SECOND DIVISION

[G.R. No. 74696. November 11, 1987.]

JOSE D. CALDERON , petitioner, vs. THE INTERMEDIATE APPELLATE

COURT, GEORGE SCHULZE, GEORGE SCHULZE, JR., ANTONIO C. AMOR,
MANUEL A. MOZO, and VICTOR M. NALUZ , respondents.

[G.R. No. 73916. November 11, 1987.]

FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC. ,

petitioner, vs. THE INTERMEDIATE APPELLATE COURT, GEORGE
SCHULZE, ANTONIO C. AMOR, MANUEL A. MOZO and VICTOR M. NALUZ ,
respondents.

SYLLABUS

1. REMEDIAL LAW; ATTACHMENT BOND: LIABILITY EXTENDS TO MORAL

AND EXEMPLARY DAMAGES IN CASE ATTACHMENT WAS MALICIOUSLY SUED OUT
AND ESTABLISHED TO BE SO. — While as a general rule, the liability on the attachment
bond is limited to actual damages, moral and exemplary damages may be recovered
where the attachment was alleged to be maliciously sued out and established to be so.
(Lazatin vs. Twano et al, L-12736, July 31, 1961). Well settled is the rule that the factual
ndings of the trial court are entitled to great weight and respect on appeal, especially
when established by unrebutted testimonial and documentary evidence, as in this case.
2. ID.; ID.; NOT RENDERED VOID UPON FILING OF THE COUNTERBOUND;
DISABILITY OF ATTACHMENT, DEFINED. — While Section 12, Rule 57 of the Rules of
Court provides that upon the ling of a counterbond, the attachment is discharged or
dissolved, nowhere is it provided that the attachment bond is rendered void and
ineffective upon the ling of counterbond. The liability of the attachment bond is
de ned in Section 4, Rule 57 of the Rules of Court. It is clear from the above provision
that the responsibility of the surety arises "if the court shall nally adjudge that the
plaintiff was not entitled thereto." In Rocco vs. Meads, 96 Phil. Reports 884, we held
that the liability attaches if the plaintiff is not entitled to the attachment because the
requirements entitling him to the writ are wanting, or if the plaintiff has no right to the
attachment because the facts stated in his a davit, or some of them, are untrue. It is,
therefore, evident that upon the dismissal of an attachment wrongfully issued, the
surety is liable for damages as a direct result of said attachment.
3. ID.; ID.; LIABILITY OF SURETY SUBSISTS UNTIL FINALLY RECKONED BY
THE COURT THAT THE CREDITOR WAS NOT ENTITLED TO ISSUANCE OF THE
ATTACHMENT WRIT. — Whether the attachment was discharged by either of the two
(2) ways indicated in the law, i.e., by ling a counterbond or by showing that the order of
attachment was improperly or irregularly issued, the liability of the surety on the
attachment bond subsists because the nal reckoning is when "the Court shall nally
adjudge that the attaching creditor was not entitled" to the issuance of the attachment
writ in the rst place. The attachment debtor cannot be deemed to have waived any
defect in the issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. Moreover, the ling of a
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 counterbond is a speedier way of discharging the attachment writ maliciously sought
out by the attaching creditor instead of the other way, which, in most instances like in
the present case, would require presentation of evidence in a fullblown trial on the
merits and cannot easily be settled in a pending incident of the case.
4. CIVIL LAW; DAMAGES; AWARD BEING EXCESSIVE ORDERED REDUCED. —
We believe, however, that in the light of the factual situation in this case, the damages
awarded by the Intermediate Appellate Court are rather excessive. They must be
reduced.

DECISION

PARAS , J : p

For review on certiorari is respondent appellate Court's decision 1 in AC-G.R. No.

