Peroxide Philippines Corporation vs. Court of Appeals

A writ of preliminary attachment, once validly issued, remains valid and effective until the judgment is satisfied or the writ is validly discharged, and any order lifting or suspending the attachment issued without the hearing required by Section 13, Rule 57 of the Rules of Court is void and cannot create a gap in the attachment's effectivity.

BPI sued Peroxide, Eastman, and the Mapua spouses in Civil Case No. 48849 before the then Court of First Instance of Pasig, Metro Manila, for the collection of an indebtedness of Peroxide wherein Eastman and the Mapuas bound themselves to be solidarily liable. Upon filing the action, the trial court ordered the issuance of a writ of preliminary attachment, which was executed after BPI filed an attachment bond of P32,700,000.00. The dispute centered on the continuing validity of that attachment and whether cash dividends declared on garnished shares of stock were subject to it.

BPI sued Peroxide, Eastman, and the Mapua spouses in Civil Case No. 48849 for the collection of an indebtedness of Peroxide wherein Eastman and the Mapuas bound themselves to be solidarily liable. Upon filing the action, the trial court, presided over by Judge Gregorio G. Pineda, ordered the issuance of a writ of preliminary attachment, which was executed on January 7, 1983 after BPI filed an attachment bond of P32,700,000.00. Petitioners' properties were accordingly attached by the sheriff.

On January 11, 1983, Eastman and the Mapuas moved to lift the attachment, and the motion was set for hearing on January 14, 1983. On that date, on motion of BPI, the court granted BPI until January 17, 1983 to file a written opposition, and BPI also filed a motion to set for hearing the motion to lift attachment and its opposition. However, on January 17, 1983, Judge Pineda issued two orders: the first denied BPI's motion for a hearing, and the second lifted the writ of attachment as prayed for by Eastman and the Mapuas. BPI filed a motion for reconsideration, but the case was re-raffled to Judge Pastor Reyes due to judiciary reorganization.

On November 28, 1983, Judge Reyes issued an order finding that the attachment against the properties of Eastman and the Mapuas was proper on the ground that they had disposed of their properties in fraud of BPI, and directed the sheriff to implement the writ upon finality of the order. On December 17, 1984, Judge Eficio B. Acosta granted BPI's motion for partial reconsideration, declaring the writ immediately executory. Petitioners sought annulment of that order in a petition for certiorari and prohibition in the Intermediate Appellate Court (AC-G.R. SP No. 05043), which issued a temporary restraining order. The appellate court lifted the restraining order when it rendered its decision on March 14, 1986 dismissing the petition, holding that even if the original petition for attachment was defective, the defect was cured by other pleadings filed by BPI.

Petitioners sought review in G.R. No. 74558, but no temporary restraining order was granted. Meanwhile, on May 29, 1986, Judge Acosta issued an order suspending the writ of preliminary attachment pursuant to an ex parte motion filed by petitioners. On October 27, 1986, the Supreme Court denied the petition for review, holding the writ was issued in accordance with law and applicable jurisprudence. Petitioners' motion for reconsideration was denied with finality on October 6, 1987. Petitioners then filed an urgent motion for clarification, submitting that the Court failed to pass upon whether Eastman and the Mapuas were sureties or mere guarantors and whether Rose U. Mapua was bound by the "Continuing Guarantee" executed by her husband. On November 10, 1987, the Court denied the motion, stating that the clarification sought involves questions of fact.

On July 30, 1987, BPI filed a motion to order Bataan Pulp and Paper Mills, Inc. (Bataan) to deliver to the sheriff the cash dividends declared on the garnished shares of stock of petitioners, and to cite Bataan's officers for contempt for releasing the dividends to petitioners. In an order dated December 16, 1987, Judge Fernando L. Gerona, Jr. granted BPI's motion for delivery of the dividends, holding that dividends are incidents or fruits of shares of stock and the attachment of the stock necessarily included dividends declared subsequent to the notice of garnishment. He also held that the preliminary attachment must become effective immediately upon issuance and continue to be effective even during the pendency of an appeal, ceasing only when the judgment is satisfied or the attachment is discharged or vacated. The contempt motion was denied. Petitioners' motion for reconsideration was denied, the court holding that the order of May 29, 1986 was based on an ex parte motion without reasonable notice, hence a patent nullity for lack of due process.

