G.R. No. L-56073 & L-58819, August 20, 1990
SPS. ROBERTO COSIQUIEN and OLIVIA SY, petitioners-appellants, vs. HONORABLE COURT OF APPEALS, PHIL-CAR SALES CORPORATION, LOTA SANTOS, and DIRECTORS OF PHIL-CAR SALES CORPORATION, respondents-appellees.

FACTS

This consolidated case stems from Civil Case No. C-7942 for collection of a sum of money. In G.R. No. 56073 , petitioners Roberto Cosiquien and Olivia Sy filed a complaint and subsequently obtained an ex-parte writ of preliminary attachment from the trial court on October 31, 1979, followed by an alias writ on August 22, 1980, all issued without notice or hearing to the adverse private respondents. The sheriff levied upon and garnished properties of Phil-Car Sales Corporation. The Court of Appeals granted the private respondents’ petition for certiorari, annulled the writs of attachment, and ordered the return of the properties, ruling the issuances were void for grave abuse of discretion.
In G.R. No. 58819 , arising from the same civil case, the trial court declared the private respondents in default during a hearing on the merits on June 24, 1980, for their non-appearance despite notice, and allowed petitioners to present evidence ex-parte. The Court of Appeals reversed this order of default.

ISSUE

The core issues are: (1) Whether the trial court committed grave abuse of discretion in issuing the writs of preliminary attachment ex-parte; and (2) Whether the trial court correctly declared the private respondents in default for non-appearance at a hearing on the merits.

RULING

The Supreme Court dismissed both petitions and affirmed the Court of Appeals. Regarding the writs of attachment, the Court upheld the appellate court’s finding of grave abuse of discretion. A writ of preliminary attachment is a harsh and extraordinary remedy. While it may be issued ex-parte under the Rules of Court, such issuance must be based on a proper showing within the strict parameters of the law, such as a clear case of fraud or an intent to defraud creditors. The trial court’s issuance without a prior hearing, and more critically, its failure to dissolve the writ upon motion despite the absence of a factual and legal basis as required by Rule 57, constituted a capricious and whimsical exercise of power. The Court of Appeals correctly nullified the orders and writs.
Concerning the order of default, the Supreme Court clarified the proper application of default under the Rules. A defendant may only be declared in default under two specific scenarios: first, for failure to file an answer within the reglementary period (Rule 18, Sec. 1); and second, for failure to appear at a pre-trial conference despite notice (Rule 20, Sec. 2). Mere non-appearance at a hearing or trial on the merits, after an answer has been duly filed and pre-trial terminated, does not constitute a ground for default. The policy of the law is to favor the trial of cases on their merits. Since private respondents had already filed their answer and pre-trial was concluded, the trial court’s declaration of default for their non-appearance at a trial hearing was a patent error. The Court of Appeals was correct in setting aside the order of default and the subsequent ex-parte proceedings.