Mt. Banahaw Wood Industries, Inc. v. Naga Dynasty Allied Marketing Corp.

FIRST DIVISION

[G.R. No. 211179. September 11, 2019.]

MT. BANAHAW WOOD INDUSTRIES, INC., petitioner, vs.NAGA DYNASTY ALLIED MARKETING CORPORATION, WILLY UY AND WILSON UY, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution datedSeptember 11, 2019which reads as follows:

"G.R. No. 211179 (Mt. Banahaw Wood Industries, Inc. v. Naga Dynasty Allied Marketing Corporation, Willy Uy and Wilson Uy). — We affirm the Decision 1 dated August 27, 2013 and Resolution 2 dated January 28, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 125730. The CA was correct in lifting the writ of preliminary attachment the Regional Trial Court (RTC) issued. Petitioner failed to sufficiently show the factual circumstances of fraud justifying its application for writ of preliminary attachment.

The facts as narrated by the CA are as follows:

On 16 September 2010, [petitioner] filed a complaint for collection of sum of money with prayer for a writ of preliminary attachment against [respondents] Naga Dynasty Allied Marketing Corporation x x x, Willy Uy and Wilson Uy.

Allegedly, [respondents] Willy and Wilson Uy, through [respondent] corporation, purchased from [petitioner] plywood products amounting to P2,450,384.00. As agreed by the parties, said purchase was made on credit and [respondents] Willy and Wilson Uy issued four (4) post-dated checks corresponding to the purchase price of the delivered plywood products.

Unfortunately, however, all four (4) checks were dishonored by Equitable PCI Bank upon presentment for the reason that [respondents'] current account with the drawee bank had already been closed. Despite repeated demands, [respondents] failed and refused to pay their monetary obligation to [petitioner].

Two years thereafter, [petitioner] again extended a credit line in favor of [respondents]. From 6 January 2006 to 24 June 2006, [petitioner] delivered to [respondents] plywood products amounting to P2,272,100.00. Again, post-dated checks were issued by [respondents] Willy and Wilson Uy to secure payment of the purchased products.

Said checks were, however, dishonored by the Land Bank of the Philippines and RCBC upon presentment since [respondents'] current account with said banks had also been closed. Despite demands, [respondents] have yet to pay their unpaid account from said two (2) transactions, thus prompting [petitioner] to file the present collection case.

Claiming that it has a valid and meritorious cause of action and that [respondents], with the intent to defraud, were already in the process of disposing their properties, [petitioner] prayed for the issuance of a writ of preliminary attachment against the properties of [respondents].

In its Order dated 14 October 2010, then presiding Judge Dennis Pastrana of the court a quo granted [petitioner's] entreaty for a writ of preliminary attachment. A Writ of Attachment was accordingly issued against [respondents] on 30 November 2010.

On 14 December 2010, [respondents] filed an omnibus motion, which seeks (1) to lift or dissolve the writ of preliminary attachment and/or (2) to hold in abeyance its implementation. [Respondents] espoused as grounds for their motion to lift the irregularity in the issuance of the writ and the unfaithful allegations in the affidavit accompanying the application for said writ. They also argued that they should not be made personally liable for the debts of [respondent] corporation.

xxx xxx xxx

On 15 December 2011, the trial court denied [respondents'] omnibus motion to lift or dissolve the writ of preliminary attachment and to hold its implementation in abeyance.

Dissatisfied with the denial of their omnibus motion, [respondents] moved for its reconsideration which was denied by the trial court in its now assailed Order of 5 June 2012. 3

Alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the trial court judge, respondents filed a petition for certiorari under Rule 65 in the CA. 4

In granting the petition, the CA held that the allegations in the complaint in support of the application for the issuance of a writ of preliminary attachment failed to establish the factual basis of respondents' intent to defraud. The CA declared that the factual circumstances of the alleged fraud must be sufficiently shown because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with the obligation. Thus, the CA lifted and dissolved the writ of preliminary attachment. 5

Hence, this petition. 6

Petitioner argues that the verified complaint and the affidavit are sufficient to support the issuance of the writ of preliminary attachment. As alleged in the complaint, respondents were aware that upon presentment, the checks they issued to petitioner would be dishonored. For petitioner, this constitutes fraud in contracting the obligation. Moreover, while general allegations will not suffice to support the issuance of a preliminary attachment, petitioner asserts that in this case, fraud may be deduced based on the facts and circumstantial evidence.

