Liberty Insurance Corporation v. The Honorable Court of Appeals
REITERATIONFacts
1. The Antecedents: Liberty Insurance Corporation (Liberty) issued a performance bond for P3,000,000.00 to guarantee the obligations of Jose H. Imperial Organizations, Pty. (Imperial) to Coca-Cola Bottlers Philippines for two concerts. As a condition for the bond, Imperial, along with Atilla Arkin and others, executed an indemnity agreement in favor of Liberty. Imperial and the private respondents failed to fulfill their obligations to Coca-Cola, leading Liberty to pay the P3,000,000.00 on the bond. Liberty's subsequent demand for reimbursement from Imperial, Arkin, and others was unsuccessful. 2. Procedural History: Liberty filed a complaint for damages with an application for a writ of preliminary attachment against Arkin and others. The Regional Trial Court (RTC) initially granted the writ, finding probable fraud based on Arkin's alleged submission of fake collaterals and disposition of properties. Arkin moved to quash the writ, which the RTC denied. However, Arkin later filed a motion for reconsideration, and the RTC, this time presided over by Judge Napoleon K. Flojo, reversed its earlier ruling, granting the motion and ordering the lifting of the writ. Liberty then filed a special civil action for certiorari with the Court of Appeals (CA), which dismissed the petition as premature. Liberty now seeks review of the CA's decision. 3. The Petition: This petition for review on certiorari seeks to set aside the CA's decision dismissing Liberty's petition for certiorari. Liberty argues that the CA erred in holding that a motion for reconsideration was a mandatory prerequisite to filing a certiorari action, asserting that special circumstances warranted immediate action. Liberty also contends that the CA erred in upholding the dissolution of the writ of preliminary attachment, arguing that the RTC's reversal was based on grounds contradicted by the evidence and that Arkin's actions demonstrated a fraudulent intent to dispose of assets. The core issues are whether the writ of preliminary attachment was properly issued and whether Liberty's failure to file a motion for reconsideration barred its certiorari action.
Issue(s)
Whether the Court of Appeals erred in dismissing the petition for certiorari on the ground that a motion for reconsideration was not filed. Whether the writ of preliminary attachment was properly issued and subsequently improperly dissolved based on the presence of fraud in contracting the obligation. Whether the respondent judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in lifting the writ of preliminary attachment, particularly in light of the established facts and the nature of the attachment.
Ruling
The petition is GRANTED. The assailed order of respondent judge dated March 6, 1991, lifting the writ of preliminary attachment, is SET ASIDE, and the order dated October 19, 1989, reinstating the writ, is REINSTATED. Costs against private respondent.
Ratio Decidendi
On the propriety of filing a special civil action for certiorari without a prior motion for reconsideration: The Court held that while ordinarily a motion for reconsideration is a prerequisite, exceptions exist. These include situations where the issue is purely of law, public interest is involved, there is urgency, or special circumstances warrant immediate action. In this case, the "indecent haste" with which respondent Arkin disposed of his properties demonstrated the imperative need for immediate and direct action, thus falling under the exceptions. Filing a motion for reconsideration would have been futile and not a plain, speedy, and adequate remedy, especially since the order to lift the writ was issued on the same day as the order granting the quashal, and it would not have automatically forestalled further disposition of properties. On the propriety of the writ of preliminary attachment and its dissolution: The Court found that fraud was present when private respondent Arkin entered into the indemnity agreement. The offering of fake collaterals, specifically a spurious land title and a heavily mortgaged vehicle, constituted fraud in contracting the obligation. The Court noted that the RTC, in its initial order, correctly found fraud supported by substantial evidence. The subsequent reversal by the RTC was deemed an irregularity, as the evidence on record contradicted the conclusion that the petitioner failed to prove Arkin's intent to defraud. The Court emphasized that the disposition of properties, even if made before the filing of the action, could be a circumstance tending to show fraudulent conveyance with intent to defraud creditors, especially when the claim was not secured. On the respondent judge's grave abuse of discretion: The Court concluded that the respondent judge acted capriciously, whimsically, and arbitrarily with grave abuse of discretion amounting to lack or excess of jurisdiction. This was evident in his reversal of his earlier finding, which was supported by substantial evidence, that fraud was committed. The judge's order to lift the writ of attachment, despite the established facts of fake collaterals and disposition of properties to defraud creditors, subverted the valid order of attachment. The Court reiterated that in cases where the attachment is issued on the ground that is the cause of action itself (like fraud in contracting the debt), the defendant is not allowed to file a motion to dissolve the attachment by offering to show the falsity of the factual averments, as this would be tantamount to a trial on the merits.
Main Doctrine
A writ of preliminary attachment may be issued when fraud is committed in contracting the obligation, which includes the intent not to pay or not to keep a collateral agreement. The offering of fake collaterals or heavily encumbered properties as security for a bond constitutes fraud in incurring the obligation. Furthermore, a motion for reconsideration is not always a prerequisite for filing a special civil action for certiorari when special circumstances warrant immediate action, such as the debtor's disposition of properties to defraud creditors.