01420, which a rmed the Regional Trial Court's decision 2 appealed from holding the
plaintiff Jose D. Calderon (petitioner herein) and his bondsman the Integrated Bonding
and Insurance Company, Inc., jointly and severally liable to pay defendants (private
respondents herein), damages caused by the ling by Calderon of the allegedly
unwarranted suit and the wrongful and malicious attachment of private respondents
properties.
The facts of the case are briefly as follows:
On November 2, 1976, petitioner Calderon purchased from the private
respondents the following: the Luzon Brokerage Corporation (LBC, for brevity) and its
ve (5) a liate companies, namely — Luzon Air Freight, Inc., Luzon Port Terminals
Services, Inc., Luzon (GS) Warehousing Corporation, GS Industrial Management
Corporation, and GS Luzon Trucking Corporation. Twenty one (21) days thereafter or on
November 23, 1976, the Bureau of Customs suspended the operations of LBC for
failure to pay the amount of P1,475,840.00 representing customs taxes and duties
incurred prior to the execution of the sale. In order to lift the suspension, Calderon paid
the sum of P606,430.00 to the Bureau of Customs.
On October 27, 1977, Calderon led a complaint against private respondents to
recover said amount of P1,475,840.00, with damages by reason of breach of warranty.
In the same complaint, the petitioner prayed for a preliminary attachment, alleging: that
private respondents had deliberately and willfully concealed from his knowledge such
staggering liability of the LBC for the purpose of misleading him into buying the six
aforesaid companies; and that private respondent Schulze is about to depart from the
Philippines in order to defraud his creditors.
To support the petition for preliminary attachment, the petitioner posted a surety
bond of P1,475,840.00. on October 28, 1977, the trial court issued a writ of preliminary
attachment, whereupon properties of the private respondents were attached and their
bank deposits were garnished.
On November 10, 1977, petitioner Calderon led an amended complaint, alleging
that while the liabilities of LBC are re ected in its books, the aforesaid amount was
fraudulently withdrawn and misappropriated by private respondent Schulze. (pp. 7-18,
Rollo).
On the other hand, private respondents claimed: that the amount of
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 P1,475,840.00 due to the Bureau of Customs represents the duties and taxes payable
out of the advanced payments made by LBC's client, Philippine Re ning Company (PRC,
for brevity) in August, September and October, 1976, and in the rst and second weeks
of November 1976, after Calderon himself had taken control of the management of
LBC (Exhibit A); that these deposit payments were properly recorded in the books of
the corporation and existing as part of the corporate funds; that from the rst week of
June, 1976 up to October 30, 1976, private respondent Schulze fully disclosed and
explained to Calderon that these customer's advanced deposit payments (including
those of the PRC) are to be paid to the Bureau of Customs when their corresponding
customs taxes and duties become due; that during this phase of the negotiation,
Calderon and his representatives inspected and studied the corporate books and
records at will and learned the daily operations and management of LBC; that the
petitioner did not pay out of his own pocket but out of the LBC funds the said amount
of P606,430.30 demanded by the Bureau of Customs, as evidenced by a manager's
check No. FEBTC 25092 (Exhibits 9, 10, 11 & 38) and another facility negotiated with
the Insular Bank of Asia and America (Exhibit K-2); and that private respondents are
setting up a counterclaim for actual, moral and exemplary damages as well as
attorney's fees, as a consequence of the ling of the baseless suit and the wrongful and
malicious attachment of their properties. (pp. 217-221, Rollo)
On November 17, 1977, private respondents led a counter-bond, whereupon the
trial court issued an order directing the sheriff to return all real and personal properties
already levied upon and to lift the notices of garnishment issued in connection with the
said attachment (Annex B, p. 42, Rollo).
After trial, the trial court dismissed the complaint, holding Calderon and his
surety First Integrated Bonding and Insurance Co., Inc., jointly and severally liable to pay
the damages prayed for by the private respondents.
Said decision was a rmed on appeal, although slightly modi ed in the sense
that the award of moral and exemplary damages in favor of private respondents
Schulze and Amor was reduced. The dispositive portion of the judgment of a rmance
and modification reads:
"WHEREFORE, the judgment of the lower court is modified as follows:
To defendant-appellee George Schulze:
P650,000.00 as moral damages and
P200,000.00 as exemplary damages.
To defendant-appellee Antonio C. Amor:
P150,000.00 as moral damages and
P30,000.00 as exemplary damages.
"All other dispositions in the judgment appealed from, including the
dismissal of the amended complaint, are hereby affirmed in toto.
"SO ORDERED."

In his petition, petitioner Calderon asserts, among other things, that the court
below erred:
I

IN HOLDING THAT THE PETITIONER FAILED TO ESTABLISH HIS CLAIMS.

II
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 IN HOLDING THAT THE PRELIMINARY ATTACHMENT HAD BEEN
WRONGFULLY AND MALICIOUSLY SUED OUT.

III
IN HOLDING THAT THE PETITIONER IS LIABLE NOT ONLY FOR ACTUAL
DAMAGES BUT MORAL AND EXEMPLARY DAMAGES AS WELL.

On the other hand, petitioner Insurance Company raises the following issues:
I

WHETHER OR NOT THE PETITIONER SURETY IS LIABLE FOR DAMAGES

ON ITS CONTRACTED SURETYSHIP NOTWITHSTANDING THE DISSOLUTION OF
THE WRIT OF PRELIMINARY ATTACHMENT, AS A CONSEQUENCE OF THE FILING
OF THE DEFENDANT'S COUNTER-BOND, WHEREBY LEVIED PROPERTIES WERE
ORDERED BY THE COURT RETURNED TO PRIVATE RESPONDENTS AND THE
NOTICES OF GARNISHMENT ISSUED IN CONNECTION THEREWITH ORDERED
LIFTED.

