period when warranted and even to order the liquidation of BF if the plan is found to be no longer feasible. On the other hand, on a more positive note, the SEC can also find within that period that BF has been sufficiently revived and able to resume its normal business operations without further need of rehabilitation. Coming now to the writ of preliminary attachment, we find that it must stand despite the suspension of the proceedings in the Regional Trial Court of Quezon City. The writ was issued prior to the creation of the management committee and so should not be regarded as an undue advantage of Mendoza and Roa over the other creditors of BF. In its amended decision and the resolution ordering the discharge of the writ of preliminary attachment, the respondent court did not rule on whether the issuance of the writ was improper or irregular. It simply said that the writ was no longer proper or necessary at that time because the properties of BF were in the hands of the receiver. We do not think so. The appointment of a rehabilitation receiver who took control and custody of BF has not necessarily secured the claims of Roa and Mendoza. In the event that the receivership is terminated with such claims not having been satisfied, the creditors may also find themselves without security therefor in the civil action because of the dissolution
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of the attachment. This should not be permitted. Having previously obtained the issuance of the writ in good faith, they should not be deprived of its protection if the rehabilitation plan does not succeed and the civil action is resumed. It is settled that: If there is an attachment or sequestration of the goods or estate of the defendant in an action which is removed to a bankruptcy court, such an attachment or sequestration will continue in existence and hold the goods or estate to answer the final judgment or decree in the same manner as they would have been held to answer the final judgment or decree rendered by the Court from which the action was removed, unless the attachment or sequestration is invalidated under applicable 5 law. (28 USCS No. 1479 [a].) 6 As we ruled in Government of the Philippine Islands v. Mercado: Attachment is in the nature of a proceeding in rem. It is against the particular property. The attaching creditor thereby acquires specific lien upon the attached property which ripens into a judgment against the res when the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and a virtual condemnation of it to pay the owner's debt. The law does not provide the length of time an attachment lien shall continue after the rendition of judgment, and it must therefore necessarily continue until the debt is paid, or sale is had under execution issued on the judgment or until judgment is satisfied, or the attachment discharged or vacated in some manner provided by law. It has been held that the hen obtained by attachment stands upon as high equitable grounds as a mortgage lien: The lien or security obtained by an attachment even before judgment, is a fixed and positive security, a specific lien, and, although whether it will ever be made available to the creditor depends on contingencies, its existence is in no way contingent, conditioned or inchoate. It is a vested interest, an actual and substantial security, affording specific security for satisfaction of the debt put in suit, which constitutes a cloud on the legal title, and is as specific as if created by virtue of a voluntary act of the debtor and stands upon as high equitable grounds as a mortgage. (7 Corpus Juris Secundum, 433, and authorities therein cited.) Under the Rules of Court, a writ of attachment may be dissolved only upon the filing of a counter-bond or upon proof of its improper or irregular issuance. Neither ground has been established in the case at bar to warrant the discharge of the writ. No counter-bond has been given. As for the contention that the writ was improperly issued for lack of notice to BF on the application for the writ, it suffices to cite Mindanao Savings & Loan Association, Inc.v. Court of Appeals, 7 where we held: The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the Rules of Court are the affidavit and bond of the applicant. 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 of some other person who personally knows 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 other sufficient security for the claim sought to be enforced by the action and that the amount due to the 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 affidavit, and the
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bond required by the next succeeding section must be duly filed with the clerk or judge of the court before the order issues. No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing would defeat the purpose of this provisional remedy. The time which such a hearing would take, could be enough to enable the defendant to abscond or dispose of his property before a writ of attachment issues. Nevertheless, while no hearing is required by the Rules of Court for the issuance of an attachment (Belisle Investment & Finance Co., Inc. v. State Investment House, Inc., 72927, June 30, 1987; Filinvest Credit Corp. v. Relova, 117 SCRA 420), a motion to quash the writ may not be granted without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13, Rule 57, Rules of Court). In sum, the Court holds that the substitution of the management committee/rehabilitation receiver in Civil Case No. Q-43104 in the Regional Trial Court of Quezon City is not necessary because the proceedings therein shall be suspended anyway pending implementation of the revised rehabilitation plan, during which the writ of preliminary attachment shall remain in force. WHEREFORE, the decision of the respondent court is SET ASIDE and judgment is rendered as follows: (1) In G.R. No. 76879, the petition is GRANTED. The proceedings in Civil Case No. Q-43104 shall remain suspended for a period of ten (10) years from February 2, 1988, unless extended or shortened by the SEC as circumstances may warrant; and (2) In [Link].77143, the petition is GRANTED insofar as it seeks restoration of the writ of preliminary attachment, issued on October 22, 1984, which is hereby reinstated. SO ORDERED.

