China Banking Corporation vs. Asian Construction and Development Corporation

A denial of a motion to sell attached property before final judgment under Section 11, Rule 57 cannot be challenged through a Rule 45 petition where the assailed CA resolutions are interlocutory and no jurisdictional issue or grave abuse of discretion is shown; whether the attached property is perishable or whether its sale will subserve the interests of all parties is a question of fact requiring reception of evidence and is beyond the scope of certiorari. The applicant’s attachment bond under Section 4, Rule 57 covers only damages sustained by reason of the attachment, not damages arising from a pre-judgment sale.

China Banking Corporation, a banking corporation, extended an Omnibus Credit Line to Asian Construction and Development Corporation, a construction corporation. The dispute concerns Rule 57 of the Rules of Court, particularly Section 11 on selling attached property before entry of judgment and Section 4 on the applicant’s attachment bond. It also concerns the procedural line between a Rule 45 petition for review on certiorari and a Rule 65 special civil action for certiorari when the assailed orders are interlocutory.

On July 24, 1996, China Banking Corporation granted Asian Construction and Development Corporation an Omnibus Credit Line in the amount of P90,000,000.00. ACDC was engaged in the construction business. On April 12, 1999, China Bank filed before the Regional Trial Court of Makati, Branch 138, a complaint for recovery of sum of money and damages with prayer for a writ of preliminary attachment, docketed as Civil Case No. 99-796. China Bank alleged that ACDC, after collecting and receiving the proceeds or receivables from various construction contracts and purportedly holding them in trust for China Bank under several Deeds of Assignment, misappropriated, converted, and used the funds for its own purpose and benefit instead of remitting or delivering them to China Bank.

On April 22, 1999, the RTC issued an Order granting China Bank’s prayer for a writ of preliminary attachment. As shown in the Sheriff’s Report dated June 14, 1999, the writ was implemented by levying ACDC’s personal properties, namely vans, dump trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment, and office machines and fixtures.

On March 27, 2000, upon China Bank’s motion, the RTC issued a Summary Judgment in favor of China Bank. ACDC filed a Notice of Appeal dated April 24, 2000. On June 15, 2000, China Bank filed with the RTC a Motion to Take Custody of Attached Properties with Motion for Grant of Authority to Sell to the Branch Sheriff, praying that it be allowed to take custody of ACDC’s properties for the purpose of selling them in an auction. On June 20, 2000, ACDC filed its Opposition, arguing that there could be no sale of its attached properties in the absence of a final and executory judgment against it. On August 25, 2000, China Bank partially appealed the Summary Judgment for not awarding interest on one of its promissory notes. The records were elevated to the CA.

On April 18, 2002, China Bank filed before the CA a Motion for Leave for Grant of Authority to Sell Attached Properties. In that motion, China Bank alleged that the attached properties were placed in locations where they were totally exposed to the natural elements and adverse weather conditions since their attachment in 1999; that as a result, the attached properties had gravely deteriorated with corrosions eating them up, with weeds germinating and growing thereon and their engines and motors stock up; and that the same held true for the office furniture, office equipment, accessories, and supplies. No evidence, however, was submitted by China Bank to support and substantiate these claims before the CA. In the petition filed before the Supreme Court, China Bank, for the first time, included as annexes photographs of the attached properties alleged to be recently taken, in an attempt to convince the Court of their deteriorated condition.

According to the CA, selling the attached properties prior to final judgment of the appealed case was premature and contrary to the intent and purpose of preliminary attachment because the attached properties were not perishable in nature and, while the sale might serve China Bank’s interest, it would not serve ACDC’s. The CA recognized China Bank’s apprehension that by the time a final judgment was rendered the attached properties would be worthless, but it also acknowledged that since ACDC was a corporation engaged in the construction business, the preservation of the properties was of paramount importance; and that if the lower court’s decision were reversed and a final judgment rendered in favor of ACDC, great prejudice would result if the attached properties were already sold.

