Alejandro Ng Wee vs. Manuel Tankiansee

A writ of preliminary attachment under Section 1(d), Rule 57 of the Rules of Court cannot be issued against a corporate officer or director based merely on a general allegation of fraud or connivance; the applicant must show specific factual circumstances demonstrating that the debtor, at the time of contracting the obligation, had a preconceived plan or intention not to pay, and the supporting affidavit must contain particulars as to how the fraud was committed.

Petitioner Alejandro Ng Wee was a valued client of Westmont Bank (now United Overseas Bank) who made money placements totaling ₱210,595,991.62 with the bank's affiliate, Westmont Investment Corporation (Wincorp), a domestic entity engaged in the business of an investment house with authority and license to extend credit. Respondent Manuel Tankiansee was Vice-Chairman and Director of Wincorp and was impleaded as one of the defendants in the civil case for damages filed by petitioner. The dispute arose from Wincorp's alleged fraudulent scheme involving the transfer of petitioner's money placements to the loan account of Power Merge Corporation without petitioner's knowledge and consent.

Petitioner Alejandro Ng Wee, a valued client of Westmont Bank (now United Overseas Bank), made several money placements totaling ₱210,595,991.62 with the bank's affiliate, Westmont Investment Corporation (Wincorp), a domestic entity engaged in the business of an investment house with the authority and license to extend credit. Sometime in February 2000, petitioner received disturbing news about Wincorp's financial condition, prompting him to inquire into and investigate the company's operations and transactions with its borrowers. He discovered that the company extended a loan equal to his total money placement to a corporation (Power Merge) with a subscribed capital of only ₱37.5M. This credit facility originated from another loan of about ₱1.5B extended by Wincorp to another corporation (Hottick Holdings). When the latter defaulted, Wincorp instituted a case against it and its surety, but a settlement was reached in which Hottick's president, Luis Juan L. Virata, assumed the obligation of the surety.

Under the scheme agreed upon by Wincorp and Hottick's president, petitioner's money placements were transferred without his knowledge and consent to the loan account of Power Merge through an agreement that virtually freed the latter of any liability. Allegedly, through the false representations of Wincorp and its officers and directors, petitioner was enticed to roll over his placements so that Wincorp could loan the same to Virata/Power Merge. Finding that Virata purportedly used Power Merge as a conduit and connived with Wincorp's officers and directors to fraudulently obtain for his benefit without any intention of paying the said placements, petitioner instituted, on October 19, 2000, Civil Case No. 00-99006 for damages with the Regional Trial Court (RTC) of Manila. One of the defendants impleaded in the complaint was respondent Manuel Tankiansee, Vice-Chairman and Director of Wincorp.

On October 26, 2000, on the basis of the allegations in the complaint and the October 12, 2000 Affidavit of petitioner, the trial court ordered the issuance of a writ of preliminary attachment against the properties not exempt from execution of all the defendants in the civil case, subject, among others, to petitioner's filing of a ₱50M bond. The writ was consequently issued on November 6, 2000. Arguing that the writ was improperly issued and that the bond furnished was grossly insufficient, respondent, on December 22, 2000, moved for the discharge of the attachment; the other defendants filed similar motions. On October 23, 2001, the RTC, in an Omnibus Order, denied all the motions for the discharge of the attachment. The defendants, including respondent, filed their respective motions for reconsideration, but the trial court denied the same on October 14, 2002.

Incidentally, while respondent opted not to question the said orders anymore, his co-defendants, Virata and UEM-MARA Philippines Corporation, assailed the same via certiorari under Rule 65 before the CA, docketed as CA-G.R. SP No. 74610. The appellate court denied the certiorari petition on August 21, 2003, and the motion for reconsideration on March 16, 2004. In a petition for review on certiorari before the Supreme Court in G.R. No. 162928, the Court denied the petition and affirmed the CA rulings on May 19, 2004, for Virata's and UEM-MARA's failure to sufficiently show that the appellate court committed any reversible error; the petition was denied with finality on August 23, 2004.

On September 30, 2004, respondent filed before the trial court another Motion to Discharge Attachment, re-pleading the grounds he raised in his first motion but raising the following additional grounds: (1) that he was not present in Wincorp's board meetings approving the questionable transactions; and (2) that he could not have connived with Wincorp and the other defendants because he and Pearlbank Securities, Inc., in which he is a major stockholder, filed cases against the company as they were also victimized by its fraudulent schemes. Ruling that the grounds raised were already passed upon by it in the previous orders affirmed by the CA and the Supreme Court, and that the additional grounds were respondent's affirmative defenses that properly pertained to the merits of the case, the trial court denied the motion in its January 6, 2005 Order.