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G.R. No. 111174 March 9, 2000 REPUBLIC OF THE PHILIPPINES, petitioner, vs. HON. BERNARDO V. SALUDARES, Presiding Judge, RTC, Br. 28, Lianga, Surigao del Sur, and HUNG MING KUK, respondents. QUISUMBING, J.: This special civil action for certiorari assails the decision of the Regional Trial Court of Lianga, Surigao del Sur, Branch 28, dated March 19, 1993. At issue is the jurisdiction of the trial court over properties owned by Lianga Bay Logging Company, Inc. (LBLC), but allegedly sequestered by the Presidential Commission on Good Government (PCGG). The facts on record show that on April 2, 1986, the PCGG issued a writ 2 of sequestration, which reads: IN THE MATTER OF THE SEQUESTRATION OF LIANGA BAY LOGGING TO: MR. ARISTIDES M. ESCOSORA Baganga, Davao Oriental WRIT OF SEQUESTRATION By virtue of the power vested unto this Commission and by authority of the President of the Philippines, LIANGA BAY LOGGING, with offices at 2nd Floor, Emerald Building, Emerald Ave., Ortigas Office Bldg. Complex, Pasig, Metro Manila is hereby sequestered. Mr. Aristides Escosora is hereby appointed Fiscal Agent of this Commission and as such, he is hereby ordered to: 1. To implement this sequestration order with a minimum disruption of business activities. 2. To preserve and safeguard, as well as prevent the removal concealment of records and the disposition and dissipation of assets, funds and resources. 3. To prevent undue removal or withdrawal of funds, until further orders to the Commission. 4. To report to the Commission on Good Government within five (5) days. Further, you are authorized to request the Commission for security support from the Military/Police authorities only if necessary. xxx xxx xxx FOR THE COMMISSION: Originally Signed MARY CONCEPCION BAUTISTA Commissioner The writ of sequestration was based on the ground that the shares of stocks in LBLC owned by Peter A. Sabido formed part of "illegally acquired wealth." On July 27, 1987, the Republic of the Philippines through the PCGG and the Office of the Solicitor General filed before 3 the Sandiganbayan a complaint for reconveyance, reversion, accounting, restitution and damages against, among others, Peter A. Sabido. On August 12, 1991, Sabido filed a Motion to Lift the Writs of Sequestration before the Sandiganbayan. On November 29, 1991, the Sandiganbayan granted the motion, disposing as follows: WHEREFORE, the "Motion (to Lift Writs of Sequestration)" dated August 12, 1991, is granted. Accordingly, the Writs of Sequestration issued against the Philippine Integrated Meat Corporation on March 17, 1986, and Lianga Bay Logging Company, Inc. on April 2, 1986, are declared to have been deemed automatically lifted upon the lapse of
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1

six months from the ratification of the 1987 Constitution on February 2, 1987, without prejudice to the continuation of the proceedings against PIMECO and Lianga. . . . (emphasis supplied) xxx xxx xxx 4 SO ORDERED. On December 11, 1991, PCGG filed a motion for reconsideration of the decision of Sandiganbayan praying for the nullification of the order which lifted the writ of sequestration of LBLC. In the meantime, on February 11, 1993, private respondent Hung Ming 5 Kuk filed a complaint for sum of money against LBLC, with a prayer for a writ of preliminary attachment, with the Regional Trial Court, Branch 28, of Lianga, Surigao del Sur. The PCGG was not impleaded by Hung Ming Kuk as party-defendant nor was the sequestration case referred to the RTC's proceedings. Thus, the Republic of the Philippines filed a special civil 6 action for certiorari under Rule 65, dated March 29, 1993, with the Supreme Court. This petition, docketed as G.R. No. 109314, was later on consolidated with other similar cases. Meantime, on February 15, 1993, the Sandiganbayan denied the motion for reconsideration of PCGG, dated December 11, 1991. On February 17, 1993, the trial court granted the writ of preliminary attachment in favor of Hung Ming Kuk. Thereafter, Hung Ming Kuk filed a motion to declare LBLC in default for failure to file responsive pleadings pursuant to Sec. 1, Rule 18 of the