Spouses Cosiquien v. Court of Appeals
REITERATIONFacts
The Antecedents: This case originated from a civil complaint filed by Spouses Roberto Cosiquien and Olivia Sy (petitioners) against Phil-Car Sales Corporation and its directors (private respondents) for the collection of P400,000.00, representing a debt incurred by Jose T. Santos, husband of respondent Lota Santos, during his lifetime. The petitioners alleged that the defendants were attempting to defraud creditors by transferring corporate assets. Procedural History: The trial court, presided by Judge Marcelino N. Sayo, issued an ex-parte Writ of Preliminary Attachment on October 31, 1979, and subsequently an alias writ on August 22, 1980, leading to the seizure of various properties belonging to the defendants. The trial court also issued an Order of Default against the defendants on June 24, 1980, after they failed to appear for a hearing on the merits, despite having filed an answer. The Court of Appeals, however, reversed both the orders concerning the attachment and the order of default, deeming them null and void. The Court of Appeals ordered the return of all attached properties and set aside the default judgment, remanding the case for re-trial. The Petition: These consolidated petitions (G.R. Nos. L-56073 & L-58819) seek to annul the decisions and resolutions of the Court of Appeals. In G.R. No. 56073, the petitioners argue that the Court of Appeals gravely abused its discretion in annulling the Writ of Preliminary Attachment, contending that the trial court acted within its jurisdiction. In G.R. No. 58819, the petitioners question the propriety of declaring the respondents in default after they had already filed an answer and pre-trial had been terminated. The Supreme Court is asked to determine whether the Court of Appeals erred in setting aside the trial court's orders.
Issue(s)
Whether the Court of Appeals acted with grave abuse of discretion in annulling the Writ of Preliminary Attachment issued ex parte by the trial court. Whether the trial court erred in declaring private respondents in default for failing to appear at a hearing for trial on the merits after having filed an answer.
Ruling
The petitions are dismissed for lack of merit. The assailed decisions and resolutions of the Court of Appeals are affirmed. The temporary restraining order issued by this Court in G.R. No. 56073 is lifted.
Ratio Decidendi
On the issue of the Writ of Preliminary Attachment: The Supreme Court affirmed the Court of Appeals' ruling that the trial court committed grave abuse of discretion in issuing the writ of preliminary attachment ex parte. The Court reiterated that a writ of attachment can be issued ex parte only if a sufficient cause of action is shown by specific allegations in the supporting affidavit. General allegations, particularly concerning fraud, are insufficient. The complaint's allegation of fraudulent transfer was couched in generalities, failing to meet the requirements of Section 3, Rule 57 of the Rules of Court. The Court emphasized that attachment is a harsh remedy and must be strictly construed in favor of the defendant. When a party challenges the issuance of the writ, the burden is on the applicant to prove the allegations of fraud, which is never presumed. Failure to comply with the requisites renders the writ fatally defective and issued in excess of jurisdiction, a defect that cannot be cured by amendment. Therefore, the appellate court correctly annulled the writ and ordered the return of the attached properties. On the issue of declaring defendants in default: The Supreme Court upheld the Court of Appeals' finding that the trial court erred in declaring the private respondents in default. The Court clarified that a defendant can only be declared in default under Section 1, Rule 18 of the Revised Rules of Court for failure to file an answer within the reglementary period. A party can be declared "as in default" under Section 2, Rule 20 for failure to appear at a pre-trial conference despite notice. However, mere non-appearance at an ordinary hearing or trial on the merits, after an answer has been filed and pre-trial terminated, does not constitute default. The policy of the law is to have litigated cases tried on the merits, and judgments by default are frowned upon. Since the private respondents had already filed their answer, it was improper and illogical for the lower court to declare them in default and proceed ex parte, thereby depriving them of their right to due process and to present their evidence.
Main Doctrine
A writ of preliminary attachment issued ex parte without sufficient basis in the affidavit supporting its issuance, particularly when fraud is alleged but not substantiated with specific facts, is fatally defective and issued in excess of jurisdiction. Furthermore, a defendant who has filed an answer cannot be declared in default for failure to appear at a hearing on the merits; such a declaration is improper and deprives the defendant of due process.