Herrera_Provisional Remedies.pdf - RULE 57 PROVISIONAL...

Unformatted text preview: RULE 57 PROVISIONAL REMEDIES 1. N a t u r e of P r o v i s i o n a l R e m e d i e s Provisional remedies are: a. Those to which parties litigant m a y resort for the preservation or protection of their rights or interest, and for no other purpose during the pendency of the action. b. T h e y are applied to a pending litigation, for the purpose of securing the judgment or preserving the status quo, and in some cases after judgment, for the purpose of preserving or disposing of the subject matter. 1 2. T h e P r o v i s i o n a l R e m e d i e s u n d e r the p r e s e n t R u l e s a) Attachment (Rule 57) b) Preliminary Injunction (Rule 58) c) Receivers (Rule 59) d) Replevin or delivery of private property (Rule 60) e) Alimony Pendente Lite (Rule 61) are: 3. Equity Jurisdiction to O r d e r Deposit D u r i n g Pendency of Action To prevent unjust enrichment and to ensure restitution in the event of rescission the trial court in the exercise of its equity jurisdiction may validly order the deposit of the 10 million down-payment during the pendency of the action despite the fact that deposit is not among the provisional remedies provided for in the Rules. 2 1 2 Calo v. Roldan, 76 Phil. 445. Reye8 v. Lim, G.R. N o . 1324241, August 11, 2003. I Sec. 1 REMEDIAL LAW V O L . III Rule 57 The principle that no person may unjustly enrich himself at the expense of another is embodied in Article 22 of the Civil Code. This principle applies not only to substantive but also procedural remedies. One condition for invoking this principle is that the aggrieved party has no other action based on contract, quasi-contract, crime, quasi-delict or any other provision of law. T h e Court can extend this condition to the hiatus in the Rules of Court where the aggrieved party during the pendency of the case has no other recourse based on the provisional remedies of the Rules of Court. 3 A court may not permit a seller to retain, pendente lite, money paid by a buyer if the seller seeks himself the rescission of the sale because he has subsequently sold the property to another buyer. 4 PRELIMINARY ATTACHMENT S E C T I O N 1. Grounds upon which attachment may issue. — At the c o m m e n c e m e n t of the action or at a n y time b e f o r e entry o f j u d g m e n t , a plaintiff o r a n y p r o p e r p a r t y m a y h a v e the p r o p e r t y o f the a d v e r s e p a r t y a t t a c h e d a s s e c u r i t y f o r the satisfaction o f a n y j u d g m e n t that m a y b e r e c o v e r e d i n the f o l l o w i n g cases: ( a ) I n a n action f o r the r e c o v e r y o f a specified a m o u n t of money or damages, other than m o r a l a n d exemplary, on a cause o f action a r i s i n g f r o m l a w , contract, q u a s i - c o n t r a c t , delict o r quasi-delict a g a i n s t a p a r t y w h o i s a b o u t t o d e p a r t f r o m the P h i l i p p i n e s w i t h intent t o d e f r a u d his c r e d i t o r s ; ( b ) I n a n action f o r m o n e y o r p r o p e r t y e m b e z z l e d o r f r a u d u l e n t l y m i s a p p l i e d o r c o n v e r t e d t o his o w n u s e b y a p u b l i c officer, or an officer of a c o r p o r a t i o n , or an attorney, factor, b r o k e r , agent, o r clerk, i n the c o u r s e o f his e m p l o y ment a s such, o r b y a n y o t h e r p e r s o n i n a f i d u c i a r y capacity, or for a w i l l f u l v i o l a t i o n of duty; ( c ) I n a n action t o r e c o v e r the p o s s e s s i o n o f p r o p e r t y unjustly o r f r a u d u l e n t l y t a k e n , d e t a i n e d o r c o n v e r t e d , w h e n the property, o r a n y p a r t thereof, h a s b e e n c o n c e a l e d , r e - 3 4 Reyes v. Lim, G.R. N o . 1324241, supra. Reyes v. Lim, supra. 2 Rule 57 PROVISIONAL REMEDIES Sec. 1 m o v e d , o r d i s p o s e d o f t o p r e v e n t its b e i n g f o u n d o r t a k e n b y the a p p l i c a n t o r a n a u t h o r i z e d p e r s o n ; ( d ) I n a n action a g a i n s t a p a r t y w h o h a s b e e n guilty o f a fraud in c o n t r a c t i n g the d e b t or i n c u r r i n g the obligation u p o n w h i c h the action i s b r o u g h t , o r i n the p e r f o r m a n c e thereof; ( e ) I n a n action a g a i n s t a p a r t y w h o h a s r e m o v e d o r d i s p o s e d of his p r o p e r t y , or is a b o u t to do so, w i t h intent to d e f r a u d his creditors; o r (f) I n a n action a g a i n s t a p a r t y w h o does not r e s i d e a n d i s not f o u n d i n the P h i l i p p i n e s , o r o n w h o m s u m m o n s may b e served b y publication, ( l a ) COMMENT: 1. S o u r c e of R u l e The present Rule on attachment was taken from Section 1 of the former Rule. 2. T h e c h a n g e s consist i n a. changing the time when the filing of an application