With the denial of its motion for reconsideration, respondent filed a certiorari petition before the CA docketed as CA-G.R. SP No. 90130. On September 14, 2005, the appellate court rendered the assailed Decision reversing and setting aside the aforementioned orders of the trial court and lifting the November 6, 2000 Writ of Preliminary Attachment to the extent that it concerned respondent's properties. Petitioner moved for reconsideration, but the CA denied the same in its January 6, 2006 Resolution. Thus, petitioner filed the instant petition before the Supreme Court.

• Improper Subject of Certiorari: Petitioner argued that the CA should not have given due course to respondent's petition for certiorari since it merely raised errors in judgment, which, under prevailing jurisprudence, are not the proper subjects of a writ of certiorari.
• Grounds Relate to the Merits: Petitioner argued that the CA committed serious legal error in resolving favorably the grounds alleged by respondent and lifting the writ of preliminary attachment, since these grounds already relate to the merits of Civil Case No. 00-99006, which cannot be used as basis for discharging a writ of preliminary attachment.
• Grounds Already Resolved with Finality: Petitioner argued that the CA erred in sustaining the errors in judgment alleged by respondent, not only because these are belied by the very documents respondent submitted as proof of such errors, but also because these had earlier been resolved with finality by the lower court.

• Insufficient Allegation of Fraud: Respondent countered that the general and sweeping allegation of fraud against him in petitioner's affidavit — that respondent as an officer and director of Wincorp allegedly connived with the other defendants to defraud petitioner — is not sufficient basis for the trial court to order the attachment of his properties.
• Lack of Specific Acts: Respondent argued that nowhere in the affidavit does petitioner mention respondent's name and any specific act committed by the latter to defraud the former; a writ of attachment can only be granted on concrete and specific grounds and not on general averments quoting perfunctorily the words of the Rules.
• Connivance Cannot Be Based on Mere Association: Respondent contended that connivance cannot be based on mere association but must be particularly alleged and established as a fact.
• Scope of Trial Court's Examination: Respondent further contended that the trial court, in resolving the Motion to Discharge Attachment, need not actually delve into the merits of the case; all that the court has to examine are the allegations in the complaint and the supporting affidavit.
• Res Judicata Not Applicable: Respondent argued that petitioner cannot rely on the decisions of the appellate court in CA-G.R. SP No. 74610 and the Supreme Court in G.R. No. 162928 to support his claim because respondent is not a party to the said cases.

• Propriety of Certiorari: Whether the Court of Appeals should have given due course to respondent's petition for certiorari despite its allegedly raising errors in judgment.
• Sufficiency of Fraud Allegations: Whether the general allegation of fraud and connivance against respondent in petitioner's supporting affidavit was sufficient to support the issuance of the writ of preliminary attachment against respondent's properties.
• Effect of Prior Final Resolutions: Whether the prior rulings in CA-G.R. SP No. 74610 and G.R. No. 162928, which affirmed the writ of attachment as to co-defendants Virata and UEM-MARA, bind respondent.

• Propriety of Certiorari: No. The CA properly gave due course to respondent's petition for certiorari because the trial court acted in excess of its jurisdiction when it issued the writ of preliminary attachment against respondent's properties, petitioner having failed to show the specific acts constitutive of the alleged fraud.
• Sufficiency of Fraud Allegations: No. The general averment in the affidavit that respondent, as an officer and director of Wincorp, allegedly connived with the other defendants to commit fraud, is insufficient to support the issuance of a writ of preliminary attachment under Section 1(d), Rule 57 of the Rules of Court, absent any statement of factual circumstances showing how respondent committed the fraud or that he had a preconceived plan or intention not to pay.
• Effect of Prior Final Resolutions: No. The ruling in G.R. No. 162928, affirming the writ of attachment as to Virata and UEM-MARA, does not affect respondent because he was never a party thereto, and he is not in the same situation as Virata and UEM-MARA since only a general allegation of fraud was made against him.

• Propriety of Certiorari: The Court agreed with respondent's contentions and denied the petition. The trial court acted in excess of its jurisdiction when it issued the writ of preliminary attachment against respondent's properties because petitioner had not fully satisfied the legal obligation to show the specific acts constitutive of the alleged fraud committed by respondent. When the requisites for the grant of attachment are not shown to be all present, the court which issues it acts in excess of its jurisdiction, making certiorari the proper remedy.

• Sufficiency of Fraud Allegations: The basis of petitioner's application for the writ was Section 1(d), Rule 57 of the Rules of Court, which allows attachment in an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof. For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation. The applicant must demonstrate that the debtor intended to defraud the creditor. Citing Liberty Insurance Corporation vs. Court of Appeals, the Court explained that to sustain an attachment on this ground, it must be shown that the debtor, in contracting the debt or incurring the obligation, intended to defraud the creditor; the fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given; a debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay.

