Pilipinas Shell Petroleum Corporation vs. Angel Y. Pobre

A writ of preliminary attachment under Section 1(d), Rule 57 of the Rules of Court requires the movant to prove fraud with sufficient specificity, resting on concrete grounds, and to establish that there is no other sufficient security for the claim sought to be enforced. The mere failure to pay a due and demandable debt or to comply with contractual obligations is not the fraud contemplated under the rule, and fraud cannot be inferred from bare allegations of non-payment or non-performance. A writ of attachment should not be issued for unliquidated or contingent claims and should, as a general rule, be confined to the principal claim.

Petitioner Pilipinas Shell Petroleum Corporation is a corporation engaged in the supply and sale of Shell brand fuel and lubricants. Respondent Angel Y. Pobre was a retailer of Shell gas stations under three Retailer Supply Agreements (RSAs) entered into in 2008 and 2009, covering stations in Buntun, Carigana, and Libag, Tuguegarao City, Cagayan. Respondent Gino Nicholas Pobre is Angel's son, who assumed ownership over the stations after Angel retired. The dispute concerns the interpretation and enforcement of the RSAs, particularly regarding Angel's resignation, the alleged assignment of the stations to Gino, and the payment of outstanding fuel purchases.

In 2008 and 2009, petitioner Pilipinas Shell Petroleum Corporation entered into three Retailer Supply Agreements (RSAs) with Angel Y. Pobre, under which petitioner would supply Shell brand fuel and lubricants that Angel would sell through three Shell stations in Buntun, Carigana, and Libag, Tuguegarao City, Cagayan. On October 26, 2017, Angel informed petitioner through a letter that he was resigning as Shell dealer/operator effective December 16, 2017, owing to his declining health and other conditions requiring constant medical attention. On December 15, 2017, he made one last purchase of Shell products in the total amount of P4,846,555.84. The next day, he sent another letter to petitioner reiterating his resignation and requesting that the payment for the last purchase be set off with receivables due him for promotional programs he conducted on behalf of petitioner.

On March 9, 2018, petitioner sent a reconciliation of accounting records to Angel and requested confirmation that his outstanding balance, net of accounts payable to him, amounted to P2,787,529.33. On that same day, Gino sent his own letter to petitioner requesting that it dismantle and remove all Shell signages at the three Shell stations, as he had already assumed ownership of the properties. On March 13, 2018, petitioner demanded that Angel pay his outstanding balance of P4,846,555.84 and that respondents cease and desist from using competitor brand products in the gas stations. Petitioner also rejected Gino's request, as the removal of the Shell signages would violate the subsisting RSAs.

In response, Angel acknowledged the reconciliation and manifested his willingness to pay the outstanding balance of P2,787,529.33, less the amount charged as Globe Telecom EDC terminal installation fees, given that the corresponding terminals were never installed. Angel reiterated that he had already resigned as dealer/operator due to his deteriorating health and that he could not be forced to continue operating the Shell sites since the RSAs were effectively terminated by his resignation. He also denied selling competitor brand products. Petitioner asserted that Angel had neither the right to unilaterally terminate the RSAs nor to assign the stations to Gino, who was a retailer of Phoenix Petroleum Philippines, Inc., one of petitioner's competitors. Gino brushed aside petitioner's demands, stating that he was neither the owner nor the lessor of the properties and merely supplied Shell products to Angel, and avouched that Angel was ready and able to pay the outstanding balance.

Unable to arrive at an amicable resolution, petitioner instituted a complaint against respondents seeking: (1) payment of P4,846,555.84 representing the price of the Shell products purchased by Angel on December 15, 2017; (2) adherence to the RSAs; (3) actual and compensatory damages for lost profit between January to June 2018 in the amount of P10,000,000.00; (4) moral and exemplary damages as well as attorney's fees in the amount of P3,000,000.00; and (5) compelling Angel to either retain a fourth site as a Shell branded station or pay nominal damages in the amount of P75,000,000.00 representing the profits petitioner could have earned from the operation of the said fourth site. The complaint likewise prayed for the issuance of a writ of preliminary attachment to safeguard its claims, as Angel was supposedly guilty of fraud in the performance of his obligations under the RSAs. On May 17, 2019, the RTC issued its Order providing for the issuance of a Writ of Preliminary Attachment in favor of petitioner, directing the sheriff to attach respondents' properties to secure the satisfaction of petitioner's total claim of P92,846,555.84.