• Perishable Property: China Bank argued that the CA’s notion of perishable property—limited to goods that rot and decay and lose their value if not speedily put to their intended use—was too strict and stringent and would betray the purpose of preliminary attachment. Citing Witherspoon vs. Cross, it invoked the definition of “perishable property” as goods that decay and lose their value if not speedily put to their intended use, and where the time contemplated is necessarily long, the term may embrace property liable merely to material depreciation in value from causes other than decay.
• Exposure and Deterioration: China Bank insisted that the attached properties—used vehicles, machinery, equipment, office machines, and fixtures—were placed inside ACDC’s stockyard in Silang, Cavite and branch office in Mayamot, Antipolo City and were totally exposed to natural elements and adverse weather conditions. It argued that if the properties were allowed to depreciate, perish, or rot while the main case was pending, they would continue losing their worth and render the rules on preliminary attachment nugatory.
• Equity and Preservation of Value: China Bank argued that if the CA allowed the attached properties to be sold, whatever monetary value they still had would be realized and saved for both parties.
• Attachment Bond: China Bank claimed that should ACDC prevail in the final judgment of the collection suit, ACDC could proceed against the bond posted by China Bank.
• Grave Abuse and Partiality: In its petition, China Bank contended that the CA rendered the questioned resolutions not in accord with Section 11, Rule 57, and shelved the demands of equity by arbitrarily disallowing the sale, upholding only the interest of ACDC, in utter partiality.

• Absence of Final and Executory Judgment: ACDC opposed China Bank’s motion to take custody and sell the attached properties, arguing that there can be no sale of its attached properties in the absence of a final and executory judgment against it.

• Propriety of Rule 45 Petition: Whether a petition for review on certiorari under Rule 45 is the proper remedy to assail the CA’s interlocutory resolutions denying a motion for authority to sell attached properties before final judgment.
• Grave Abuse of Discretion: Whether the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying China Bank’s motion for leave and authority to sell the attached properties.
• Perishable Property: Whether the attached vehicles, office machines, and fixtures are “perishable property” within the meaning of Section 11, Rule 57 of the Rules of Court.
• Interests of All Parties: Whether the sale of the attached properties will subserve the interests of all the parties to the action under Section 11, Rule 57.
• Applicant’s Bond: Whether ACDC may claim from China Bank’s attachment bond for damages arising from the denial of the sale or the alleged deterioration of the attached properties if ACDC prevails in the collection suit.

• Propriety of Rule 45 Petition: No. The assailed CA resolutions are interlocutory; the proper remedy is a special civil action under Rule 65, not a petition for review on certiorari under Rule 45. A Rule 45 petition may be treated as a Rule 65 petition only where jurisdiction is involved or grave abuse of discretion is shown.
• Grave Abuse of Discretion: No. No jurisdictional issue or grave abuse of discretion was shown in the CA’s denial of the motion to sell the attached properties.
• Perishable Property: Not resolved on the merits. Whether the attached vehicles, office machines, and fixtures are “perishable” under Section 11, Rule 57 is a factual question requiring reception of evidence, which is beyond the scope of certiorari.
• Interests of All Parties: Not resolved on the merits. Whether the sale would subserve the interests of all parties under Section 11, Rule 57 is likewise a factual question requiring evidence and cannot be determined in a petition for certiorari.
• Applicant’s Bond: No. The bond under Section 4, Rule 57 answers only for damages sustained by reason of the attachment if the applicant was not entitled thereto, not for damages arising from a sale of attached properties before final judgment.