for a w r i t of preliminary attachment may be filed at the commencement of the action or at any time "thereafter" to "or before entry of judgment"; b. clarifying the ground in subsection ( a ) to an action for the recovery of a "specified amount" of money or damages, "other than moral or exemplary" and expanding the scope by not confining the cause of action to those arising only from contract, express or implied but also those arising from "law, contract, delict, or quasidelict." This rule confirms decisions of the Supreme Court that a writ of preliminary attachment may not issue in an action for damages where the claims are unliquidated; 1 c. Clarifying and consolidating in subsection (c) the grounds mentioned in former subsections (c) and the second ground in sub- 1 Salas v. Adil, 90 S C R A 121; Peregrino v. Panis, 133 S C R A 72; Mialhe v. de Lenquesaing, 142 S C R A 694. 3 REMEDIALLAW V O L . III Sec. 1 Rule 57 sections (d) to "an action to recover the possession of property unjustly or fraudulently taken, detained or converted, when the property, or any part thereof, has been concealed, removed, or disposed of to prevent its being found or taken by the applicant or an authorized person"; and deleting the limitation "personal" thereby including therein an action to recover "real" property. d. l b fraud in contracting the debt or incurring the obligation, the present rule added fraud in the performance of the obligation. e. Preliminary attachment may be granted against a defendant who does not reside and is not found in the Philippines under Sec. 15 of Rule 14. It may also be granted against a defendant whose identity or whereabouts are unknown and cannot be ascertained by diligent inquiry on w h o m summons m a y be served by publication under Sec. 14, Rule 14. T h e attachment converts an action in personam into an action quasi in rem and validates summons by publication. 2 M e r e non-residence is not enough, the rule added "and is not found in the Philippines." The rule does not include foreign corporations duly licensed to do business in the Philippines but refers only to natural persons. 3 In other words a foreign corporation licitly doing business in the Philippines which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippines. Otherwise stated, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines — and is consequently and necessarily a party who resides out of the Philippines. Such corporations are thus considered as residing in the Country. 4 5 2 Citizens Surety and Ins. Co. v. Melencio-Herrera, 38 S C R A 369; Consolidated Plywood Industries, Inc. v. Breve, 163 S C R A 589. Claude Neon Lights v. Philippine Advertising Corp., 57 Phil. 607. State Investment House, Inc. v. Citibank N . A . , 203 S C R A 9, cited in Northwest Airlines v. Court of Appeals, 241 S C R A 192 (1995). Vide Northwest Airlines v. Court of Appeals, supra. 3 4 5 4 Rule 57 PROVISIONAL REMEDIES 3. Notes and Cases a. Definition Sec. 1 A w r i t of preliminary attachment is a provisional remedy issued upon order of the court where an action is pending to be levied upon the property or properties of the defendant therein, the same to be held thereafter by the Sheriff as security for the satisfaction of whatever judgment might be secured in said action by the attaching creditor against the defendant. 6 7 In Davao Light and Power Co. v. Court of Appeals, Justice Narvasa paraphrasing Section 1, Rule 57 of the Rules of Court defined a preliminary attachment as 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 the judgment that m a y be recovered. It is a remedy which is purely statutory in respect of which the law requires a strict construction of the provisions granting it. Another definition given in 4 Words and Phrases 727 (1940), is that it is a provisional remedy, auxiliary or incidental to the main action whereby the debtor's property capable of being taken under levy and execution is placed under custody of the law pending determination of the cause to secure the payment of any judgment that may be recovered therein. 8 b. Concept: P U R P O S E "Attachment is a juridical institution which has for its purpose to secure the outcome of the trial, that is, the satisfaction of the pecuniary obligation really contracted by a person or believed to have been contracted by him, either by virtue of a civil obligation emanating from contract or from law, or by virtue of some crime or misdemeanor that he might have committed, and the writ issued, granted it, is executed by attaching and safely keeping all the mov- 6 Eleazar v. A d l a w a n v. Hon. Judge Valeriano P. Tomol, G.R. N o . 63225, April 3, 1990; Reiterate M. Cuartero v. Court of Appeals, 212 SCRA200 (1992), cited in Chemphil C E I C v. C A , Dec. 12,1995, G.R. Nos. 112438-39. 204 S C R A 343(1991). *Supra. 