We agree with the CA and deny the petition.

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, the same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment that might be secured in the said action by the attaching creditor against the defendant. 7 Section 1, Rule 57 of the Rules of Court provides the grounds upon which attachment may issue. It provides:

Sec. 1. Grounds upon which attachment may issue. — At the commencement of the action or at any time before entry of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:

(a) In an action for the recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract, quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors;

(b) In an action for money or property embezzled or fraudulently misapplied or converted to his own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent, or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of duty;

(c) In an action to recover the possession of property unjustly or fraudulently taken, detained or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person;

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof;

(e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors; or

(f) In an action against a party who does not reside and is not found in the Philippines, or on whom summons may be served by publication.

Being a harsh remedy, it is to be construed strictly in favor of the defendant and there must be more compelling reasons to justify attachment beyond a mere general assertion of fraud. 8 In Allied Banking Corporation v. South Pacific Sugar Corporation, We ruled that the writ of preliminary attachment may not be issued based on a general averment such as one ceremoniously quoting from a pertinent rule. 9

Here, petitioner relied on Section 1 (d) and (e) on fraud as grounds for the issuance of a writ of preliminary attachment and alleged in its complaint:

25. The acts of [respondents] in assuring that all the post-dated checks as payment to the plywood products they purchased were to be honored by the drawee bank when deposited when in fact they were all dishonored constitute fraud in contracting their obligations with the [petitioner];

26. [Respondents], with the intent of defrauding [petitioner] of their obligations totaling P4,722,484.00 are presently in the process of disposing of their properties and unless a writ of preliminary attachment is issued against the properties of the [respondents], [petitioner] will suffer irreparable injury and would render nugatory any judgment that may be rendered against the [respondents]; 10

On the other hand, the affidavit of merit merely stated:

1. I am the authorized representative of the [Petitioner] Corporation in the case entitled Naga Dynasty Allied Marketing Corporation, Wilson Uy and Willy Uy for Sum of Money with Damages and a Prayer for the Issuance of a Writ of Preliminary Attachment;

2. [Petitioner] Corporation have a valid cause of action against [Respondents] in this case and would be able to prove by competent and admissible evidence all the material allegations in my Complaint;

3. There is no other security for the claim sought to be enforced by the action stated;

4. The amount due from [Respondents] to the [Petitioner] Corporation is as much as the sum for which the order is granted above all legal counterclaims;

5. I am executing this affidavit pursuant to the provisions of Sec. 3, Rule 57 of the Revised Rules on Civil Procedure. 11

In general, fraud may be defined as the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission. 12 Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach of the senses, usually kept secret, very unlikely to be confessed, and therefore, can only be proved by unguarded expressions, conduct and circumstances. Thus, in an application for issuance of a writ of preliminary attachment, it is necessary to recite in what particular manner an applicant for the issuance of the writ of attachment was defrauded. The particulars of such circumstances necessarily include the time, persons, places and specific acts of fraud committed. Mere general averments render the writ defective and the court that ordered its issuance acted with grave abuse of discretion amounting to excess of jurisdiction. 13

We agree with the CA that the allegations in the complaint and affidavit of merit are vague and failed to specify the details establishing the grounds for the issuance of the writ of preliminary attachment. In other words, the particularities on how respondents defrauded petitioner, whether in contracting or performing the obligation, or in removing or disposing their properties, were missing.

