Insular Savings Bank v. Far East Bank
REITERATIONFacts
The Antecedents: Respondent Far East Bank and Trust Company (FEBTC) instituted an arbitration case against petitioner Insular Savings Bank (ISB) concerning three unfunded checks totaling P25,200,000.00. ISB had received the funds from FEBTC for these checks but refused to refund the amount when the checks were dishonored. Subsequently, FEBTC filed a civil case against ISB, seeking a writ of preliminary attachment for the disputed amount. During the arbitration proceedings, ISB and FEBTC agreed to temporarily divide the P25,200,000.00, with P12,600,000.00 being held by FEBTC. Procedural History: FEBTC obtained a writ of preliminary attachment from the Regional Trial Court (RTC) of Makati, Branch 133, for P25,200,000.00. ISB later filed a motion to discharge this attachment by posting a counter-bond of P12,600,000.00. The RTC, through respondent Judge Omar U. Amin of Branch 135, denied this motion, first on June 13, 1994, and again on July 20, 1994, after a motion for reconsideration. ISB then filed a petition for certiorari with the Court of Appeals (CA), alleging grave abuse of discretion by the RTC. The CA, in its decision dated October 9, 1995, and resolution dated January 24, 1996, denied ISB's petition, finding that while the RTC may have erred in calculating the counter-bond amount, such error did not constitute grave abuse of discretion. The Petition: ISB, through a petition for review on certiorari under Rule 45 of the Rules of Court, seeks to set aside the CA's decision and resolution. ISB argues that the CA erred in not ruling that the counter-bond should be based solely on the principal amount claimed (P25,200,000.00, later reduced to P12,600,000.00 due to the parties' agreement) and not on unliquidated damages. ISB also contends that the CA erred in considering arguments regarding the value of attached property for the counter-bond amount, which were allegedly raised for the first time on appeal, and in allowing the counter-bond to exceed the principal claim. The core issue presented to the Supreme Court is whether the CA erred in upholding the RTC's denial of ISB's motion to discharge the attachment by counter-bond.
Issue(s)
Whether the Court of Appeals erred in not ruling that the trial court committed grave abuse of discretion in denying petitioner’s motion to discharge attachment by counter-bond. Whether the principal amount claimed should be the sole basis for computing the counter-bond, excluding contingent expenses and unliquidated damages. Whether the amount of the counter-bond should be based on the reduced principal claim of ₱12,600,000.00, given the parties' agreement to divide the disputed amount.
Ruling
The petition is GRANTED. The assailed decision and resolution of the Court of Appeals are REVERSED and SET ASIDE, along with the orders of the Regional Trial Court, insofar as they denied petitioner’s motion to discharge attachment by counter-bond in the amount of ₱12,600,000.00. A new order is entered GRANTING the motion upon the reposting of the same counter-bond.
Ratio Decidendi
On the Court of Appeals' affirmation of the RTC's order: The Court held that the CA erred in dismissing ISB's petition for certiorari. While the CA acknowledged a potential error in the RTC's computation, it incorrectly concluded that this error did not amount to grave abuse of discretion. The Supreme Court found that the RTC's order was indeed a clear case of grave abuse of discretion, as it disregarded the reduced principal claim and improperly included unliquidated damages in the counter-bond calculation. The CA's failure to correct this palpable error constituted reversible error. On the computation of the counter-bond: The Court ruled that the amount of a counter-bond to discharge a preliminary attachment must be based on the value of the attached property, which should correspond to, or approximate, the attaching creditor's principal claim. This is to prevent excessive attachment. The Court reiterated the principle that a writ of attachment cannot be issued for moral and exemplary damages, and other unliquidated or contingent claims. In this case, the principal claim was ₱25,200,000.00, but the parties later agreed to temporarily divide this amount, effectively reducing the principal claim to ₱12,600,000.00. Therefore, the counter-bond should have been based on this reduced amount, as a portion of the claim was already secured or satisfied. On the trial court's denial of the motion to discharge & application of Rules of Court: The Court found that the trial court committed grave abuse of discretion in requiring a counter-bond of ₱27,237,700.00. This amount was significantly higher than the original attachment amount of ₱25,200,000.00 and did not account for the subsequent agreement between the parties that reduced the disputed amount to ₱12,600,000.00. The trial court erroneously included unliquidated claims such as actual and exemplary damages, legal interest, and attorney's fees in its computation. The Court emphasized that if a portion of a claim is already secured, it should not be included in the counter-bond. The Court noted that the proceedings occurred under the old rules on preliminary attachment. It clarified that under the former Section 12 of Rule 57, the value of the attached property was the defining measure for the counter-bond. The current, less stringent rule allows for discharge based on an amount fixed by the court. However, the Court stressed that the Rules of Court cannot be given retroactive effect, and the disposition of the case was based on the rules in effect at the time.
Main Doctrine
The amount of a counter-bond to discharge a preliminary attachment should be based on the principal claim, excluding unliquidated damages and contingent claims, and should be adjusted to reflect any reduction in the principal claim due to subsequent agreements or partial satisfaction.