Facts:
On various dates between March 5, 1990, and August 29, 1990, petitioner Phil-Air sold to respondent RCJ Lines four Carrier Paris 240 air-conditioning units for buses (units). The units included compressors, condensers, evaporators, switches, wiring, circuit boards, brackets, and fittings. RCJ Lines issued three post-dated checks in favor of Phil-Air to partly cover the unpaid balance. All the post-dated checks were dishonored when Phil-Air subsequently presented them for payment.
In view of the failure of RCJ Lines to pay the balance despite demand, Phil-Air filed on April 1, 1998 the complaint for sum of money with prayer for the issuance of a writ of preliminary attachment. Phil-Air sought to recover from RCJ Lines. In its answer with compulsory counterclaim, RCJ Lines admitted that it purchased the units. It refused to pay the balance because Phil-Air allegedly breached its warranty.
RCJ Lines averred that the units did not sufficiently cool the buses despite repeated repairs. Phil-Air purportedly represented that the units were in accord with RCJ Lines’ cooling requirements as shown in Phil-Air’s price quotation17 dated August 4, 1989. The price quotation provided that full payment should be made upon the units’ complete installation. Complete installation, according to RCJ Lines, is equivalent to being in operational condition.
The RTC granted the application for the issuance of a writ of preliminary attachment after Phil-Air posted an attachment bond. The attachment, however, was later lifted when the RTC granted RCJ Lines’ urgent motion to discharge the writ of attachment. RCJ Lines posted a counter-bond in the same amount as the attachment bond.
Ruling on the merits after trial, the RTC found that Phil-Air was guilty of laches and estopped from pursuing its claim. It also sustained the allegation that Phil-Air had breached its warranty and directing the Phil-Air among others to pay P82,274.00 as refund of the premium xxx for defendant’s counter-bond for the release of the two buses which were attached per Writ of Attachment of this Court.
The CA affirmed the RTC decision in toto. Hence, this case.
Issue:
Whether Phil-Air is directly liable for the counter-bond premium and RCJ Lines.
Held:
No, granting that RCJ Lines suffered losses, the judgment award should have been first executed on the attachment bond. Only if the attachment bond is insufficient to cover the judgment award can Phil-Air be held liable.
A writ of preliminary attachment is a provisional remedy issued by the court where an action is pending to be levied upon the property or properties of the defendant. The property is held by the sheriff as security for the satisfaction of whatever judgment that might be secured by the attaching party against the defendant.
The grant of the writ is conditioned not only on the finding of the court that there exists a valid ground for its issuance. The Rules also require the applicant to post a bond.
Section 4 of Rule 57 of the Rules of Civil Procedure (Rules) provides that “the party applying for the order must…give a bond executed to the adverse party in the amount fixed by the court, in its order granting the issuance of the writ, conditioned that the latter will pay all the costs that may be adjudged to the adverse party and all damages that he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto.”
The enforcement of the writ notwithstanding, the party whose property is attached is afforded relief to have the attachment lifted.
There are various modes of discharging an attachment under Rule 57, viz.: (1) by depositing cash or posting a counter-bond under Section 12; (2) by proving that the attachment bond was improperly or irregularly issued or enforced, or that the bond is insufficient under Section 13; (3) by showing that the attachment is excessive under Section 13; and (4) by claiming that the property is exempt from execution under Section 2.
Under the first mode, the court will order the discharge of the attachment after (1) the movant makes a cash deposit or posts a counter-bond and (2) the court hears the motion to discharge the attachment with due notice to the adverse party.
The amount of the cash deposit or counter-bond must be equal to that fixed by the court in the order of attachment, exclusive of costs. The cash deposit or counter-bond shall secure the payment of any judgment that the attaching party may recover in the action.
The filing of a counter-bond to discharge the attachment applies when there has already been a seizure of property by the sheriff and all that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis thereof. The counter-bond stands in place of the property so released.
To be clear, the discharge of the attachment by depositing cash or posting a counter-bond under Section 12 should not be confused with the discharge sanctioned under Section 13. Section 13 speaks of discharge on the ground that the writ was improperly or irregularly issued or enforced, or that the attachment bond is insufficient, or that the attachment is excessive.
To reiterate, the discharge under Section 12 takes effect upon posting of a counter-bond or depositing cash, and after hearing to determine the sufficiency of the cash deposit or counter-bond. On the other hand, the discharge under Section 13 takes effect only upon showing that the plaintiffs attachment bond was improperly or irregularly issued, or that the bond is insufficient. The discharge of the attachment under Section 13 must be made only after hearing.
These differences notwithstanding, the discharge of the preliminary attachment either through Section 12 or Section 13 has no effect on and does not discharge the attachment bond. The dissolution of the preliminary attachment does not result in the dissolution of the attachment bond.
The dissolution of the preliminary attachment upon security given [Section 12], or a showing of its irregular or improper issuance [Section 13], does not of course operate to discharge the sureties on plaintiffs own attachment bond. The reason is simple. That bond is executed to the adverse party,. . . conditioned that the … (applicant) will pay all the 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.” Hence, until that determination is made, as to the applicant’s entitlement to the attachment, his bond must stand and cannot be withdrawn. [emphasis and underscoring supplied, citations omitted]
Distinction:
Attachment Bond – That bond is executed to the adverse party conditioned that the applicant of the Writ of Attachment will pay all the 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.” Hence, until that determination is made, as to the applicant’s entitlement to the attachment, his bond must stand and cannot be withdrawn.
Counterbond – The filing of a counter-bond to discharge the attachment applies when there has already been a seizure of property by the sheriff and all that is entailed is the presentation of a motion to the proper court, seeking approval of a cash or surety bond in an amount equivalent to the value of the property seized and the lifting of the attachment on the basis thereof. The counter-bond stands in place of the property so released.
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