• Timeliness of the Certiorari Petition: Petitioner argued that the CA should have dismissed respondents' petition for certiorari outright for being filed out of time, as respondents filed their petition 149 days after receiving the October 7, 2019 Order, and the second motion for reconsideration did not toll the running of the 60-day period under Section 4, Rule 65 of the Rules of Court.
• Fraud by Angel: Petitioner alleged that Angel fraudulently incurred the obligation to pay P4,846,555.84 for the December 15, 2017 purchase, despite having already made known his intent to resign, and that he led petitioner to believe he was ready and willing to pay his obligations, yet paid nothing as of June 2018.
• Fraudulent Assignment to Gino: Petitioner alleged that Angel made an illegal unilateral assignment of rights despite clear stipulation under the RSAs to the contrary, effected through the "clever guise" of health concerns, when the main reason for his resignation was really for Gino to take over the sites in violation of Shell's rights under the RSAs.
• Insufficient Security: Petitioner argued that Angel never posted any bond or security to secure his obligations under the RSAs, and therefore there was no sufficient security for Shell's claim to be enforced by the action.

• Distinct Remedy of Motion to Discharge: Respondents countered that there was no prohibited second motion for reconsideration, insisting that the first motion sought to prevent the issuance of the writ, whereas the second motion sought its discharge, a primary and distinct remedy allowed under Section 13, Rule 57 of the Rules of Court.
• Extraordinarily Persuasive Reasons: Respondents maintained that even assuming there was a "second" motion for reconsideration, it was filed under "extraordinarily persuasive reasons to serve the higher interest of justice."
• Lack of Fraud: Respondents argued that petitioner failed to prove the imputed fraud under Section 1(d) of Rule 57 of the Rules of Court.

• Timeliness of the Certiorari Petition: Whether the CA erred in taking cognizance of respondents' petition for certiorari despite its alleged late filing.
• Fraud Requisite: Whether petitioner sufficiently established that respondents were guilty of fraud in the performance of their obligations under the RSAs to warrant the issuance of a writ of preliminary attachment under Section 1(d), Rule 57.
• Insufficient Security Requisite: Whether petitioner established that respondents had no other sufficient security for the claim sought to be enforced by the action.
• Excessiveness of the Attachment: Whether the amount covered by the writ of preliminary attachment was excessive.

• Timeliness of the Certiorari Petition: No. The CA did not err in taking cognizance of respondents' petition. With respect to the denial of the motion to discharge, the 60-day period under Rule 65 began to run only upon respondents' receipt of the RTC's Order dated February 14, 2020, and the petition was filed on time. In any event, the merits of the case and substantial justice serve as exceptions to the 60-day period under Rule 65.
• Fraud Requisite: No. Petitioner failed to prove fraud with the specificity required under prevailing jurisprudence. The mere failure to pay a due and demandable debt or to comply with contractual obligations is not the fraud contemplated under Section 1(d), Rule 57, and fraud cannot be inferred from bare allegations of non-payment or non-performance.
• Insufficient Security Requisite: No. Petitioner's evidence failed to establish that respondents had insufficient security to answer its claim. Petitioner's argument that Angel never posted a security for the RSAs as proof that he could not post a security for the amounts claimed was illogical and did not follow.
• Excessiveness of the Attachment: Yes. The amount that the RTC ordered to be attached was excessive, as it included unliquidated and contingent claims beyond the principal claim. A writ of attachment should not be issued for unliquidated or contingent claims and should, as a general rule, be confined to the principal claim.