• Propriety of Rule 45 Petition: Section 1, Rule 41 of the Rules of Court, as amended by A.M. No. 07-7-12-SC, provides that no appeal may be taken from an interlocutory order and that the aggrieved party may file an appropriate special civil action under Rule 65. The assailed CA Resolutions did not dispose of the case completely but left something to be done upon the merits; they were therefore interlocutory. The present petition for review on certiorari under Rule 45 should have been dismissed outright. Although a Rule 45 petition has been treated as a Rule 65 petition in cases where the subject of the recourse is jurisdiction or the act complained of was perpetrated by a court with grave abuse of discretion amounting to lack or excess of jurisdiction, the present petition involved no jurisdictional issue and did not show that the CA committed grave abuse of discretion in denying the motion to sell the attached property.
• Grave Abuse of Discretion: The denial of the motion to sell attached property did not constitute grave abuse of discretion. The issue of whether the sale of attached properties is for the convenience of the parties and whether the interests of all parties will be subserved by the sale is a question of fact. It can only be resolved upon examination of the evidence presented by both parties, which the Court cannot do in a petition for certiorari under Rule 65. Factual issues are beyond the scope of certiorari because they do not involve any jurisdictional issue. Only jurisdictional questions may be raised in a petition for certiorari, including matters of grave abuse of discretion equivalent to lack of jurisdiction. The writ of certiorari is restricted to correction of defects of jurisdiction and to truly extraordinary cases, none of which was shown here.
• Perishable Property: Section 11, Rule 57 allows an attached property to be sold after levy and before entry of judgment whenever it is made to appear to the court, upon hearing with notice to both parties, that the attached property is perishable or that the interests of all parties will be subserved by the sale. China Bank argued for a broad definition of “perishable property,” citing Witherspoon vs. Cross. The Court examined foreign jurisprudence: in Mossler Acceptance Co. vs. Denmark, the Louisiana Supreme Court held that automobiles were not perishable within the statute because, if properly cared for, there would be no material deterioration of the car or its appurtenances, even if there might be depreciation in value during storage depending on economic conditions. In McCreery vs. Berney National Bank, the Alabama Supreme Court held that whatever the character of the property, if the court is satisfied that, either by reason of its perishable nature or because of the expense of keeping it until the termination of the litigation, it will prove or be likely to prove fruitless to the creditor, and the purpose of its original seizure will probably be frustrated, the sale is justified. McCreery applied Millard’s Admrs. vs. Hall, where an attached property was considered perishable if it is shown that, by keeping the article, it will necessarily become, or is likely to become, worthless to the creditor and by consequence to the debtor, regardless of the subject matter. In this case, however, China Bank’s claims that the properties were exposed and had deteriorated were not supported by evidence before the CA. The photographs submitted for the first time before the Supreme Court could not be considered, because the Court does not make findings of facts, especially on evidence raised for the first time on appeal, as held in JAM Transportation Co., Inc. vs. Flores. The determination whether the attached vehicles were properly cared for, and whether keeping the office furniture, equipment, and supplies would necessarily or likely make them worthless to China Bank and, consequently, to ACDC, were factual issues requiring reception of evidence, which the Court could not do in a petition for certiorari.
• Interests of All Parties: The second requisite under Section 11, Rule 57 is that the interests of all the parties to the action will be subserved by the sale. This issue is also a question of fact. It can only be resolved upon examination of the evidence presented by both parties, which the Court cannot do in a petition for certiorari under Rule 65. The CA’s denial was therefore not shown to be grave abuse of discretion.
• Applicant’s Bond: Section 4, Rule 57 requires the party applying for the attachment to give a bond executed to the adverse party, conditioned that the latter will pay all costs which may be adjudged to the adverse party and all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto. The bond posted by China Bank answers only for the payment of all damages which ACDC may sustain if the court finally adjudges that China Bank was not entitled to attachment. Liability attaches if the plaintiff is not entitled to the attachment because the requirements entitling him to the writ are wanting, or if the plaintiff has no right to the attachment because the facts stated in his affidavit, or some of them, are untrue. ACDC can only claim from the bond for damages sustained by reason of the attachment, not because of the sale of the attached properties prior to final judgment. China Bank’s argument that ACDC could proceed against the bond if it prevailed was therefore misplaced.

