Petitioner Watercraft Venture Corporation (Watercraft) is engaged in the business of building, repairing, storing and maintaining yachts, boats and other pleasure crafts at the Subic Bay Freeport Zone, Subic, Zambales. In connection with its operations and maintenance of boat storage facilities, it charges a boat storage fee of Two Hundred Seventy-Two US Dollars (US$272.00) per month with interest of 4% per month for unpaid charges. Sometime in June 1997, Watercraft hired respondent Alfred Raymond Wolfe (Wolfe), a British national and resident of Subic Bay Freeport Zone, Zambales, as its Shipyard Manager.
During his empolyment, Wolfe stored the sailboat, Knotty Gull, within Watercraft’s boat storage facilities, but never paid for the storage fees. On March 7, 2002, Watercraft terminated the employment of Wolfe.
Sometime in June 2002, Wolfe pulled out his sailboat from Watercraft’s storage facilities after signing a Boat Pull-Out Clearance dated June 29, 2002 where he allegedly acknowledged the outstanding obligation of Sixteen Thousand Three Hundred and Twenty-Four and 82/100 US Dollars (US$16,324.82) representing unpaid boat storage fees for the period of June 1997 to June 2002. Despite repeated demands, he failed to pay the said amount.
Thus, on July 7, 2005, Watercraft filed against Wolfe a Complaint for Collection of Sum of Money with Damages with an Application for the Issuance of a Writ of Preliminary Attachment.
In his Answer, Wolfe claimed he was hired as Service and Repair Manager, instead of Shipyard Manager. He denied owing Watercraft the amount of US$16,324.82 representing storage fees for the sailboat. He explained that the sailboat was purchased in February 1998 as part of an agreement between him and Watercraft’s then General Manager, Barry Bailey, and its President, Ricky Sandoval, for it to be repaired and used as training or fill-in project for the staff, and to be sold later on. He added that pursuant to a central Listing Agreement for the sale of the sailboat, he was appointed as agent, placed in possession thereof and entitled to a ten percent (10%) sales commission. He insisted that nowhere in the agreement was there a stipulation that berthing and storage fees will be charged during the entire time that the sailboat was in Watercraft’s dockyard. Thus, he claimed to have been surprised when he received five (5) invoices billing him for the said fees two (2) months after his services were terminated. He pointed out that the complaint was an offshoot of an illegal dismissal case he filed against Watercraft which had been decided in his favor by the Labor Arbiter.
Meanwhile, finding Watercraft’s ex-parte application for writ of preliminary attachment sufficient in form and in substance pursuant to Section 1 of Rule 57 of the Rules of Court, the RTC granted the same.
On November 8, 2005, Wolfe filed a Motion to Discharge the Writ of Attachment, arguing that Watercraft failed to show the existence of fraud and that the mere failure to pay or perform an obligation does not amount to fraud. RTC denied Wolfe’s Motion to Discharge Writ of Attachment and Motion for Preliminary Hearing for lack of merit. Wolfe filed a motion for reconsideration, but the RTC also denied it for lack of merit. Wolfe filed a petition for certiorari before the CA. The CA granted Wolfe’s petition annulling and setting aside the order of the RTC. The CA denied Watercraft’s motion for reconsideration of its Decision. Hence, this case.
Whether the allegations in the affidavit of merit concerning fraud are sufficient to warrant the issuance of a preliminary writ of attachment by the trial court in favor of the petitioner.
No, Fraudulent intent is not a physical entity, but a condition of the mind beyond the reach of the senses, usually kept secret, very unlikely to be confessed, and therefore, can only be proved by unguarded expressions, conduct and circumstances. Thus, the applicant for a writ of preliminary attachment must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the debtor’s mere non-payment of the debt or failure to comply with his obligation. The particulars of such circumstances necessarily include the time, persons, places and specific acts of fraud committed. An affidavit which does not contain concrete and specific grounds is inadequate to sustain the issuance of such writ. In fact, mere general averments render the writ defective and the court that ordered its issuance acted with grave abuse of discretion amounting to excess of jurisdiction.
A writ of preliminary attachment is defined as 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 that might be secured in the said action by the attaching creditor against the defendant. However, it should be resorted to only when necessary and as a last remedy because it exposes the debtor to humiliation and annoyance. It must be granted only on concrete and specific grounds and not merely on general averments quoting the words of the rules. Since attachment is harsh, extraordinary, and summary in nature, the rules on the application of a writ of attachment must be strictly construed in favor of the defendant. the court in which the action is pending. Such bond executed to the adverse party in the amount fixed by the court is subject to the conditions that the applicant will pay: (1) all costs which may be adjudged to the adverse party; and (2) all damages which such party may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto.15 As to the requisite affidavit of merit, Section 3, Rule 57 of the Rules of Court states that an order of attachment shall be granted only when it appears in the affidavit of the applicant, or of some other person who personally knows the facts:
1. that a sufficient cause of action exists;
2. that the case is one of those mentioned in Section 117 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 is entitled to recover, is as much as the sum for which the order is granted above all legal counterclaims.