• Timeliness of the Certiorari Petition: The Court distinguished between the denial of respondents' plea to reconsider the issuance of the writ and the denial of their alternative prayer to discharge the writ. The first motion filed by respondents was also the first time they availed of the remedy under the third option under Rule 57, i.e., discharge of the attachment on the ground that it was improperly or irregularly issued. Consequently, the Omnibus Motion for Inhibition with Motion for Reconsideration was simultaneously a second motion for reconsideration of the Order dated May 17, 2019 and also the first and only motion for reconsideration of the denial of the motion to discharge. Necessarily, and only with respect to the denial of the motion to discharge, it was only upon receipt of the RTC's Order dated February 14, 2020 that the 60-day period under Rule 65 began to run. The Court also noted that the CA characterized the petition for certiorari as impugning both the Order dated October 7, 2019 and the Order dated February 14, 2020 only insofar as it denied the discharge of the Writ of Preliminary Attachment, and denied respondents' motion for reconsideration thereof, respectively. Patently absent was any mention of the challenge to the issuance of the Writ itself from the Order dated May 17, 2019. Hence, the petition was filed on time. In any event, even assuming there was a delay, the merits of the instant case and substantial justice serve as exceptions to the 60-day period under Rule 65.
• Fraud Requisite: The Court reiterated the requisites to apply for a writ of preliminary attachment under Section 1(d), Rule 57: (1) that a sufficient cause of action exists; (2) that the case is one of those mentioned in Section 1 hereof; (3) that there is no other sufficient security for the claim sought to be enforced by the action; and (4) that the amount due to the applicant, or the value of the property the possession of which he/she is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The RTC failed to determine the existence of the second and third requisites. On the second requisite, case law has consistently instructed that the fraud alleged must be of sufficient specificity and must rest on concrete grounds. The mere failure to pay a due and demandable debt or to comply with contractual obligations is not the fraud contemplated under Section 1(d), Rule 57. Being a state of mind, fraud cannot be inferred from bare allegations of non-payment or non-performance. The Court examined petitioner's allegations in its complaint and found that nowhere in the foregoing allegations may it be inferred that Angel employed such multifarious means to defraud petitioner. Up until the RSAs were actually terminated, Angel had the right to place purchase orders for Shell products to sell at the stations. Petitioner was apprised beforehand of his intent to resign but still acceded to the purchase request. This circumstance per se, without more, is not indicative of fraud. As to his purported refusal to pay a "single centavo" to petitioner when the dispute arose, non-payment of a debt, by itself, cannot constitute fraud under Section 1(d), Rule 57. With respect to Gino, there was nothing in the averments of any particular fraudulent act on his part. Thus, the second requisite was palpably absent. The Court clarified that it was not making a categorical statement on the presence or absence of fraud or bad faith in the dealings between the parties, as this is a matter best left to the trial court in the resolution of the main case. The Court strictly confined its conclusions to the failure of petitioner to meet the particularity required under case law for the issuance of a writ of preliminary attachment in cases of fraud.
• Insufficient Security Requisite: The Court agreed with the CA's observation that the evidence presented by petitioner failed to establish that respondents had insufficient security to answer its claim. Petitioner's argument on this point was "woefully deficient." Petitioner used the fact that Angel never posted a security for the RSAs as proof that he could not post a security for the amounts claimed in its complaint. However, this reasoning was illogical and simply did not follow. By petitioner's own admission, the reason Angel never posted a security was not because of his inability, but because of their "harmonious contractual relations." Thence, this could not serve as basis to comply with the third requisite.
• Excessiveness of the Attachment: The Court wholly concurred with the CA that the amount that the RTC ordered to be attached was excessive. Petitioner was primarily seeking to cover at least its principal claim of P4,846,555.84, but the RTC erroneously included all the amounts sought by petitioner, even those corresponding to the claimed actual and compensatory damages, moral and exemplary damages, and nominal damages. The Court sternly reminded the lower courts that a writ of attachment should not be issued for unliquidated or contingent claims and should, as a general rule, be confined to the principal claim. The rationale is to avoid excessive attachments that would unduly prejudice and, in some cases, financially cripple the debtor or defendant even before the main issues of the controversy have been resolved. The P75,000,000.00 in nominal damages sought as expected profits for 10 years relating to the fourth site that never materialized, despite the fact that the said arrangement was not even covered by a contract in writing, is the very definition of an unliquidated claim, i.e., one that cannot be established with reasonable certainty. In including this amount, the RTC issued an excessive and unconscionable writ.