• Sale of Attached Property Before Judgment under Section 11, Rule 57 — Attached property may be sold after levy and before entry of judgment only when, upon hearing with notice to both parties, it is made to appear that the property is perishable or that the interests of all parties will be subserved by the sale. The proceeds are deposited in court to abide judgment. In this case, the Court ruled that whether these requisites are present is a question of fact requiring reception of evidence, not a matter for certiorari.
• “Perishable Property” under Section 11, Rule 57 — The term is not limited to goods that rot or decay speedily. Foreign jurisprudence cited in the decision indicates that property may be considered perishable if, by keeping it, it will necessarily become or is likely to become worthless to the creditor and, consequently, to the debtor, or if the expense of keeping it until litigation ends would frustrate the purpose of the attachment. The Court did not make a definitive factual finding in this case because China Bank failed to present evidence before the CA and the issue required reception of evidence.
• Propriety of Certiorari and Interlocutory Orders — A petition for review on certiorari under Rule 45 cannot ordinarily assail an interlocutory order; the proper remedy is a special civil action for certiorari under Rule 65. A Rule 45 petition may be treated as a Rule 65 petition only where the subject of the recourse is jurisdiction or the act complained of was perpetrated by a court with grave abuse of discretion amounting to lack or excess of jurisdiction. Here, no jurisdiction issue or grave abuse was shown.
• Scope of Certiorari — Certiorari is an extraordinary remedy restricted to correction of defects of jurisdiction and to truly extraordinary cases; factual issues are beyond its scope because they do not involve jurisdictional issues. The Court cannot make findings of fact, especially on evidence raised for the first time on appeal.
• Attachment Bond under Section 4, Rule 57 — The applicant’s bond answers only for costs and damages sustained by the adverse party by reason of the attachment if the court finally adjudges that the applicant was not entitled to the attachment. It does not answer for damages arising from a sale of attached property before final judgment.

• “Thus, an attached property may be sold after levy on attachment and before entry of judgment whenever it shall be made to appear to the court in which the action is pending, upon hearing with notice to both parties, that the attached property is perishable or that the interests of all the parties to the action will be subserved by the sale of the attached property.” — This passage states the two requisites under Section 11, Rule 57 for selling attached property before judgment.
• “The determination on whether the attached vehicles are properly cared for, and the burden to show that, by keeping the attached office furniture, office equipment and supplies, it will necessarily become, or is likely to become, worthless to China Bank, and by consequence to ACDC, are factual issues requiring reception of evidence which the Court cannot do in a petition for certiorari.” — This passage is the ratio for the holding that the perishability question is factual and beyond the scope of certiorari.
• “It is clear from the foregoing provision that the bond posted by China Bank answers only for the payment of all damages which ACDC may sustain if the court shall finally adjudge that China Bank was not entitled to attachment. The liability attaches if “the plaintiff is not entitled to the attachment because the requirements entitling him to the writ are wanting,” or “if the plaintiff has no right to the attachment because the facts stated in his affidavit, or some of them are untrue.”” — This passage defines the limited scope of the attachment bond under Section 4, Rule 57.
• “Sale of attached property before final judgment is an equitable remedy provided for the convenience of the parties and preservation of the property.” — This passage characterizes the sale of attached property before final judgment as an equitable remedy, not a matter of right.

