G.R. No. 84588 and G.R. No. 84659; May 29, 1991
The Consolidated Bank and Trust Corporation (Solidbank), petitioner, vs. Honorable Court of Appeals, F. Antonio M. Andal and Antonio Roxas Chua, respondents. ( G.R. No. 84588 ) / F. Antonio M. Andal and Antonio Roxas Chua, Jr., petitioners, vs. Honorable Court of Appeals and The Consolidated Bank and Trust Corporation, respondents. (G.R. No. 84659)

FACTS

Solidbank filed a complaint for sum of money with a prayer for preliminary attachment against United Pacific Leasing and Financing Corporation (UPLFC) and its directors, including spouses F. Antonio M. Andal and Antonio Roxas Chua, Jr. The bank alleged it extended a P20 million credit line to UPLFC secured by deeds of assignment of receivables. Solidbank claimed the defendants, in bad faith, directly collected from the account debtors on the assigned receivables without informing them of the assignment, thereby appropriating the proceeds for their own benefit to the bank’s prejudice. The trial court granted the writ of preliminary attachment.
The individual defendants moved to dismiss the complaint and to lift the attachment. They argued the complaint failed to state a cause of action against them personally due to lack of privity of contract and the separate corporate personality of UPLFC. The trial court denied the motion to dismiss and partially dissolved the writ only as to the spouses of the individual defendants. On certiorari, the Court of Appeals modified the orders, upholding the denial of the motion to dismiss but lifting the writ of preliminary attachment against the individual defendants for insufficiency of the alleged grounds under Rule 57.

ISSUE

The consolidated petitions present two issues: (1) whether the complaint against the individual defendants sufficiently states a cause of action; and (2) whether the writ of preliminary attachment was validly issued.

RULING

The Supreme Court ruled on both issues. First, on the sufficiency of the complaint, the Court held that a motion to dismiss based on failure to state a cause of action tests the legal sufficiency of the allegations in the complaint. The complaint alleged that the individual defendants, as directors, employed illegal machinations to induce the grant of credit facilities with no intention to fulfill the security arrangements, and that they fraudulently collected the assigned receivables. These allegations, if hypothetically admitted, sufficiently aver a cause of action for damages arising from alleged fraudulent acts, making a ruling on the separate corporate identity premature at the motion to dismiss stage. The trial court correctly deferred resolution.
Second, on the validity of the preliminary attachment, the Court reversed the Court of Appeals and reinstated the writ. The appellate court erred in ruling that the grounds under Rule 57, Sections 1(b) and (d), were inapplicable. The complaint specifically alleged that the defendants committed fraud in contracting the obligation (the security arrangements for the loan) and in its execution (the collection of the assigned receivables). These are grounds for attachment under Section 1(d). The Court emphasized that in a motion to dissolve an attachment, the merits of the main action are not to be determined definitively; only a prima facie showing of the ground for attachment is required. The allegations of fraud in the complaint, which must be presumed true for this purpose, made a sufficient prima facie case for the issuance of the writ pending trial on the merits.