Coca-Cola Femsa Philippines, Inc. vs. Pacific Sugar Holdings Corporation

A writ of preliminary attachment may be discharged only through the specific modes prescribed in Rule 57, Sections 12 and 13 of the Rules of Court, namely: (1) the filing of a cash deposit or counter-bond; (2) proof that the attachment was improperly or irregularly issued or enforced, or that the attachment bond is insufficient; or (3) proof that the attachment is excessive. A standby letter of credit is not a valid substitute for a counter-bond, and a trial court's acceptance of it as a mode of discharge constitutes grave abuse of discretion.

Coca-Cola Femsa Philippines, Inc. (petitioner) and Pacific Sugar Holdings Corporation (respondent) entered into two Supply and Purchase Agreements for the delivery of refined sugar. Respondent failed to deliver the contracted amounts and unilaterally terminated the agreements, citing low sugarcane productivity. Petitioner filed a complaint for specific performance and damages, and successfully obtained a writ of preliminary attachment against respondent's properties. To dissolve the writ, respondent filed a motion proposing to submit a standby letter of credit instead of the counter-bond specified in the Rules. The Regional Trial Court granted the motion, a decision later affirmed by the Court of Appeals.

• Nature of the Action: Petitioner sued respondent for specific performance and damages due to respondent's failure to deliver sugar and unilateral termination of their supply agreements. Petitioner also sought and obtained a writ of preliminary attachment.
• The Motion to Dissolve: Respondent moved to dissolve the attachment by offering a standby letter of credit, arguing it served the same purpose as a counter-bond and was even more favorable.
• RTC's Ruling: The RTC granted the motion, reasoning that both instruments secure payment and that the letter of credit allowed immediate collection, making it more favorable than a surety.
• CA's Ruling: The CA affirmed, agreeing that the standby letter of credit served the same purpose as a counter-bond.
• RTC's Action During Certiorari: Pending petitioner's certiorari petition before the CA, the RTC proceeded to discharge the attachment based on its prior order, citing the lack of an injunctive writ from the higher court.

• Grave Abuse of Discretion (Procedural): Petitioner argued the RTC committed grave abuse of discretion by continuing to act on the dissolution of the writ while the propriety of its issuance was under review by the CA via certiorari.
• Invalidity of Standby Letter of Credit: Petitioner maintained that a standby letter of credit is not a valid substitute for a counter-bond under Rule 57, Section 12. It contended the letter of credit imposed more onerous conditions (e.g., requiring proof of execution failure) compared to the direct liability of a surety on a counter-bond.
• Violation of Rules: Petitioner asserted that accepting the letter of credit was a circumvention of the explicit modes for discharging an attachment prescribed by the Rules of Court, constituting an error of jurisdiction, not merely of judgment.

• Same Purpose and More Favorable: Respondent countered that a standby letter of credit serves the same security function as a counter-bond and is more favorable because the beneficiary can immediately collect from the issuing bank upon presentation of specified documents.
• No Grave Abuse of Discretion: Respondent argued the RTC orders were proper and not issued in a capricious or whimsical manner, thus the CA correctly denied the certiorari petition.
• Jurisdiction to Proceed: Respondent maintained the RTC Judge did not err in continuing with the main case and discharging the attachment, as no temporary restraining order or preliminary injunction was issued by the CA to halt proceedings, per Rule 65, Section 7.

• Procedural Issue (Judicial Courtesy): Whether the Regional Trial Court committed grave abuse of discretion by proceeding to discharge the writ of preliminary attachment while a petition for certiorari questioning the dissolution order was pending before the Court of Appeals.
• Substantive Issue (Mode of Discharge): Whether a standby letter of credit may validly substitute for the counter-bond required under Rule 57, Section 12 of the Rules of Court to discharge a writ of preliminary attachment.

