G.R. No. L-61011 October 18, 1990
INSULAR BANK OF ASIA AND AMERICA, INC., petitioner, vs. HON. COURT OF APPEALS and COMMERCIAL CREDIT CORPORATION, respondents.

FACTS

Petitioner Insular Bank of Asia and America (IBAA) made a money market placement with respondent Commercial Credit Corporation (CCC) on December 12, 1980, amounting to P1,877,053.03. In consideration, CCC executed a Non-Negotiable Repurchase Agreement, conveying Interbank securities to IBAA, and a resale agreement binding IBAA to re-sell the securities to CCC for P2,000,000 on April 22, 1981. On the due date, CCC issued a cashier’s check for the amount, but it was dishonored upon presentment for being drawn against uncollected deposits.
IBAA demanded cash payment. CCC admitted financial difficulty and proposed staggered payment, attaching a Central Bank letter approving an additional standby credit facility to meet maturing obligations. Due to CCC’s failure to pay, IBAA filed a collection suit with an application for a writ of preliminary attachment before the CFI of Rizal, alleging fraud under Rule 57, Section 1(d) of the Rules of Court. The trial court granted the attachment, leading to the garnishment of CCC’s bank deposits and the attachment of its equipment.

ISSUE

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

RULING

The Supreme Court affirmed the Court of Appeals’ decision, ruling that the writ of preliminary attachment was improperly issued. The legal logic centers on the purpose and grounds for attachment under Rule 57. A preliminary attachment is a harsh provisional remedy designed to secure a contingent lien on the defendant’s property to ensure satisfaction of a potential judgment, applicable only in specific cases such as when the defendant is guilty of fraud in contracting the debt.
The Court held that IBAA failed to substantiate its claim of fraudulent intent by CCC at the inception of the obligation. Mere inability to pay an obligation, as demonstrated by CCC’s financial difficulties and the dishonored check, is not equivalent to fraudulent intent. The records showed CCC was operating as an ongoing concern, had disclosed its condition to creditors, and was attempting to negotiate payments. Its withdrawal of bank funds was for legitimate operational expenses, not to dissipate assets to defraud creditors. Since there was no clear evidence of fraud in contracting the debt or of acts to conceal or dispose of property to prejudice creditors, the essential ground for attachment under Rule 57, Section 1(d) was absent. Therefore, the Court of Appeals correctly set aside the attachment order.