G.R. No. L-50378 September 30, 1982
Filinvest Credit Corporation, petitioner, vs. The Honorable Judge Benjamin Relova (In his capacity as Presiding Judge of the Court of First Instance of Manila, Branch XI) and Ernesto Salazar, respondents.

FACTS

Petitioner Filinvest Credit Corporation filed a complaint for sum of money with a prayer for a writ of preliminary attachment against Rallye Motor Co., Inc. and respondent Ernesto Salazar. Filinvest alleged that Salazar executed a promissory note and a chattel mortgage over a Mazda school bus in favor of Rallye, which subsequently assigned these documents to Filinvest. The corporation later discovered that Rallye had never delivered the vehicle to Salazar. Upon Salazar’s default, Filinvest sued, claiming fraud in the contracting of the obligation, as the defendants had concealed the non-delivery, which induced Filinvest to accept the assignment. The trial court initially granted the writ of attachment.
Subsequently, respondent Salazar filed a motion to quash the writ, arguing he could not have defrauded Filinvest at the time he signed the documents since Filinvest was not yet a party. The respondent judge granted the motion and dissolved the attachment, ruling that the plaintiff failed to present evidence to substantiate the allegation of fraud when the motion to quash was heard. Filinvest’s motion for reconsideration was denied, prompting this certiorari petition.

ISSUE

Whether the respondent judge committed grave abuse of discretion in dissolving the writ of preliminary attachment.

RULING

Yes. The Supreme Court reversed the orders of the lower court. The legal logic centers on the definition of fraud under the Rules of Court and the Civil Code. A writ of preliminary attachment may issue under Rule 57, Section 1(d) in an action against a party guilty of fraud in contracting the debt. Fraud is not limited to fraud committed against the plaintiff at the very moment of contracting the obligation with the plaintiff. It includes fraud committed against the assignor, which induced the assignment to the plaintiff, especially when the defendant’s acts ultimately cause damage to the assignee-plaintiff.
Here, Salazar’s execution of a chattel mortgage over a non-existent or undelivered vehicle, coupled with his failure to disclose this material fact to Filinvest—despite his prior dealings with them and his consent to the assignment—constituted fraudulent concealment. Under Article 1339 of the Civil Code, failure to disclose a material fact, when there is a duty to reveal it, constitutes fraud. Salazar had a duty to disclose the non-delivery, as it was crucial to Filinvest’s decision to accept the assignment. The respondent judge’s narrow interpretation, requiring proof of direct fraud against Filinvest at the instant of contracting with Rallye, was a grave abuse of discretion. The writ of preliminary attachment was properly issued and should be reinstated.