• Preliminary attachment as a provisional remedy — Preliminary attachment is "the provisional remedy in virtue of which a plaintiff or other proper party may, at the commencement of the action or at any time thereafter, have the property of the adverse party taken into the custody of the court as security for the satisfaction of any judgment that may be recovered." As a remedy which is purely statutory in nature, it necessitates "strict construction of the provisions granting it." The Court applied this doctrine in finding that the RTC failed to strictly adhere to the requisites under Rule 57, resulting in a writ issued in excess of the trial court's jurisdiction.
• Fraud under Section 1(d), Rule 57 — The fraud alleged must be of sufficient specificity and must rest on concrete grounds. The mere failure to pay a due and demandable debt or to comply with contractual obligations is not the fraud contemplated under Section 1(d), Rule 57. Being a state of mind, fraud cannot be inferred from bare allegations of non-payment or non-performance. The Court applied this doctrine in finding that petitioner's allegations lacked the specificity required to establish fraud on the part of Angel, and that there was nothing in the averments of any particular fraudulent act on Gino's part.
• Requisites for issuance of writ of preliminary attachment — The requisites to apply for a writ of preliminary attachment under Section 1(d), Rule 57 are: (1) that a sufficient cause of action exists; (2) that the case is one of those mentioned in Section 1 hereof; (3) that there is no other sufficient security for the claim sought to be enforced by the action; and (4) that the amount due to the applicant, or the value of the property the possession of which he/she is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims. The Court applied this doctrine in finding that the RTC failed to determine the existence of the second and third requisites.
• Attachment confined to principal claim — A writ of attachment should not be issued for unliquidated or contingent claims and should, as a general rule, be confined to the principal claim. The rationale is to avoid excessive attachments that would unduly prejudice and, in some cases, financially cripple the debtor or defendant even before the main issues of the controversy have been resolved. The Court applied this doctrine in finding that the P75,000,000.00 in nominal damages sought as expected profits for 10 years relating to the fourth site that never materialized was the very definition of an unliquidated claim, and that the RTC issued an excessive and unconscionable writ in including this amount.
• Motion to discharge as a distinct remedy — A motion to discharge is a distinct remedy afforded by the Rules of Court. The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other. The Court applied this doctrine in ruling that respondents' first motion was also the first time they availed of the remedy of discharge under the third option, and that the 60-day period under Rule 65 began to run only upon the denial of the motion to discharge.

• "The mere failure to pay a due and demandable debt or to comply with contractual obligations is not the fraud contemplated under Section 1(d), Rule 57." — This passage articulates the controlling doctrine on the specificity required to establish fraud for purposes of preliminary attachment, and is central to the Court's finding that the second requisite was absent.
• "Being a state of mind, fraud cannot be inferred from bare allegations of non-payment or non-performance." — This passage reinforces the requirement that fraud must be established with concrete grounds and cannot be presumed from mere non-payment, and was applied to both Angel and Gino.
• "A writ of attachment should not be issued for unliquidated or contingent claims and should, as a general rule, be confined to the principal claim." — This passage states the rule on the proper scope of attachment amounts, and was applied in finding the P75,000,000.00 nominal damages claim to be an unliquidated claim that rendered the writ excessive and unconscionable.
• "The attachment debtor cannot be deemed to have waived any defect in the issuance of the attachment writ by simply availing himself of one way of discharging the attachment writ, instead of the other." — This passage, quoted from Davao Light, supports the Court's ruling that respondents' motion to discharge was a distinct remedy that did not bar their other remedies, and that the 60-day period for certiorari began only upon denial of the discharge motion.

