Filinvest Credit Corp. v. Relova
REITERATIONFacts
The Antecedents: Filinvest Credit Corporation (FILINVEST) filed a complaint against Rallye Motor Co., Inc. (RALLYE) and Ernesto Salazar for collection of a sum of money with damages and preliminary writ of attachment. Salazar executed a promissory note and a chattel mortgage in favor of RALLYE for a motor vehicle. RALLYE assigned its rights to FILINVEST. FILINVEST alleged that RALLYE and Salazar concealed the fact that the vehicle was never delivered to Salazar, which would have prevented FILINVEST from accepting the assignment. Salazar defaulted on the note, and RALLYE, as assignor, also failed to pay FILINVEST. Procedural History: A writ of preliminary attachment was granted by the RTC. Subsequently, Salazar filed a motion to quash the writ, arguing he could not have committed fraud as FILINVEST was not yet his creditor when he contracted the obligation, and that his repudiation of the loan was justified by the non-delivery of the vehicle. The RTC, presided over by respondent Judge Relova, initially ordered the dissolution of the writ, stating that the plaintiff (FILINVEST) had the burden to prove fraud. After FILINVEST's motion for reconsideration, the court allowed it to adduce evidence but ultimately denied the motion, finding that Salazar was also a victim of fraud by RALLYE and that there was no evidence of Salazar's conspiracy with RALLYE. The Petition: FILINVEST filed a special civil action for certiorari, seeking to annul the orders of respondent Judge Relova dissolving the writ of preliminary attachment. FILINVEST argued that the writ could only be dissolved by posting a counter-replevin bond and that the respondent Judge erred in finding no fraud on Salazar's part.
Issue(s)
Whether the respondent Judge committed grave abuse of discretion in dissolving the writ of preliminary attachment. Whether the burden of proof to establish fraud lies with the plaintiff (attaching creditor) when a motion to quash a writ of attachment is filed on the ground of improper or irregular issuance. Whether Ernesto Salazar committed fraud in contracting the debt or incurring the obligation.
Ruling
The Supreme Court reversed and set aside the orders of the lower court dated February 2, 1979, and April 4, 1979, and made permanent the temporary restraining order previously issued. The Court held that the writ of preliminary attachment was improperly dissolved.
Ratio Decidendi
On the issue of grave abuse of discretion in dissolving the writ of preliminary attachment: The Court found that the respondent Judge committed grave abuse of discretion in dissolving the writ of preliminary attachment. The issuance of the writ was based on the allegation of fraud in contracting the debt, as provided under Section 1(d) of Rule 57. When Salazar filed a motion to quash on the ground that the attachment was improperly or irregularly issued, specifically alleging no fraud on his part, the court should have conducted a hearing to determine the truth of the allegations. The Court disagreed with the respondent Judge's initial stance that the defendant should prove his allegations, emphasizing that the plaintiff, as the attaching creditor, must prove its affirmative allegations of fraud. On the burden of proof to establish fraud: The Court sustained the ruling of the court a quo that it was incumbent upon the plaintiff (FILINVEST) to prove the truth of the allegations of fraud which formed the basis for the issuance of the writ of attachment. This is in accordance with Section 1, Rule 131 of the Rules of Court, which states that each party must prove his own affirmative allegations, and the burden of proof lies on the party who would be defeated if no evidence were given. The Court reiterated the principle that fraud is never presumed (fraus est odiosa et non praesumenda), and private transactions are presumed fair and regular. On whether Ernesto Salazar committed fraud: The Supreme Court disagreed with the lower court's finding that Salazar was merely a victim of fraud and had not conspired with RALLYE. The Court reasoned that if, as Salazar claimed, the motor vehicle was not delivered, then the invoice, receipt for delivery, promissory note, chattel mortgage over a non-existent vehicle, and the registration of the vehicle in Salazar's name were all fictitious, fraudulent, or falsified. By executing these documents and consenting to the assignment of the fictitious note and fraudulent mortgage to FILINVEST, knowing that no vehicle was delivered, Salazar committed fraud. His failure to disclose the material fact of non-delivery to FILINVEST, despite a duty to do so, constituted fraud under Article 1339 of the New Civil Code. FILINVEST, acting in the ordinary course of business and relying on the regularity of the transaction, was induced to accept the assignment.
Main Doctrine
The attaching creditor bears the burden of proving the allegations of fraud upon which a writ of preliminary attachment was issued, especially when the debtor files a motion to quash the writ on the ground that the attachment was improperly or irregularly issued.