• Mossler Acceptance Co. vs. Denmark, 211 La. 1078, 31 So. 2d 216 (1947) — Foreign jurisprudence examined by the Court; the Louisiana Supreme Court reversed an order selling attached automobiles and airplanes, holding that automobiles are not perishable within the statute if properly cared for, and that depreciation in value during storage depending on economic conditions is not material deterioration.
• McCreery vs. Berney National Bank, 116 Ala. 224, 22 So. 577 (1897) — Foreign jurisprudence cited for a broader construction of “perishable” property; the Alabama Supreme Court held that sale of attached property is justified if, by reason of its perishable nature or the expense of keeping it until litigation ends, it will likely prove fruitless to the creditor and frustrate the purpose of the seizure.
• Millard’s Admrs. vs. Hall, 24 Ala. 209 (1854) — Applied in McCreery; held that attached property is perishable if keeping it will necessarily or likely make it worthless to the creditor and consequently to the debtor, regardless of the subject matter.
• Witherspoon vs. Cross, 135 Cal. 96, 67 Pac. 18 (Dec. 14, 1901) — Cited by China Bank for its proposed definition of “perishable property”; the Court noted the citation but did not adopt it as controlling.
• JAM Transportation Co., Inc. vs. Flores, G.R. No. 82829, March 19, 1993, 220 SCRA 114 — Cited for the rule that the Court does not make findings of fact, especially on evidence raised for the first time on appeal; thus the photographs first submitted to the Supreme Court could not be considered.
• De Leon vs. Court of Appeals, 432 Phil. 775, 787 (2002) — Cited for the principle that the assailed CA resolutions were interlocutory because they did not completely dispose of the case but left something to be done upon the merits.
• Estandarte vs. People of the Philippines; Longos Rural Waterworks and Sanitation Association, Inc. vs. Desierto; Fortich vs. Corona — Cited collectively to show that the Court has treated a Rule 45 petition as a Rule 65 petition in cases involving jurisdiction or grave abuse of discretion.
• Ongpauco vs. Court of Appeals, G.R. No. 134039, December 21, 2004, 447 SCRA 395, 401; Militante vs. People of the Philippines, G.R. No. 150607, November 26, 2004, 444 SCRA 465, 476 — Cited for the rule that factual issues are beyond the scope of certiorari because they do not involve any jurisdictional issue.
• De Castro vs. Delta Motor Sales Corp., 156 Phil. 334, 337 (1974) — Cited for the rule that only jurisdictional questions may be raised in certiorari, including grave abuse of discretion equivalent to lack of jurisdiction, and that certiorari is restricted to correction of defects of jurisdiction.
• Rocco vs. Meads, 96 Phil. 884, 887-888 (1955) — Cited for the rule that liability on the attachment bond attaches if the plaintiff is not entitled to the attachment because the requirements are wanting, or if the plaintiff has no right because the facts in the affidavit are untrue.
• Republic of the Philippines vs. Sandiganbayan, 453 Phil. 1059, 1121 (2003) — Cited as basis for examining foreign laws and jurisprudence where local jurisprudence or authoritative work has not touched upon the matter.

• Section 11, Rule 57, Rules of Court — Allows sale of attached property after levy and before entry of judgment when, upon hearing with notice to both parties, the property is perishable or the interests of all parties will be subserved by the sale; proceeds are deposited in court to abide judgment. The Court held that whether these requisites exist is a factual question requiring evidence and cannot be resolved in certiorari.
• Section 4, Rule 57, Rules of Court — Condition of applicant’s bond: the applicant must give a bond to the adverse party conditioned to pay all costs and damages sustained by reason of the attachment if the court finally adjudges that the applicant was not entitled thereto. The Court held it does not cover damages from sale of attached property before final judgment.
• Section 1, Rule 41, Rules of Court, as amended by A.M. No. 07-7-12-SC — No appeal may be taken from an interlocutory order; the aggrieved party may file an appropriate special civil action under Rule 65. The Court cited this to show that the Rule 45 petition was improper.
• Rule 45, Rules of Court — Petition for review on certiorari. The Court noted it should have been dismissed outright because the assailed resolutions were interlocutory, but may be treated as a Rule 65 petition in jurisdiction or grave abuse cases.
• Rule 65, Rules of Court — Special civil action for certiorari. The Court discussed its scope: only jurisdictional questions or grave abuse of discretion; factual issues are beyond its scope.

Tinga, Chico-Nazario, Nachura, and Reyes, JJ., concurred. A footnote states: “In lieu of Justice Consuelo Ynares-Santiago, per Special Order No. 497 dated March 14, 2008.”