G.R. No. L-35990 June 17, 1981
Aboitiz & Company, Inc., Hon. Vicente N. Cusi Jr., Judge of the Court of First Instance of Davao, and the Provincial Sheriff of Davao del Sur, petitioners, vs. Cotabato Bus Company, Inc., respondent.

FACTS

Petitioner Aboitiz & Company filed a collection suit against respondent Cotabato Bus Company. Simultaneously, Aboitiz applied for and obtained ex-parte a writ of preliminary attachment from the Court of First Instance of Davao. The application was based on an affidavit alleging that the respondent bus company “has removed or disposed of its properties or is about to do so, with intent to defraud its creditors.” Acting on the writ, the provincial sheriff attached several buses, machinery, and equipment of the bus company.
Respondent moved to dissolve the writ, attaching a counter-affidavit from its Assistant Manager stating it had not been selling assets and was, in fact, acquiring more. The trial court denied the motion, finding the respondent’s own testimony corroborated the plaintiff’s allegations instead of refuting them. Upon denial of its motion for reconsideration, respondent filed a certiorari petition with the Court of Appeals.

ISSUE

Whether the Court of Appeals erred in nullifying the writ of preliminary attachment issued by the trial court.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The legal logic centers on the specific grounds for issuing a writ of preliminary attachment under the Rules of Court. The petitioner’s core allegation was that the respondent was disposing of properties to defraud creditors under Section 1(e), Rule 57. The Supreme Court found the evidence presented by petitioner insufficient to prove this specific fraudulent intent.
The Court dismissed the significance of the respondent’s depleted bank accounts, explaining this was likely due to heavy operational expenses, not fraudulent removal. It also rejected the claim that the repair and substitution of five attached buses constituted a fraudulent “removal,” noting the action was for operational necessity and public service, with no proof of intent to defraud. Crucially, the Court reiterated the legal principle that mere insolvency or inability to pay debts is not, by itself, a ground for attachment. Since the petitioner failed to substantiate the specific statutory ground of fraudulent disposition of property, the writ was improperly issued. The Court of Appeals correctly nullified it, though the Supreme Court modified the decision to lift the restraint on the trial court from hearing the main collection case.