Applying these principles, the Court found that petitioner's October 12, 2000 Affidavit was bereft of any factual statement that respondent committed fraud. The affidavit narrated only the alleged fraudulent transaction between Wincorp and Virata and/or Power Merge. As to respondent's participation, the affidavit merely stated that respondent, an officer and director of Wincorp, connived with the other defendants to defraud petitioner of his money placements. No other factual averment or circumstance detailed how respondent committed fraud or how he connived with the other defendants. The affidavit, being the foundation of the writ, must contain such particulars as to how the fraud imputed to respondent was committed for the court to decide whether or not to issue the writ. Absent any statement of other factual circumstances to show that respondent, at the time of contracting the obligation, had a preconceived plan or intention not to pay, or without any showing of how respondent committed the alleged fraud, the general averment is insufficient. The Court stressed that fraud is never presumed, and the mere fact that respondent is an officer and director of the company does not necessarily give rise to the inference that he committed fraud or connived with the other defendants. While courts may treat a corporation as a mere aggroupment of persons under certain circumstances, this is only done when the wrongdoing has been clearly and convincingly established.

The Court further emphasized that the provisional remedy of preliminary attachment is harsh and rigorous, exposing the debtor to humiliation and annoyance. The rules governing its issuance are strictly construed against the applicant, and if the requisites for its grant are not shown to be all present, the court shall refrain from issuing it. The writ should not be abused to cause unnecessary prejudice; if it is wrongfully issued on the basis of false or insufficient allegations, it should at once be corrected.

• Effect of Prior Final Resolutions: The Court acknowledged the rule in G.B. Inc., etc. vs. Sanchez, et al. that the merits of the main action are not triable in a motion to discharge an attachment. However, the Court found that this principle finds no application in this case because petitioner had not yet fulfilled the requirements set by the Rules of Court for the issuance of the writ against respondent's properties. The evil sought to be prevented by that ruling will not arise because the propriety or impropriety of the issuance of the writ can be determined by simply reading the complaint and the affidavit in support of the application. Furthermore, the ruling in G.R. No. 162928, to the effect that the writ of attachment was properly issued insofar as it concerned the properties of Virata and UEM-MARA, does not affect respondent, as he was never a party thereto. He is not in the same situation as Virata and UEM-MARA since, while petitioner's affidavit detailed the alleged fraudulent scheme perpetrated by Virata and/or Power Merge, only a general allegation of fraud was made against respondent.

• Fraud as Ground for Preliminary Attachment (Section 1(d), Rule 57) — To sustain an attachment on the ground of fraud, it must be shown that the debtor, in contracting the debt or incurring the obligation, intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case. In this case, the Court applied this doctrine by requiring petitioner to show specific factual circumstances of the alleged fraud committed by respondent, which petitioner failed to do.

• Fraud Never Presumed — Fraud is never presumed; it must be established by clear and convincing evidence. The mere fact that a person is an officer and director of a corporation does not necessarily give rise to the inference that he committed fraud or connived with other defendants to commit fraud. While courts may treat a corporation as a mere aggroupment of persons under certain circumstances, this is only done when the wrongdoing has been clearly and convincingly established. The Court applied this doctrine to reject petitioner's general allegation of connivance against respondent based solely on his position as Vice-Chairman and Director of Wincorp.

• Strict Construction of Rules on Preliminary Attachment — The provisional remedy of preliminary attachment is harsh and rigorous, for it exposes the debtor to humiliation and annoyance. The rules governing its issuance are strictly construed against the applicant, such that if the requisites for its grant are not shown to be all present, the court shall refrain from issuing it; otherwise, the court which issues it acts in excess of its jurisdiction. The writ should not be abused to cause unnecessary prejudice; if it is wrongfully issued on the basis of false or insufficient allegations, it should at once be corrected. The Court applied this doctrine to find that the trial court acted in excess of its jurisdiction in issuing the writ against respondent's properties.

• Merits Not Triable in Motion to Discharge Attachment — The merits of the main action are not triable in a motion to discharge an attachment, otherwise an applicant for the dissolution could force a trial of the merits of the case on his motion. However, this principle does not apply where the applicant for the writ has not yet fulfilled the requirements set by the Rules of Court for the issuance of the writ, because the propriety or impropriety of the issuance can be determined by simply reading the complaint and the supporting affidavit.

• "For a writ of attachment to issue under this rule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with his obligation." — This passage articulates the core requirement for attachment based on fraud under Section 1(d), Rule 57, and was central to the Court's finding that petitioner's affidavit was insufficient.

• "To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the obligation intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the reason which induced the other party into giving consent which he would not have otherwise given. To constitute a ground for attachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should be committed upon contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a preconceived plan or intention not to pay, as it is in this case. Fraud is a state of mind and need not be proved by direct evidence but may be inferred from the circumstances attendant in each case." — This is the canonical formulation of the fraud ground for preliminary attachment, quoted from Liberty Insurance Corporation vs. Court of Appeals, and applied by the Court to the facts of this case.