• Davao Light & Power Co., Inc. vs. Court of Appeals, et al., 281 Phil. 386 (1991) — Controlling precedent on the concept of preliminary attachment and the various options available to a party whose properties are sought to be attached under Rule 57. The Court relied on this case for the proposition that the relative ease with which a preliminary attachment may be obtained is matched by the relative facility with which it may be prevented or frustrated, and that the attachment debtor does not waive any defect by availing of one remedy over another.
• Tsuneishi Heavy Industries (Cebu), Inc. vs. MIS Maritime Corp., 829 Phil. 90 (2018) — Cited for the propositions that the fraud alleged must be of sufficient specificity and must rest on concrete grounds, and that the mere failure to pay a due and demandable debt is not the fraud contemplated under Section 1(d), Rule 57. Also cited for the caution that lower courts should exercise great caution in issuing writs of attachment as it entails interfering with property prior to a determination of actual liability.
• Lorenzo Shipping Corp. vs. Villarin, 848 Phil. 412 (2019) — Cited for the proposition that a writ issued in excess of the trial court's jurisdiction results from failure to strictly adhere to the requisites under Rule 57.
• Chua vs. China Banking Corp., G.R. No. 202004, November 4, 2020 — Cited for the enumeration of the requisites to apply for a writ of preliminary attachment under Section 1(d), Rule 57.
• Dumaran vs. Llamedo, G.R. No. 217583, August 4, 2021 — Cited for the proposition that fraud, being a state of mind, cannot be inferred from bare allegations of non-payment or non-performance.
• Communication and Information Systems Corp. vs. Mark Sensing Australia Pty. Ltd., et. al., 804 Phil. 233 (2017) — Cited for the proposition that the 60-day period under Rule 65 began to run only upon receipt of the RTC's Order denying the motion to discharge.
• Fluor Daniel, Inc.-Philippines vs. Fil-Estate Properties, Inc., 866 Phil. 626 (2019) — Cited for the enumeration of instances when the period to file a petition for certiorari may be extended, including the merits of the case and substantial justice.
• Insular Savings Bank vs. Court of Appeals, 499 Phil. 116 (2005) — Cited for the rule that a writ of attachment should not be issued for unliquidated or contingent claims and should, as a general rule, be confined to the principal claim.
• UCPB Leasing and Finance Corp. vs. Heirs of Leporgo, Sr., G.R. No. 210976, January 12, 2021 — Cited for the definition of an unliquidated claim as one that cannot be established with reasonable certainty.

• Section 1(d), Rule 57, Rules of Court — Provides for the issuance of a writ of preliminary attachment when the defendant is guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought. The Court applied this provision in finding that petitioner failed to prove fraud with the required specificity.
• Section 2, Rule 57, Rules of Court — Provides for the issuance and contents of the order of attachment, which may be issued ex parte or upon motion with notice and hearing. The Court cited this provision in discussing the options available to a party whose properties are sought to be attached.
• Section 5, Rule 57, Rules of Court — Provides for the manner of attaching property and the option of the party to make a deposit or give a counter-bond. The Court cited this provision in discussing the remedies available to the attachment debtor.
• Section 12, Rule 57, Rules of Court — Provides for the discharge of attachment upon giving a counter-bond. The Court cited this provision in discussing the options available to the attachment debtor.
• Section 13, Rule 57, Rules of Court — Provides for the discharge of attachment on other grounds, including that the attachment was improperly or irregularly issued or enforced, or that the bond is insufficient, and that if the attachment is excessive, the discharge shall be limited to the excess. The Court applied this provision in ruling that respondents' motion to discharge was a distinct remedy.
• Section 4, Rule 65, Rules of Court — Provides for the 60-day period within which to file a petition for certiorari. The Court applied this provision in determining the timeliness of respondents' petition before the CA.

Caguioa (Chairperson), Inting, Gaerlan, and Singh, JJ., concurred.