7 5 Rule 57 REMEDIAL LAW V O L . III Sec. 1 able property of the defendant, or so much thereof as may be sufficient to satisfy the plaintiff's demands x x x." 9 The chief purpose of the remedy of attachment is to secure a contingent lien on defendant's property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or concealed, or otherwise placed beyond the reach of creditors. 10 c. W h e r e Indebtedness A l r e a d y Secured The grounds upon which attachment m a y issue are set forth in Section 1, Rule 57 of the Rules of Court. But quite apart from the grounds stated therein, it is further provided in Section 3 of Rule 57 that "an order of attachment shall be granted only when it is made to appear by the affidavit of the applicant or some other person who personally knows the facts, that x x x there is no other sufficient security for the claim sought to be enforced by the action." The reason for the rule prohibiting attachment where indebtedness was already secured is to prevent the secured creditors from attaching additional property and thus tying up more of the debtor's property than was necessary to secure the indebtedness. Thus, to sustain an order of attachment, "it is incumbent, upon plaintiff to establish either of these two facts, to wit: ( a ) that the obligation had not been secured originally, or ( b ) that, if secured at its beginning, the security later became valueless." 11 d. N a t u r e a n d Scope: A t t a c h m e n t P u r e l y S t a t u t o r y Attachment is not a distinct proceeding in the nature of an action in rem but is a proceeding to an action of law, designed to secure the payment of any judgment the plaintiff m a y obtain. Attachment as a provisional remedy is purely a statutory one. It does not exist unless expressly granted by the statute. It is there- G u z m a n v. Catolica, et al., Phil. 257; Gruenberg v. Court of Appeals, 138 S C R A 471, cited in C E I C v. C A , supra. I d . , citing Salgado v. C A , 128 S C R A 395 (Italics ours); Chemphil Export & Import Corp. v. C A , 251 S C R A 289. S a l g a d o v. Court of Appeals, supra. 10 u 6 Rule 57 PROVISIONAL REMEDIES Sec. 1 fore not available except in those cases where the statute expressly permits. For this purpose, the party seeking an attachment must show that a sufficient cause of action exists and that the amount due him is as much as the sum for which the order of attachment is sought. 12 13 e. Strict C o m p l i a n c e w i t h R u l e T h e rule on the issuance of a w r i t of attachment must be construed strictly in favor of the defendant. If all the requisites for the issuance of the w r i t are not present, the court which issues it acts in excess of jurisdiction. It should be issued only on concrete and specific grounds. 14 15 f. Writ m a y be Q u a s h e d on Certiorari If Not Based on Statutory G r o u n d s If a w r i t is issued for which there is no statutory authority, the court is acting irregularly and in excess of jurisdiction, hence the w r i t may be quashed by certiorari. 16 g. P a r t y Entitled to R e m e d y 1. Plaintiff or "any proper party" includes defendant in a counterclaim. 2. Plaintiff cannot attach property claimed as his and in his actual possession. 17 3. T h e w r i t m a y not issue in an action instituted by an administratrix of an estate to protect her personal interest as creditor of the estate. 18 h. G r o u n d s for Issuance ( a ) In an action f o r the r e c o v e r y of a specified a m o u n t of m o n e y or d a m a g e s , o t h e r t h a n m o r a l a n d exemplary, on a 12 U . S . v. Namit, 38 Phil. 926. "General v. De Venecia, 78 Phil. 780. Gruenberg v. C A , supra. D y v. Enage, 70 S C R A 96. L e u n g v. O'Brien, 38 Phil. 182; Salas v. Adil, 90 S C R A 121; Jardine Manila Finance, Inc. v. Court of Appeals, 171 S C R A 636. Calo, et al. v. Roldan, et al., 76 Phil. 445. Gruenberg v. C A , supra. 14 16 16 17 18 7 Rule 57 REMEDIAL LAW V O L . III Sec. 1 cause of action a r i s i n g from l a w , contract, quasi-contract, delict or quasi-delict a g a i n s t a p a r t y w h o is a b o u t to d e p a r t from the P h i l i p p i n e s w i t h intent to d e f r a u d his creditors; 1. It must be shown that the defendant is about to depart from the Phils, with intent to defraud his creditor or that he is a non-resident alien in order that attachment of his property is justified. 19 2. Attachment may not issue if the allegation in the affidavit is insufficient. 20 3. Attachment is not available where demand is not due and payable. 