• "The affidavit, being the foundation of the writ, must contain such particulars as to how the fraud imputed to respondent was committed for the court to decide whether or not to issue the writ." — This passage establishes the requirement that the supporting affidavit must contain specific factual particulars of the fraud, not merely general averments, and was the basis for the Court's finding that the writ was improperly issued against respondent.

• "Let it be stressed that the provisional remedy of preliminary attachment is harsh and rigorous for it exposes the debtor to humiliation and annoyance. The rules governing its issuance are, therefore, strictly construed against the applicant, such that if the requisites for its grant are not shown to be all present, the court shall refrain from issuing it, for, otherwise, the court which issues it acts in excess of its jurisdiction." — This passage underscores the strict construction of the rules on preliminary attachment and the consequence that a court issuing the writ without all requisites present acts in excess of its jurisdiction.

• Liberty Insurance Corporation vs. Court of Appeals, G.R. No. 104405, May 13, 1993, 222 SCRA 37 — Controlling precedent cited for the doctrine that to sustain an attachment on the ground of fraud, it must be shown that the debtor intended to defraud the creditor at the time of contracting the obligation, and that a debt is fraudulently contracted if the debtor had a preconceived plan or intention not to pay.

• Philippine National Construction Corporation vs. Dy, G.R. No. 156887, October 3, 2005, 472 SCRA 1 — Cited for the proposition that the applicant for a writ of attachment must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from mere non-payment.

• Spouses Godinez vs. Hon. Alano, 362 Phil. 597 (1999) — Cited for the requirement that the applicant must demonstrate that the debtor intended to defraud the creditor.

• Jardine-Manila Finance, Inc. vs. Court of Appeals, G.R. No. 55272, April 10, 1989, 171 SCRA 636 — Cited for the proposition that the affidavit is the foundation of the writ and must contain particulars of the fraud.

• Philippine Bank of Communications vs. Court of Appeals, 405 Phil. 271 (2001) — Cited for the requirement that the affidavit must contain such particulars as to how the fraud was committed, and for the consequence that a court issuing the writ without all requisites present acts in excess of its jurisdiction.

• PCL Industries Manufacturing Corporation vs. Court of Appeals, G.R. No. 147970, March 31, 2006, 486 SCRA 214 — Cited for the insufficiency of general averments of fraud to support the issuance of a writ of preliminary attachment.

• Ting vs. Villarin, G.R. No. 61754, August 17, 1989, 176 SCRA 532 — Cited for the need to give a hint about what constituted the fraud and how it was perpetrated in the application for the writ.

• Benitez vs. Intermediate Appellate Court, No. L-71535, September 15, 1987, 154 SCRA 41 — Cited for the rules that fraud is never presumed, that preliminary attachment is harsh and rigorous, and that a wrongfully issued writ should at once be corrected.

• Solidbank Corporation vs. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28, 2005, 464 SCRA 409 — Cited for the proposition that courts may treat a corporation as a mere aggroupment of persons only when the wrongdoing has been clearly and convincingly established.

• D.P. Lub Oil Marketing Center, Inc. vs. Nicolas, G.R. No. 76113, November 16, 1990, 191 SCRA 423 — Cited for the rule that the rules governing the issuance of preliminary attachment are strictly construed against the applicant.

• G.B. Inc., etc. vs. Sanchez, et al., 98 Phil. 886 (1956) — Cited for the rule that the merits of the main action are not triable in a motion to discharge an attachment; distinguished in this case because petitioner had not fulfilled the requirements for the issuance of the writ.

• Villongco, et al. vs. Panlilio etc., et al., 94 Phil. 15 (1953) — Cited in support of the proposition that the principle that the merits are not triable in a motion to discharge attachment finds no application when the applicant has not fulfilled the requirements for the issuance of the writ.

• Section 1(d), Rule 57, Rules of Court — The provision allowing preliminary attachment in an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, or in the performance thereof. The Court applied this provision to require petitioner to show specific factual circumstances of the alleged fraud committed by respondent, which he failed to do.

• Rule 45, Rules of Court — The provision governing petitions for review on certiorari before the Supreme Court, under which petitioner filed the instant petition.

• Rule 65, Rules of Court — The provision governing petitions for certiorari before the Court of Appeals, under which respondent and his co-defendants assailed the trial court's orders.

• Section 13, Article VIII, Constitution — The constitutional provision cited in the Certification, relating to the certification that the conclusions in the decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

• Consuelo Ynares-Santiago, Associate Justice (Chairperson, Third Division)
• Ma. Alicia Austria-Martinez, Associate Justice
• Renato C. Corona, Associate Justice
• Ruben T. Reyes, Associate Justice