Petitioners filed a second motion for reconsideration, which remained pending when Judge Gerona inhibited himself. The case was re-raffled to Judge Jainal D. Rasul, who issued the disputed order of August 23, 1988, holding that the contempt charge could not be sustained because the officers relied on the order of May 29, 1986 suspending the writ, and that the release of cash dividends was valid. The order also stated that the propriety of the attachment of the properties of Eastman and the Mapuas should still be determined as a question of fact pursuant to the Supreme Court resolution of November 23, 1987, and that it was only fair that their properties should not, pending such determination, be attached.

BPI moved for reconsideration. Thereafter, BPI learned that Bataan had again declared a cash dividend payable on or before September 30, 1988, and that Bataan would release the dividends to Eastman and Edmund O. Mapua on September 23, 1988. BPI filed an urgent ex parte motion on September 19, 1988 for suspension of the effects of the August 23, 1988 order, which the trial court denied in an order of the same date. BPI then filed a petition for certiorari in the Court of Appeals (CA-G.R. SP No. 15672), which granted the petition, declaring the writ of preliminary attachment valid and enforceable from the beginning, setting aside the order of August 23, 1988 insofar as it decreed that the cash dividends were not subject to attachment, ordering the defendants and Bataan to deliver to the sheriff the cash dividends as may hereafter be declared and paid on the garnished shares, and setting aside the order of September 19, 1988. Petitioners' motion for reconsideration was denied, prompting the instant petition.

• Validity of the Attachment: Petitioners contended that the Court of Appeals departed from the accepted and usual course of judicial proceedings in upholding the continuing validity of the writ of preliminary attachment.
• Effect of the Temporary Restraining Order: Petitioners argued that the temporary restraining order issued by the Intermediate Appellate Court in AC-G.R. SP No. 05043 was reinstated "until further orders" on April 24, 1986, and was never lifted, so the writ of attachment could not be implemented.
• Nature of Liability: Petitioners argued that the preliminary attachment was not applicable to Eastman and the Mapuas because they were allegedly mere guarantors, not sureties, of Peroxide.
• Jurisdictional Error: Petitioners bewailed that respondent court handled the certiorari case as if it were a petition for review on certiorari by passing upon what they submitted should be considered as errors of judgment and not errors of jurisdiction.
• Exhaustion of Remedies: Petitioners charged that respondent court injudiciously gave due course to the petition for certiorari without requiring the prior filing and resolution of a motion for reconsideration of the questioned orders.

• Illegality of the Discharge: BPI asserted that the discharge of the attachment was illegal and void because the order lifting it violated Section 13, Rule 57 of the Rules of Court, which requires a prior hearing before the judge may order the discharge of the attachment upon proof adduced therein of the impropriety or irregularity in the issuance of the writ.
• Continuing Validity of the Writ: BPI argued that the attachment continued to be valid and effective because the orders of January 17, 1983 and May 29, 1986 were void for lack of due process, and the writ could not have been deemed inefficacious.
• Attachment of Dividends: BPI maintained that dividends are incidents or fruits of shares of stock, and the attachment of the stock necessarily included the dividends declared thereon if declared subsequent to the notice of garnishment.
• Propriety of Attachment: BPI argued that before the determination of the liability of Eastman and the Mapuas after trial on the merits, the writ of preliminary attachment may properly issue, and the trial court could not have ruled on the guarantor-surety issue in an auxiliary proceeding.

• Validity of the Attachment: Whether the writ of preliminary attachment against the properties of Eastman and the Mapuas remained valid and effective despite the orders of January 17, 1983 and May 29, 1986 purporting to lift and suspend it.
• Effect of the Temporary Restraining Order: Whether the temporary restraining order issued by the Intermediate Appellate Court in AC-G.R. SP No. 05043 remained effective and prevented the implementation of the writ of attachment.
• Applicability of the Attachment: Whether the preliminary attachment was applicable to Eastman and the Mapuas, who allegedly were mere guarantors and not sureties of Peroxide.
• Jurisdictional Error: Whether the Court of Appeals erred in taking cognizance of the certiorari petition and passing upon what petitioners claimed were errors of judgment rather than errors of jurisdiction.
• Exhaustion of Remedies: Whether the Court of Appeals erred in giving due course to the certiorari petition without requiring the prior filing and resolution of a motion for reconsideration.

