G.R. No. 134049; June 17, 2004
MARCOPPER MINING CORPORATION, petitioner, vs. SOLIDBANK CORPORATION, THE SHERIFF OF MANILA and DEPUTY SHERIFF CARLOS BAJAR, respondents.

FACTS

Petitioner Marcopper Mining Corporation (MMC) obtained two foreign currency loans from respondent Solidbank Corporation, each for US$1,000,000.00, payable on demand. The promissory notes stipulated that payment would be sourced from the foreign exchange proceeds of a specific shipment of copper concentrates to Nippon Mining & Metals Co., Ltd. in May 1996. In March 1996, a tailings leakage occurred at MMC’s mining pit in Marinduque, leading to a government-issued Closure Order and a cease and desist order from the Pollution Adjudication Board. This environmental disaster halted MMC’s operations and prevented the shipment, rendering it unable to pay its loans.
Solidbank consolidated the loans and, after MMC’s continued default, filed a complaint for sum of money. The bank also applied for a writ of preliminary attachment, alleging that MMC committed fraud by falsely representing it would pay from the shipment proceeds. The trial court granted the attachment. MMC’s petition for certiorari was dismissed by the Court of Appeals, which upheld the finding of fraud. MMC elevated the case to the Supreme Court via a petition for review.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s issuance of the writ of preliminary attachment based on an alleged fraudulent breach of the loan agreement.

RULING

The Supreme Court granted the petition and reversed the lower courts. The legal logic centers on the stringent requirements for issuing a writ of preliminary attachment under Rule 57, Section 1(d) of the Rules of Court, which requires a clear showing of fraud in incurring the obligation. The Court held that Solidbank failed to prove such fraud. The contractual provision regarding the source of payment was merely a statement of intent or a proposed mode of payment, not a fraudulent misrepresentation. MMC’s failure to pay was directly caused by a supervening event—the catastrophic tailings leak and the consequent government closure orders—which was a fortuitous event that prevented the fulfillment of its intended payment method.
The Court emphasized that a simple inability to pay a debt, or a breach of contract, does not automatically constitute fraud warranting attachment. For fraud to exist at the inception of the obligation, it must be deliberate and intended to deceive the creditor at the time of contracting. Here, MMC entered into the loan in good faith, with every expectation of fulfilling it from its normal business operations. The environmental disaster was an unforeseeable event that occurred after the obligation was incurred. Therefore, no factual and legal basis existed for the writ of attachment, as its issuance was a grave abuse of discretion. The preliminary attachment was improperly issued and was consequently set aside.