II
WHETHER OR NOT THE SUBSEQUENT FILING BY PRIVATE
RESPONDENTS OF A COUNTER-BOND TO DISCHARGE THE WRIT OF
PRELIMINARY ATTACHMENT CONSTITUTE A WAIVER ON ANY DEFECT IN THE
ISSUANCE OF THE ATTACHMENT WRIT.
III
WHETHER OR NOT A SURETY IS A GUARANTOR OF THE EXISTENCE OF A
GOOD CAUSE OF ACTION IN THE COMPLAINT.

The petition is devoid of merit.

Whether or not the amount of P1,475,840.00 was duly disclosed as an
outstanding liability of LBC or was misappropriated by private respondent Schulze is
purely a factual issue. That Calderon was clearly in bad faith when he asked for the
attachment is indicated by the fact that he failed to appear in court to support his
charge of misappropriation by Schulze, and in effect, preventing his being cross-
examined, no document on the charges was presented by him.

What the Appellate Court found in this regard need not be further elaborated
upon. The Appellate Court ruled: llcd

". . . The record shows that appellant Calderon failed to produce any
evidence in support of his sworn charge that appellee Schulze had deliberately
and willfully concealed the liabilities of Luzon Brokerage Corporation. Neither did
appellant Calderon prove his sworn charges that appellee Schulze had
maliciously and fraudulently withdrawn and misappropriated the amount of
P1,475,840.00 and that all the defendants had maliciously and fraudulently
concealed and withheld from him this alleged liability of Luzon Brokerage
Corporation in breach of the contract-warranty that said corporation had no
obligations or liabilities except those appearing in the books and records of the
said corporation. Indeed, appellant Calderon never appeared in the trial court to
substantiate the charges in his veri ed complaints and in his a davit to support
his petition for the issuance of a writ of attachment. He distanced himself from
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 the appellees and avoided cross-examination regarding his sworn allegations. . . .
" . . . But even though appellant Calderon failed to prove his serious
charges of fraud, malice and bad faith, the appellees took it upon themselves to
show that they did not conceal or withhold from appellant's knowledge the
deposits made by Philippine Re ning Co., Inc. with Luzon Brokerage Corporation
and that they did not withdraw and misappropriate the deposits made by
Philippine Refining Co., Inc. with Luzon Brokerage Corporation.

"The books and records of Luzon Brokerage Corporation on which the

Financial Statement of Luzon Brokerage Corporation, as of October 31, 1976 was
prepared by the auditing rm retained by appellant Calderon himself (Exhibit 1),
disclose that the liabilities of Luzon Brokerage Corporation in the total amount of
P4,574,498.32 appear under the heading 'Customers Deposit' (Exhibit 1-A) this
amount includes the deposit of Philippine Re ning Co., Inc. in the sum of
P1,475,840.00.

"But appellant Calderon contends that this nancial statement was dated
February 4, 1977 (see Exhibit 1-C). There is nothing commendable in this
argument because the bases of the nancial statement were the books, records
and documents of Luzon Brokerage Corporation for the period ending October 31,
1976, which were all turned over to and examined by appellant Calderon and his
executive, legal and nancial staffs. There is also no merit in the contention of
appellant Calderon that the appellees have tampered the books of Luzon
Brokerage Corporation because there is no proof to back this charge, let alone the
fact that appellant Calderon did not even present the said books to support his
charge.
"As stated above, the amount of customers' deposits in the sum of
P4,574,498.32 includes the deposits of Philippine Re ning Co., Inc. (Exhibits 46-A,
46-B, 46-C, 46-D, 46-E:, 46-F, 46-G, 46-H, 46-I, 46-J, t.s.n. July 23, 1980, pp. 12-13,
14-15). The amounts deposited by Philippine Re ning Co., Inc. on various dates
with Luzon Brokerage Corporation made before the execution of the sale were all
entered in three other corporate books of Luzon Brokerage Corporation namely,
the Cash Receipts Register (Exhibits 39-A-1 to 39-K-1 and 39-A-1-B to 39-K-1-B),
the Journal Vouchers (Exhibits 42 to 46 and 42-A to 45-A), and the Customer's
Deposit Ledger (Exhibit 46-A to 46-J) . . .
Thus, the claim of appellant Calderon that the deposits made by Philippine
Re ning Co., Inc. with Luzon Brokerage Corporation of P406,430.00 on August 24,
1976 (Exhibit N), P53,640.00 on October 13, 1976 (Exhibit O), P406,430.00 on
September 8, 1976 (Exhibit P), P199,508.00 on September 24, 1976 (Exhibit Q),
P52,738.00 on October 22, 1976 (Exhibit R), and P264,436.00 on October 7, 1976
(Exhibit S) were not entered in the books of Luzon Brokerage Corporation, is
completely without merit. . . . (pp. 85-87, Rollo)