• Validity of the Attachment: Yes, the attachment remained valid and continuously effective. The orders of January 17, 1983 and May 29, 1986 were void because they were issued without the hearing required by Section 13, Rule 57 of the Rules of Court, and thus could not have created a gap in the attachment's effectivity.
• Effect of the Temporary Restraining Order: No. The temporary restraining order was expressly lifted in the decision of March 14, 1986, and its temporary reinstatement on April 24, 1986 was for purposes of the motion for reconsideration that was ultimately denied, so it was necessarily lifted. Moreover, a temporary restraining order not supplanted by a writ of preliminary injunction could not have had an effectivity of more than twenty days.
• Applicability of the Attachment: No. The writ was issued against the properties of all petitioners, and whether they are guarantors or sureties, there exists a valid cause of action against them and their properties were properly attached. The guarantor-surety issue could be entertained only after a full-blown trial, not in an auxiliary proceeding.
• Jurisdictional Error: No. The errors assigned in the certiorari petition involved erroneous conclusions and/or lack of factual bases beyond the pale of mere errors of judgment, dwelling on the improvident issuance of orders clearly arbitrary and oppressive for being in defiance of the rules.
• Exhaustion of Remedies: No. A motion for reconsideration was correctly dispensed with since the questions raised in the certiorari proceeding had been duly raised and passed upon by the lower court, and a motion for reconsideration would serve no practical purpose.

• Validity of the Attachment: When an attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor. That hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them. Section 13, Rule 57 requires that the attaching creditor should be allowed to oppose the application for the discharge of the attachment by counter-affidavit or other evidence. In this case, BPI's counsel was allowed to file a written opposition, which he seasonably did, but Judge Pineda denied both the requested subpoena and hearing and instead granted the discharge of the attachment. The order of Judge Acosta of May 29, 1986 suspending the writ was likewise issued ex parte and without notice and hearing in disregard of Section 13, Rule 57. Both orders were void, so the attachment remained valid from its issuance since the judgment had not been satisfied, nor had the writ been validly discharged either by the filing of a counterbond or for improper or irregular issuance. The cancellation of the annotations regarding the levy on attachment, procured by the sheriff pursuant to the invalid orders, was likewise a nullity, and another levy thereon was not required.
• Effect of the Temporary Restraining Order: The records in AC-G.R. SP No. 05043 show that the appellate court's resolution of April 24, 1986 revived the restraining order "until further orders" to maintain the status quo while the motion for reconsideration was pending. When the court denied the motion for reconsideration, all incidents in the case were disposed of, so the temporary restraining order, which had been expressly lifted in the decision and merely temporarily reinstated, was necessarily lifted. Furthermore, a temporary restraining order not supplanted by a writ of preliminary injunction could not have had an effectivity of more than twenty days, and this limitation applies to temporary restraining orders issued by the Court of Appeals.
• Applicability of the Attachment: Eastman and the Mapuas moved for the discharge of the attachment on the ground that they were not disposing of their properties in fraud of creditors, but they did not raise the issue of their liabilities as being allegedly those of mere guarantors. They did so only when the Supreme Court resolved on October 27, 1986 that the writ was issued in accordance with law. The passage in the decision in AC-G.R. SP No. 05043 stating that there was "nothing wrong with the attachment of the properties of PEROXIDE" was a harmless oversight, since the properties referred to as having been alienated in fraud of BPI were properties of Eastman and the Mapuas, not of Peroxide. When the Supreme Court said that the clarification sought involves a question of fact, this means that the court a quo should determine the propriety or regularity thereof in appropriate proceedings, but until such attachment has been found to be improper and irregular, the attachment is valid and subsisting. Even assuming that Eastman and the Mapuas presented evidence that they were guarantors and not sureties, the trial court could not have admitted such evidence or ruled upon that issue since the same could be entertained only after a full-blown trial. The proceeding in the issuance of a writ of preliminary attachment is ancillary to the main action, and the attachment does not affect the decision of the case on the merits.
• Jurisdictional Error: The petition in CA-G.R. SP No. 15672 faulted the orders of the trial court as tainted with grave abuse of discretion equivalent to a jurisdictional flaw. The errors assigned necessarily involved a discussion of erroneous conclusions and/or lack of factual bases much beyond the pale of mere errors of judgment or misperception of evidence, and dwelt on the improvident issuance of orders clearly arbitrary and oppressive for being in defiance of the rules and devoid of justifying factual moorings.
• Exhaustion of Remedies: There are settled exceptions to the requirement of filing a motion for reconsideration before certiorari, and these obtain in the present case. A motion for reconsideration was correctly dispensed with since the questions raised in the certiorari proceeding had been duly raised and passed upon by the lower court, and under the circumstances, a motion for reconsideration would serve no practical purpose since the trial judge had already had the opportunity to consider and pass upon the questions elevated on certiorari.