21 4. Attachment may not issue for moral and exemplary damages or for an unspecified amount of damages. (See Note 2 [b]) ( b ) I n a n action f o r m o n e y o r p r o p e r t y e m b e z z l e d o r f r a u d u l e n t l y m i s a p p l i e d o r c o n v e r t e d t o his o w n u s e b y a p u b l i c officer, or an officer of a c o r p o r a t i o n , or an attorney, factor, b r o k e r , agent, or clerk, in the c o u r s e of his employment as such, or by a n y o t h e r p e r s o n in a fiduciary capacity, or f o r a w i l l f u l violation of duty; If one of two persons who owned a sweepstakes ticket, that won a prize appropriated the entire prize to himself, a w r i t of preliminary attachment is proper in an action against him to recover the share of the co-owner. 22 The act of a corporate officer in taking money from the corporation in his capacity as President, Treasurer and General M a n a g e r for personal use without being duly authorized constitutes an irregularity that, while it does not amount to a criminal fraud, is undoubtedly a fraud of a civil character — an abuse of confidence to the damage of the corporation and its stockholders. 23 19 K . O . Glass Const. Co. v. Valenzuela, 116 S C R A 563. Ibid. General v. De Venecia, supra. T a n v. Zandueta, 61 Phil. 526. "Walter E. Olsen and Co. v. Olsen, 48 Phil. 238. 20 21 22 8 Rule 57 PROVISIONAL REMEDIES Sec. 1 ( c ) I n a n action t o r e c o v e r the possession o f p r o p e r t y unjustly o r f r a u d u l e n t l y t a k e n , d e t a i n e d o r converted, w h e n the p r o p e r t y , o r a n y p a r t thereof, h a s b e e n concealed, rem o v e d , o r d i s p o s e d o f t o p r e v e n t its b e i n g f o u n d o r t a k e n b y the a p p l i c a n t o r a n a u t h o r i z e d p e r s o n ; As distinguished from replevin — the personal property in this case belongs to the defendant and the plaintiff seeks to attach it to secure the satisfaction of any judgment that he may recover from the defendant. 24 In replevin, the property being recovered belongs to the plaintiff, or plaintiff is entitled thereto, by virtue of a chattel mortgage in his favor. In an action to recover possession of personal property a writ of replevin m a y issue under Rule 60. If the property has been concealed, removed or disposed of to prevent its being found, a writ of preliminary attachment under the present Rule may be issued. A t tachment is issued as security for the satisfaction of a judgment under Section 9, Rule 60, where the court is called upon to determine who has the right of possession to and the value of the property and shall render judgment in the alternative for the delivery thereof to the party entitled to the same, or for its value in case delivery cannot be made, and also for such damages as either party may prove, with costs. Concealment — there should be a physical hiding or secreting of property so that it cannot be seized to satisfy creditor's claims. Removal is actual physical removal by the debtor. 25 ( d ) I n a n action a g a i n s t a p a r t y w h o h a s b e e n guilty o f a fraud in c o n t r a c t i n g the d e b t or i n c u r r i n g the obligation u p o n w h i c h the action i s b r o u g h t , o r i n the p e r f o r m a n c e thereof; 26 3. Insolvency is not a ground. Formerly neither is fraud in the performance of an obligation. It is now a ground for the issuance of the writ. 27 24 Santos v. Bernabe, 54 Phil. 19; Calo v. Roldan, supra. 3 MORAN, 1980 ed., p. 7. Aboitiz v. Cotabato Bus Co., 105 S C R A 88. State Investment House, Inc. v. Court of Appeals, 163 S C R A 799. 25 26 27 9 Rule 57 REMEDIAL LAW V O L . III Sec. 1 Failure to disclose non-delivery of vehicle to financing company who funded sale constitutes fraud. 28 (e) I n a n action a g a i n s t a p a r t y w h o h a s r e m o v e d o r disposed of his property, or is a b o u t to do so, w i t h intent to d e f r a u d his creditors; or — Actual transfer is not necessary as mere design to dispose of property and intent to carry it out is sufficient. 29 1. The acts of a bus company in having buses repaired and substitution by the same number of buses does not constitute removal. 30 2. Intent to defraud may be and usually is inferred from the facts and circumstances of the case. It can rarely be proven by direct evidence. It may be gleaned from the statements and conduct of the debtor. The principle may be applied that every person is presumed to intend the natural consequences of his act. 31 3. M e r e removal or disposal of property, by itself, is not a ground for the issuance of attachment, notwithstanding the absence of any security for the satisfaction of any judgment against defendant. 4. It is the removal or disposal with intent to defraud defendant's creditors that justifies the issuance of a w r i t of preliminary attachment. 32 Thus, to justify the issuance of a w r i t of preliminary attachment based on removal, concealment and disposition of defendant's property with intent to defraud his creditors, the factual basis on defendant's intent to defraud must be clearly alleged in the affidavit in suppor...
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