Rules of Court. The RTC of Lianga, acting on the motion of Hung Ming Kuk, issued an order dated March 4, 1993, declaring LBLC as in default. Consequently, on March 19, 1993, the RTC rendered judgment by default, and decreed thus: WHEREFORE, premised on the foregoing evidences and findings, this court hereby renders judgment in favor of the plaintiff, and ordering the defendant-Corporation to pay, as follows: 1. To pay plaintiff the principal amount of the accrued unpaid obligation in the total amount of P18,031,563.78, with interests at 14% per annumreckoned from July 1992 to February 1993 in the computed total of P1,250,666.66, the same to continue until said obligation is fully paid; 2. To pay plaintiff moral and exemplary damages in the total amount of P150,000.00, plus Appearance Fee for the counsel in the sum of P5,000.00; 3. To pay plaintiff the total amount of P4,857,195.45 for Sheriff's Expenses, Attached Properties Guards' Fees, Filing Fees, Litigation Expenses, and Attorneys Fees computed at 25% of the principal obligation, or P4,507,890.95, or a total amount of P4,857,195.45; 4. To pay the costs of the suit. 7 IT IS SO ORDERED. On August 11, 1993, petitioner filed this special civil action under Rule 65 of the Rules of Court, raising the sole issue as follows: WHETHER, THE TRIAL COURT FAULTED IN DECIDING THE CLAIM OF PRIVATE RESPONDENT WHICH INVOLVED THE PROPERTIES OF LIANGA BAY LOGGING CO. INC. In the meantime, on January 23, 1995, the Supreme Court en banc issued its decision in the consolidated cases ofRepublic vs. Sandiganbayan (First Division), 240 SCRA 376 (1995). The decision included the nullification of the resolution of the Sandiganbayan that lifted the writ of sequestration of LBLC properties in G.R. No. 109314. Hence, the Court effectively confirmed the validity of the writ of sequestration over said properties. Peter A. Sabido's motion for
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reconsideration was denied. Finally, an entry of judgment was issued on April 22, 1997, in G.R. No. 109314. Petitioner contends that the RTC of Lianga has no jurisdiction over the subject matter of the case inasmuch as the same are under sequestration by the PCGG. Citing Baseco vs. PCGG, 150 SCRA 181 (1987), petitioner asserts that the sequestered assets have been placed under custodia legis of the PCGG pending the final determination by the Sandiganbayan that said assets are in fact ill-gotten. Hence, the RTC has no jurisdiction to order the attachment of said sequestered properties. Private respondent, however avers that his original complaint was for a sum of money. It was a demand for payment of a valid obligation owed to him by LBLC. He adds that it would be unfair and unjust to declare the entire RTC proceedings regarding his claim for sum of money null and void. Private respondent further claims that the attachment order of the trial court was issued after the Sandiganbayan had lifted the writ of sequestration against LBLC. But petitioner asserts that this order of the Sandiganbayan was reversed by the Supreme Court in a 8 banc decision dated January 23, 1995, resolving several consolidated cases for which G.R. No. 109314 was included. Petitioner stresses that said reversal had become final and executory on April 22, 1997. In PAGCOR vs. CA, 275 SCRA 433-434 (1997), involving ownership by Philippine Casino Operators Corporation (PCOC) over several gaming and office equipment during the time that PCOC was under a sequestration by PCGG, the Court ruled: We disagree with the RTC and the CA on the issue of jurisdiction. While there can be no dispute that PCOC was sequestered, the fact of sequestration alone did not automatically oust the RTC of jurisdiction to decide upon the question of ownership of the subject gaming and office equipment. The PCGG must be a party to the suit in order that the Sandiganbayan's exclusive jurisdiction may be correctly invoked. This is deducible from no less than E.O. No. 14, the "Pea" and "Nepomuceno" cases relied upon by both subordinate courts. Note that in Section 2 of E.O. No. 14 which provides: Sec. 2. The Presidential Commission on Good Government shall file all such cases, whether civil or criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof. it speaks of the PCGG as party-plaintiff. On the other hand, the PCGG was impleaded as co-defendant in both the "Pea" and "Nepomuceno" cases. But here, the PCGG does not appear in either capacity, as the complaint is solely between PAGCOR and respondents PCOC and Marcelo. The "Pea" and "Nepomuceno" cases which recognize the independence of the PCGG and the Sandiganbayan in sequestration cases, therefore, cannot be invoked in the instant case so as to divest the RTC of its jurisdiction, under Section 19 of B.P. Blg. 129, over PAGCOR's action for recovery of personal property. In the case at bar, the claim of private respondent Hung Ming Kuk is for a sum of money arising from a debt incurred by LBLC. Under a contract, private respondent had extended cash advances and supplied LBLC hardware materials, auto spare parts, and rendered services, for cutting and hauling logs. The total claim amounts to P18,031,563.78. Following Section 19 of B.P. Blg. 129, as amended by R.A. No. 7691 on March 25, 1994, the complaint falls within the jurisdiction of the Regional Trial Court, viz: Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: xxx xxx xxx
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(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred thousand pesos (P200,000). Petitioner relies, however, on the case of PCGG vs. Pea, 159 SCRA 556 (1988) and asserts that the controversy of LBLC or a sequestered company falls within the exclusive jurisdiction of the Sandiganbayan and not of the trial court. In the Pea case, the trial court issued a temporary restraining order which prevented PCGG from enforcing the memorandum of then PCGG Commissioner Mary Concepcion Bautista. Her memorandum denied complainant's authority to sign and manage the funds of the sequestered company. The Supreme Court ruled that the trial court had no jurisdiction over PCGG being a co-equal body, and therefore, the regional trial courts may not interfere with and restrain the PCGG or set aside the orders and actions of its Commissioner. In contrast, the case now before us concerns receivables of the private respondent arising out of a legitimate business contract to supply goods and services in favor of LBLC. When a collection suit was filed against LBLC by its supplier, Hung Ming Kuk, evidently PCGG could not be the proper party to defend against such claim. More so, because when PCGG had not taken over the LBLC's business operations. We note that PCGG is not an owner but a conservator. It can exercise only powers of administration over property sequestered, frozen or provisionally taken over. Even resort to the provisional remedies should entail the least possible interference with business operations or activities so that, in the event that the accusation that the business enterprise is "ill-gotten" be not proven, it may be returned to its rightful owner as far as possible in the same condition as it was at the 9 time of sequestration. The holding in Pea which confers exclusive jurisdiction on the Sandiganbayan in sequestration cases cannot also be relied upon by petitioner in this case. We hold that the Regional Trial Court has jurisdiction over the complaint for payment of money allegedly averred by LBLC to private respondent. We now move to the ancillary issue of whether or not the provisional remedy of attachment issued by the trial court in favor of the private respondent is valid. It bears recalling that when the Sandiganbayan ordered that the writ of sequestration be lifted, PCGG filed a special civil action for certiorari to contest that order. The Supreme Court ruled in favor of PCGG when it granted the latter's petition to declare the lifting of the writ of sequestration by the Sandiganbayan null and void. The Court's en banc resolution pertinently reads: WHEREFORE, judgment is hereby rendered: A. NULLIFYING AND SETTING ASIDE: xxx xxx xxx 10 17) in G.R. No. 109314, its impugned Resolutions dated November 29, 1991 and February 16, 1993. In the same en banc Resolution, the Court observed: II. Provisional Remedies in Pursuance of Policy Special adjective tools or devices were provided by the Revolutionary Government for the recovery of that "ill-gotten wealth." These took the form of provisional remedies akin to preliminary attachment (Rule 57), writ of seizure of personalty (Rule 60) and receivership (Rule 59). They