• Ex parte discharge or suspension of attachment is void — An order lifting or suspending a writ of preliminary attachment issued without the hearing required by Section 13, Rule 57 of the Rules of Court is a patent nullity for lack of due process. Such an order cannot create a gap in the attachment's effectivity, and the attachment remains valid and continuously effective from its issuance until the judgment is satisfied or the writ is validly discharged.
• Hearing requirement in discharge of attachment — When an attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor. The hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them, and the attaching creditor should be allowed to oppose the application for discharge by counter-affidavit or other evidence.
• Ancillary nature of preliminary attachment — The proceeding in the issuance of a writ of preliminary attachment is ancillary to the main action. The attachment does not affect the decision of the case on the merits, the right to recover judgment on the alleged indebtedness and the right to attach the property of the debtor being entirely separate and distinct. The judgment in the main action neither changes the nature nor determines the validity of the attachment.
• Temporary restraining order effectivity — A temporary restraining order not supplanted by a writ of preliminary injunction cannot have an effectivity of more than twenty days, and this limitation applies to temporary restraining orders issued by the Court of Appeals.

• "Now, it is undeniable that when the attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor." — This passage articulates the fundamental requirement of a hearing before an attachment may be discharged, placing the burden on the attaching creditor.
• "That hearing embraces not only the right to present evidence but also a reasonable opportunity to know the claims of the opposing parties and meet them. The right to submit arguments implies that opportunity, otherwise the right would be a barren one. It means a fair and open hearing." — This defines the scope of the hearing required for the discharge of an attachment, emphasizing due process.
• "Under the facts of this case, the ex parte discharge or suspension of the attachment is a disservice to the orderly administration of justice and nullifies the underlying role and purpose of preliminary attachment in preserving the rights of the parties pendente lite as an ancillary remedy." — This states the Court's rationale for holding the ex parte orders void and affirming the continuing validity of the attachment.
• "The proceeding in the issuance of a writ of preliminary attachment, as a mere provisional remedy, is ancillary to an action commenced at or before the time when the attachment is sued out. Accordingly the attachment does not affect the decision of the case on the merits, the right to recover judgment on the alleged indebtedness and the right to attach the property of the debtor being entirely separate and distinct." — This articulates the ancillary nature of preliminary attachment and its separation from the merits of the main action.

• Mindanao Savings and Loan Association, Inc., et al. vs. Court of Appeals, et al., 172 SCRA 480 (1989) — Cited for the proposition that if the petition for the discharge of the writ violates the requirements of the law, the trial judge does not acquire jurisdiction to act thereon.
• Benitez vs. Intermediate Appellate Court, et al., 154 SCRA 41 (1987) — Cited for the rule that when the attachment is challenged for having been illegally or improperly issued, there must be a hearing with the burden of proof to sustain the writ being on the attaching creditor.
• Delbros Hotel Corporation vs. Intermediate Appellate Court, etc., et al., 159 SCRA 533 (1988) — Cited for the proposition that the twenty-day limitation on temporary restraining orders applies to those issued by the Court of Appeals.
• G.B. Inc., etc. vs. Sanchez, 98 Phil. 886 (1956) — Cited for the rule that the trial court could not have admitted evidence or ruled upon the guarantor-surety issue in an auxiliary proceeding since the same could be entertained only after a full-blown trial.
• Legaspi Oil Co., Inc. vs. Geronimo, etc., et al., 76 SCRA 174 (1977) — Cited for the exception to the requirement of filing a motion for reconsideration before certiorari where the questions raised had been duly raised and passed upon by the lower court.
• Fortich-Celdran, et al. vs. Celdran, et al., 19 SCRA 52 (1967) — Cited for the same exception to the motion for reconsideration requirement.
• Central Bank vs. Cloribel, et al., 44 SCRA 307 (1972) — Cited for the proposition that a motion for reconsideration would serve no practical purpose since the trial judge had already had the opportunity to consider and pass upon the questions elevated on certiorari.

• Section 13, Rule 57, Rules of Court — Requires a prior hearing before the judge may order the discharge of an attachment upon proof adduced therein of the impropriety or irregularity in the issuance of the writ, and allows the attaching creditor to oppose the application for discharge by counter-affidavit or other evidence. The Court applied this provision to hold that the orders lifting and suspending the attachment were void for lack of due process.
• Section 5, Rule 58, as amended by B.P. Blg. 224 — Limits the effectivity of a temporary restraining order to twenty days if not supplanted by a writ of preliminary injunction. The Court applied this provision to hold that the temporary restraining order in AC-G.R. SP No. 05043 could not have had an effectivity of more than twenty days.

• Justice Melencio-Herrera
• Justice Sarmiento