It is evident from the foregoing that the attachment was maliciously sued out
and that as already pointed out Schulze was not in bad faith.
While as a general rule, the liability on the attachment bond is limited to actual
damages, moral and exemplary damages may be recovered where the attachment was
alleged to be maliciously sued out and established to be so. (Lazatin vs. Twano et al, L-
12736, July 31, 1961).
In the instant case, the issues of wrongful and malicious suing out of the writ of
preliminary attachment were joined not only in private respondents motion to discharge
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 the attachment but also in their answer to the amended complaint (p. 38, Rollo). The
trial court observed that the books and records of Luzon Brokerage Corporation
disclose that the liabilities of the said corporation in the total amount of P4,574,498.32
appear under the heading "Customs Deposit" (Exhibit 1-A) and this amount includes the
deposit of Philippine Re ning Co., Inc. in the sum of P1,475,840.00 (p. 26, Rollo). On the
other hand, plaintiff never appeared in court, and failed to produce any evidence to
substantiate his charges (p. 26, Rollo). LLjur

Well settled is the rule that the factual ndings of the trial court are entitled to
great weight and respect on appeal, especially when established by unrebutted
testimonial and documentary evidence, as in this case.
Anent the petition of the surety, We say the following:
Speci cally, petitioner surety contends that the dissolution of the attachment
extinguishes its obligation under the bond, for the basis of its liability, which is wrongful
attachment, no longer exists, the attachment bond having been rendered void and
ineffective, by virtue of Section 12, Rule 57 of the Rules of Court. (p. 5, Petition).
While Section 12, Rule 57 of the Rules of Court provides that upon the ling of a
counterbond, the attachment is discharged or dissolved, nowhere is it provided that the
attachment bond is rendered void and ineffective upon the filing of counterbond.
The liability of the attachment bond is de ned in Section 4, Rule 57 of the Rules
of Court, as follows:
"Sec. 4. Condition of applicant's bond. The party applying for the order
must give a bond executed to the adverse party in an amount to be xed by the
judge, not exceeding the applicant s claim, conditioned that the latter will pay all
the costs which may be adjudged to the adverse party and all damages which he
may sustain by reason of the attachment, if the court shall nally adjudge that
the applicant was not entitled thereto."

It is clear from the above provision that the responsibility of the surety arises "if
the court shall nally adjudge that the plaintiff was not entitled thereto." In Rocco vs.
Meads, 96 Phil. Reports 884, we held that the liability attaches if the plaintiff is not
entitled to the attachment because the requirements entitling him to the writ are
wanting, or if the plaintiff has no right to the attachment because the facts stated in his
a davit, or some of them, are untrue. It is, therefore, evident that upon the dismissal of
an attachment wrongfully issued, the surety is liable for damages as a direct result of
said attachment.
Equally untenable is the Surety's contention that by ling a counterbond, private
respondents waived any defect or aw in the issuance of the attachment writ, for they
could have sought, without need of ling any counterbond, the discharge of the
attachment if the same was improperly or irregularly issued, as provided in Section 13,
Rule 57 of the Rules of Court.
Whether the attachment was discharged by either of the two (2) ways indicated
in the law, i.e., by ling a counterbond or by showing that the order of attachment was
improperly or irregularly issued, the liability of the surety on the attachment bond
subsists because the nal reckoning is when "the Court shall nally adjudge that the
attaching creditor was not entitled" to the issuance of the attachment writ in the rst
place. The attachment debtor cannot be deemed to have waived any defect in the
issuance of the attachment writ by simply availing himself of one way of discharging
the attachment writ, instead of the other. Moreover, the ling of a counterbond is a
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 speedier way of discharging the attachment writ maliciously sought out by the
attaching creditor instead of the other way, which, in most instances like in the present
case, would require presentation of evidence in a fullblown trial on the merits and
cannot easily be settled in a pending incident of the case.
We believe, however, that in the light of the factual situation in this case, the
damages awarded by the Intermediate Appellate Court are rather excessive. They must
be reduced. LLpr

WHEREFORE, the judgment of said Appellate Court is hereby modified as

follows: Both petitioner Calderon and petitioner First Integrated Bonding and Insurance
Company, Inc. are hereby ordered to give jointly and severally:
1. Respondent George Schulze, P250,000.00 as moral damages and
P50,000.00 as exemplary damages; and
2. Respondent Antonio C. Amor, P50,000.00 as moral damages and
P10,000.00 as exemplary damages.

The rest of the judgment of the Intermediate Appellate Court is hereby

AFFIRMED.
SO ORDERED.
Yap (Chairman), Melencio-Herrera and Padilla, JJ., concur.
Sarmiento, J., took no part.

Footnotes
1. Penned by Justice Crisolito Pascual and concurred in by Justices Jose C. Campos, Jr.,
Serafin E. Camilon and Desiderio P. Jurado.
2. Penned by Judge Jose Castro.

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