• Procedural Issue (Judicial Courtesy): The RTC committed grave abuse of discretion. While Rule 65, Section 7 states that a certiorari petition does not stay proceedings absent an injunctive writ, the principle of judicial courtesy applies when there is a strong probability that the issue before the higher court would be rendered moot by the lower court's continued action. Here, the RTC's discharge of the attachment rendered the pending certiorari petition moot, as it allowed the very act the petition sought to prevent.
• Substantive Issue (Mode of Discharge): A standby letter of credit is not a valid substitute for a counter-bond. The modes for discharging a writ of preliminary attachment are exclusively enumerated in Rule 57, Sections 12 and 13. A standby letter of credit is not among them. The RTC's acceptance of it sanctioned a remedy not contemplated by law, amounting to judicial legislation and grave abuse of discretion. Furthermore, the conditions of the letter of credit were more onerous than those of a counter-bond, as it transformed the obligation from a direct suretyship into a conditional guarantee.

• Modes of Discharging a Writ of Preliminary Attachment — The Rules of Court provide a closed list of methods to dissolve a writ of preliminary attachment: (1) filing a cash deposit or counter-bond under Rule 57, Sec. 12; or (2) filing a motion on grounds that the writ was improperly issued, the bond is insufficient, or the attachment is excessive under Rule 57, Sec. 13. Courts cannot create or accept additional modes not found in the Rules.
• Principle of Judicial Courtesy — This is an exception to the rule that a petition for certiorari does not automatically stay proceedings. It requires a lower court to defer action on a matter pending before a higher court if there is a strong probability that the higher court's resolution would be rendered moot and academic by the lower court's continued proceedings.
• Distinction Between Surety and Guarantee — A surety is directly, primarily, and absolutely liable for the debt, solidarily bound with the principal debtor. A guarantor, on the other hand, is liable only if the principal debtor is unable to pay. A counter-bond creates a suretyship, while the standby letter of credit in this case functioned as a guarantee due to its conditional nature.

• "By allowing the filing of a standby letter of credit instead of a counter-bond contemplated in Rule 57, Section 12, the trial court supplanted the law and sanctioned a remedy not contemplated therein." — This passage encapsulates the core holding that the trial court's action was a violation of procedural rules.
• "The courts cannot, in exercising its power of interpretation, supplant what is written in the law. To do so would be tantamount to judicial legislation." — This underscores the Court's strict construction of procedural rules and separation of powers.
• "A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor." — This excerpt clearly defines the critical legal distinction applied to find the standby letter of credit insufficient.

• Joy Mart Consolidated Corporation v. Court of Appeals, 285 Phil. 315 (1992) — Cited as controlling precedent for the principle that a trial court is divested of jurisdiction to act on a provisional remedy (like a writ of attachment) once its propriety is elevated to a higher court via certiorari.
• Trajano v. Uniwide Sales Warehouse Club, 736 Phil. 264 (2014) — Applied to explain the qualification and limitation of the principle of judicial courtesy, holding it applies only when there is a strong probability that the higher court's issue would be rendered moot.
• Excellent Quality Apparel Inc. v. Visayan Surety and Insurance Corporation, 762 Phil. 706 (2015) — Relied upon to explain the nature and purpose of preliminary attachment and the direct, primary liability of a surety on a counter-bond.
• Trade and Investment Development Corp. of the Philippines v. Asia Paces Corporation, 726 Phil. 555 (2014) — Cited to distinguish the obligations of a surety from those of a guarantor, which was pivotal in ruling that the standby letter of credit was a guarantee, not a surety.

• Rule 57, Sections 12 and 13, Rules of Court — These provisions were central to the ruling. Section 12 provides for discharge upon the filing of a cash deposit or counter-bond. Section 13 provides for discharge on other grounds (improper issuance, insufficient bond, excessive attachment). The Court held these are the exclusive modes for discharge.
• Rule 65, Section 7, Rules of Court — This provision states that a petition for certiorari does not interrupt the course of the principal case unless a TRO or injunction is issued. The Court qualified its application through the doctrine of judicial courtesy.
• Rule 67, Section 17, Rules of Court (on recovery upon counter-bond) — Referenced to highlight the direct liability mechanism for a counter-bond surety, contrasting it with the conditional requirements of the standby letter of credit.

• Justice Amy C. Lazaro-Javier
• Justice Henri Jean Paul B. Inting
• Justice Jhosep Y. Lopez
• Justice Antonio T. Kho, Jr.

N/A — The decision was unanimous.