The Supreme Court clarified the process for claiming damages from wrongful attachments in the Philippines, emphasizing the need for a proper hearing and due process. Even if a party loses the main case, they can still recover damages if the attachment was improperly issued. This decision underscores the importance of protecting individuals from financial harm caused by wrongful legal actions.

When the Attachment is Unjust: Seeking Damages After a Preliminary Writ

This consolidated case arose from a dispute initiated by Juan de Dios Carlos against Felicidad Sandoval and Teofilo Carlos II, concerning properties inherited from Felix B. Carlos. Carlos claimed that Sandoval and Teofilo were not validly married and that Teofilo II was not Teofilo’s legitimate child, seeking to invalidate agreements and reclaim properties. As part of his complaint, Carlos successfully obtained a writ of preliminary attachment, which was later dissolved by the Court of Appeals (CA) due to insufficient cause of action. This dissolution was affirmed by the Supreme Court. Sandoval then filed a Motion for Judgment on the Attachment Bond, seeking damages for the wrongful attachment. The CA awarded damages, leading to multiple petitions to the Supreme Court questioning the CA’s procedures and the award itself.

At the heart of the Supreme Court’s analysis was Section 20, Rule 57 of the 1997 Rules of Civil Procedure, which governs claims for damages arising from improper attachment. This provision allows for an application for damages to be filed at any time before the judgment becomes executory, within the same case as the main action. The rule explicitly states:

SECTION 20. Claim for damages on account of improper, irregular or excessive attachment.—An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before appeal is perfected or before the judgment becomes executory, with due notice to the attaching obligee or his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Such damages may be awarded only after proper hearing and shall be included in the judgment on the main case.

If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim damages sustained during the pendency of the appeal by filing an application in the appellate court with notice to the party in whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory. The appellate court may allow the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from recovering in the same action the damages awarded to him from any property of the attaching obligee not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully satisfy the award.

The petitioners argued that the CA failed to conduct a proper hearing and prematurely resolved the motion before the main judgment. The Supreme Court addressed the requirement for a “proper hearing,” emphasizing that while a full-blown trial is not mandatory, due process necessitates that the attaching party and surety are notified and given an opportunity to present their case. This includes the right to present evidence and rebut opposing claims. In this case, the Court found that both Carlos and SIDDCOR were notified and filed comments, satisfying the minimum requirements of due process.

The Court acknowledged that the facts differed from previous cases where the trial on the merits included the claim for damages. However, it clarified that the prior judicial finding on the wrongfulness of the attachment, which had become conclusive, significantly shaped the scope of the hearing. Since the attachment’s validity was no longer in question, the hearing primarily concerned the amount of damages sustained, for which the court found sufficient evidence in the case record.

Building on this principle, the Supreme Court then turned to the requirement that the award of damages “shall be included in the judgment on the main case.” The petitioners argued that this provision meant the award should not be rendered before the main judgment. The Court agreed that ideally, the award should be incorporated into the main judgment. However, it recognized the unique circumstances of this case, where the right to damages had already been conclusively established by a final judgment affirming the wrongful attachment.

Moreover, the Court reasoned that remanding the case solely to adhere to the procedural rule would be unnecessarily redundant and would further delay the resolution of a long-pending case. The Court weighed the formal requirements of the rule against the interests of a just, speedy, and inexpensive disposition of the case. Emphasizing the principle of liberal construction of procedural rules, the Court validated the award of damages despite its apparent prematurity.

The Supreme Court also addressed the issue of whether the CA could decide the motion for judgment on the attachment bond before the case was re-raffled for study and report, as per the Revised Internal Rules of the Court of Appeals (RIRCA). The Court acknowledged that the CA had deviated from the RIRCA by acting on the application before the second raffle. However, it again emphasized that the parties had already presented their arguments and evidence, and the wrongful attachment had been conclusively determined. Thus, strict adherence to the procedural rule would only cause further delay without serving any substantive purpose.

Finally, the Court reviewed the scope of damages awarded, including the amount of P15,384,509.98 plus interest, and P1,000,000.00 in attorney’s fees. It affirmed that the amount drawn from Sandoval’s account due to the wrongful attachment was well-established. SIDDCOR’s argument that damages should only cover the period during the appeal was rejected, citing Section 4, Rule 57, which conditions the bond to cover “all damages which he may sustain by reason of the attachment, if the court shall finally adjudge that the applicant was not entitled thereto.” Thus, the bond encompasses all damages incurred at any stage due to the attachment.

The court also considered that a Notice of Garnishment was served upon the PNB over deposit accounts maintained by respondents. This action put all the accounts under the control of the RTC, and prevented the transfer or disposition of these accounts. Then the subsequent Writ of Execution dated 27 May 1996 ordered the delivery to Carlos of these accounts earlier subjected to garnishment. This made the burden of proof of damages sustained by the respondents considerably lessened.

Concerning the interest, the Court clarified that it should accrue from the date the CA’s decision in CA-G.R. SP No. 39267 became final, rather than from the date of the “unlawful garnishment.” The Court also deemed the attorney’s fees of P1,000,000.00 excessive and reduced it to P500,000.00, representing approximately three percent of the actual damages. The Court justified this award, even without moral or exemplary damages, by invoking Article 2208(11) of the Civil Code, which allows for attorney’s fees when deemed just and equitable, especially when a party incurs expenses to lift a wrongfully issued writ of attachment.

FAQs

What was the key issue in this case?	The central issue was whether the Court of Appeals correctly awarded damages on the attachment bond before the main case was adjudicated and whether the procedures followed adhered to due process requirements.
What does Section 20, Rule 57 of the Rules of Civil Procedure cover?	This rule governs claims for damages arising from improper, irregular, or excessive attachment, outlining the process for filing an application and the conditions under which damages can be awarded.
Can a party recover damages for wrongful attachment even if they lose the main case?	Yes, the Supreme Court clarified that even a party who loses the main action can recover damages if they establish a right to damages due to an improper, irregular, or excessive attachment.
What constitutes a “proper hearing” under Section 20, Rule 57?	A proper hearing requires that the attaching party and surety are notified and given an opportunity to present their case, including the right to present evidence and rebut opposing claims, though a full-blown trial is not mandatory.
When should the legal interest accrue on the awarded damages?	The legal interest should start accruing from the date the Court of Appeals decision declaring the attachment unlawful becomes final, marking the point when the right to damages comes into existence.
Why did the Supreme Court reduce the attorney’s fees awarded by the Court of Appeals?	The Supreme Court deemed the original amount of P1,000,000.00 as excessive, reducing it to P500,000.00, which was considered a more reasonable percentage of the actual damages suffered by the respondents.
What is the significance of the two-raffle system in the Court of Appeals?	The two-raffle system is designed to ensure impartiality in assigning cases to justices for study and report. The Supreme Court acknowledged that the Court of Appeals deviated from this system but found the deviation excusable under the circumstances.
Was a certification against forum shopping required for the Motion for Judgment on the Attachment Bond?	No, the Supreme Court ruled that a certification against forum shopping was not required because the motion could not be independently set up from the main action, making it an auxiliary proceeding.

In conclusion, the Supreme Court’s decision in this case offers valuable insights into the procedural aspects and substantive rights related to wrongful attachments. While affirming the importance of adhering to procedural rules, the Court demonstrated flexibility in exceptional circumstances to ensure a just and expeditious resolution. The decision balances the rights of parties seeking attachment with the protection of individuals from unwarranted financial harm, underscoring the importance of due process and fairness in legal proceedings.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Juan de Dios Carlos v. Felicidad Sandoval, G.R. Nos. 135830, 136035, 137743, September 30, 2005