When Attached Property May Be Sold Before Judgment: China Banking Corp. v. Asian Construction

The Rules of Court allow a creditor who has obtained a writ of preliminary attachment to ask the court for authority to sell the attached property even before the case is finally decided. But when is such a sale allowed? In China Banking Corporation v. Asian Construction and Development Corporation (G.R. No. 158271, April 8, 2008), the Supreme Court laid down the rules on when attached properties may be sold before judgment, and clarified the proper remedy for a party who disagrees with the trial court's ruling on the matter.

The Facts

China Banking Corporation (China Bank) granted Asian Construction and Development Corporation (ACDC) an Omnibus Credit Line of P90 million. When ACDC allegedly failed to comply with its obligations, China Bank filed a complaint for recovery of sum of money and damages, with a prayer for the issuance of a writ of preliminary attachment.

The trial court granted the writ, and the sheriff levied on ACDC's personal properties—vans, dump trucks, cement mixers, cargo trucks, utility vehicles, machinery, equipment, and office machines and fixtures. After the trial court rendered summary judgment in favor of China Bank, ACDC appealed to the Court of Appeals (CA).

While the appeal was pending, China Bank filed a motion asking the CA for authority to sell the attached properties. China Bank argued that the properties, which were exposed to the elements at ACDC's stockyard, were deteriorating and losing value. The CA denied the motion, ruling that the properties were not perishable and that selling them before final judgment would be premature. China Bank then went to the Supreme Court.

The Issue

The central question was whether the attached vehicles, office machines, and fixtures could be considered "perishable property" under Section 11, Rule 57 of the Rules of Court, which would allow their sale before entry of judgment.

The Ruling

The Supreme Court denied China Bank's petition and affirmed the CA's resolutions.

First, the Court noted that China Bank filed a petition for review under Rule 45, but the CA's resolution was interlocutory—it did not completely dispose of the case. The proper remedy for an interlocutory order is a petition for certiorari under Rule 65, not an appeal under Rule 45. While the Court has sometimes treated a Rule 45 petition as a Rule 65 petition, this is only done in cases involving jurisdiction or grave abuse of discretion. China Bank's petition raised neither.

Second, on the substantive issue, the Court examined Section 11, Rule 57, which allows the sale of attached property before judgment if the property is perishable, or if the interests of all parties will be subserved by the sale. The Court looked to foreign jurisprudence for guidance since this was a case of first impression in the Philippines.

The Court cited Mossler Acceptance Co. v. Denmark, where the Supreme Court of Louisiana held that automobiles are not perishable merely because they depreciate in value while in storage. However, the Court also cited McCreery v. Berney National Bank, where the Supreme Court of Alabama ruled that property is perishable if keeping it will likely make it worthless to the creditor, regardless of the property's nature.

Applying these principles, the Court found that whether the attached properties were properly cared for, and whether keeping them would render them worthless, were factual questions requiring reception of evidence. China Bank had submitted photographs of the properties only for the first time on appeal, which the Court refused to consider.

Third, the Court rejected China Bank's argument that ACDC could simply claim against the attachment bond if it prevailed. Under Section 4, Rule 57, the bond answers only for damages sustained by reason of the attachment itself, not for damages from a premature sale of the attached properties.

Practical Takeaways

• Sale before judgment is an equitable remedy. Under Section 11, Rule 57, attached property may be sold before final judgment only if it is perishable or if the interests of all parties will be subserved by the sale. The party requesting the sale bears the burden of proving these conditions.

• "Perishable" is not limited to rotting goods. While goods that decay quickly are clearly perishable, the term may also cover property that will likely become worthless to the creditor if kept. However, mere depreciation in value is not enough—there must be material deterioration.

• Evidence must be presented at the right time. A party seeking authority to sell attached property must substantiate its claims with evidence before the trial court or the CA. Evidence presented for the first time on appeal will not be considered.

• Know the proper remedy. An order denying a motion to sell attached property is interlocutory. The aggrieved party must file a petition for certiorari under Rule 65, not an appeal under Rule 45, unless there is a clear showing of grave abuse of discretion.

• The attachment bond has limits. The bond posted by the attaching creditor covers damages from the attachment itself, not from a premature sale of the attached property. A party should not assume the bond will protect it from all consequences.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.