On Section 1 (d), a debt is fraudulently contracted if at the time of contracting it, the debtor has a preconceived plan or intention not to pay. 14 What petitioner established in the complaint, however, was that respondents were unable to pay the plywood products they purchased from petitioner. Unfortunately for petitioner, fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation. 15 The mere fact of failure to pay after the obligation to do so has become due and despite several demands is not enough to warrant the issuance of a writ of preliminary attachment. 16

On Section 1 (e), petitioner only quoted the rule but failed to support this allegation with the specific factual circumstances of the alleged disposal of respondents' properties.

At this point, We reiterate Our ruling with respect to the caution which must be exercised in issuing writs of preliminary attachment:

There is a reason why a writ of preliminary attachment is available only in specific cases enumerated under Section 1 of Rule 57. As it entails interfering with property prior to a determination of actual liability, it is issued with great caution and only when warranted by the circumstances. As we said in Ng Wee v. Tankiansee, the rules on the issuance of the writ of preliminary attachment as a provisional remedy are strictly construed against the applicant because it exposes the debtor to humiliation and annoyance.

Moreover, we highlight that this petition for review on certiorari arose out of a Decision of the CA in a Rule 65 petition. In cases like this, this Court's duty is only to ascertain whether the CA was correct in ruling that the RTC acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

Jurisprudence has consistently held that a court that issues a writ of preliminary attachment when the requisites are not present acts in excess of its jurisdiction. In Philippine Bank of Communications v. CA, we highlighted:

Time and again, we have held that the rules on the issuance of a writ of attachment must be construed strictly against the applicants. This stringency is required because the remedy of attachment is harsh, extraordinary and summary in nature. If all the requisites for the granting of the writ are not present, then the court which issues it acts in excess of its jurisdiction. 17 (Citations omitted.)

Here, there was no factual basis for the issuance of a writ of preliminary attachment against the properties of respondents. Thus, the dissolution of the writ is proper.

WHEREFORE, the petition is DENIED. The Decision dated August 27, 2013 and Resolution dated January 28, 2014 of the Court of Appeals in CA-G.R. SP No. 125730 are hereby AFFIRMED.

SO ORDERED."

Very truly yours,

(SGD.) LIBRADA C. BUENADivision Clerk of Court

 

Footnotes

1.Rollo, pp. 35-43. Penned by Associate Justice Danton Q. Bueser, concurred in by Associate Justices Amelita G. Tolentino and Ramon R. Garcia.

2.Id. at 45-46. Penned by Associate Justice Danton Q. Bueser, concurred in by Associate Justices Amelita G. Tolentino and Ramon R. Garcia.

3.Id. at 36-38.

4.Id. at 146-163.

5.Id. at 42-43.

6.Id. at 11-32.

7.Watercraft Venture Corporation v. Wolfe, G.R. No. 181721, September 9, 2015, 770 SCRA 179, 191.

8.Allied Banking Corporation v. South Pacific Sugar Corporation, G.R. No. 163692, February 4, 2008, 543 SCRA 585, 593.

9.Id. at 595.

10.Rollo, p. 54.

11.Id. at 57.

12.Legaspi Oil Co., Inc. v. Court of Appeals, G.R. No. 96505, July 1, 1993, 224 SCRA 213, 215-216.

13.Watercraft Venture Corporation v. Wolfe, supra note 6 at 197-198.

14.Philippine Bank of Communication v. Court of Appeals, G.R. Nos. 115678 & 119723, February 23, 2001, 352 SCRA 616, 623.

15.Security Bank Corporation v. Great Wall Corporation Press Company, Inc., G.R. No. 219345, January 30, 2017, 816 SCRA 224, 232.

16.PCL Industries Manufacturing Corp. v. Court of Appeals, G.R. No. 147970, March 31, 2006, 486 SCRA 214, 225-226.

17. See Tsuneishi Heavy Industries (Cebu), Inc. v. MIS Maritime Corporation, G.R. No. 193572, April 4, 2018, 860 SCRA 259, 282.