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were (a)sequestration and (b) freeze orders, as regards "unearthed instance of "ill-gotten wealth"; and (c)provisional takeover, as regards "business enterprises and properties taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos." A. Executive Orders Re Sequestration, Freezing and Takeover These special remedies were prescribed and defined in Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino in March, 1986. Their validity and propriety were sustained by this Court on May 27, 1987, against claims that they were unconstitutional as being bills of attainder, or as violative of the right against self-incrimination and the guaranty against unreasonable searches and seizures. In the same case, the Court also set the parameters for and restrictions on the proper exercise of the remedies. In BASECO vs. PCGG, 150 SCRA 181, 182 (1987), sequestration is defined as the process, which may be employed as a conservatory writ whenever the right of the property is involved, to preserve, pending litigation, specific property subject to conflicting claims of ownership or 11 liens and privileges. The Court also noted the relationship between attachment and receivership, on one hand, and sequestration, freeze order and provisional takeover on the other. The latter there are ancillary remedies in prosecuting the ill-gotten wealth of the previous Marcos regime. The Court observed that sequestration, freezing and provisional takeover are akin to the provisional remedy of preliminary attachment or receivership. By an order of attachment, a sheriff seizes property of a defendant in a civil suit so that it may stand as security for the satisfaction of any judgment that may be obtained, and not disposed of, or dissipated, or 12 lost intentionally, or otherwise, pending the action. When a writ of attachment has been levied on real property or any interest therein belonging to the judgment debtor, the levy creates a lien which nothing 13 can destroy but its dissolution. This well-settled rule is likewise applicable to a writ of sequestration. Attachment is in the nature of a proceeding in rem. It is against a particular property of a debtor. The attaching creditor thereby acquires a specific lien upon the attached property which ripens into a judgment against the reswhen the order of sale is made. Such a proceeding is in effect a finding that the property attached is an indebted thing and results in its virtual condemnation to pay for the owner's debt. The law does not provide the length of time during which an attachment lien shall continue after the rendition of the judgment, and it must therefore continue until the debt is paid, or sale is had under execution issued in the judgment, or until the judgment is satisfied, or the statement discharged or vacated in some manner provided by law. In our view, the disputed properties of LBLC were already under custodia 15 legis by virtue of a valid writ of sequestration issued by the PCGG on April 2, 1986, when respondent Judge Saludares issued the assailed writ of attachment in favor of private respondent Hung Ming Kuk. At that time the writ of sequestration issued by PCGG against LBLC was subsisting. Said writ of the PCGG could not be interfered with by the RTC of Lianga, because the PCGG is a coordinate and co-equal body. The PCGG had acquired by operation of law the right of redemption over the property until after the final determination of the case or until its dissolution. WHEREFORE, the instant petition is partially GRANTED. The default Order issued by the public respondent dated March 19, 1993, is
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AFFIRMED, but should be held in abeyance until the sequestration case involving LBLC before the Sandiganbayan is determined. The Order of Attachment issued by the public respondent is declared NULL and VOID. No pronouncement as to [Link] SO ORDERED.

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