FACTS:

Petitioner Tsuneishi Heavy Industries (Cebu), Inc. (Tsuneishi) filed a complaint against respondent MIS Maritime Corporation (MIS) for the collection of unpaid obligations arising from a contract for dry docking and repairs of two vessels. Tsuneishi also sought the issuance of a writ of preliminary attachment, which the Regional Trial Court (RTC) granted without a hearing. The attachment covered MIS' condominium units, cash deposits, charter hire receivables, and one of the vessels involved.

MIS filed a motion to discharge the attachment, but the RTC denied it. MIS then filed a petition for certiorari before the Court of Appeals (CA), which ruled in its favor. The CA held that the RTC had acted with grave abuse of discretion in issuing the writ of preliminary attachment due to the absence of necessary allegations and proof of fraud.

Tsuneishi appealed the CA ruling to the Supreme Court, arguing that the maritime lien provided by the Ship Mortgage Decree should be enforced through the procedure for the issuance of a writ of preliminary attachment. Tsuneishi claimed that MIS' failure to comply with its payment obligations amounted to fraud. Tsuneishi also contended that a hearing is not required prior to the issuance of a writ of preliminary attachment and that all requirements under the rules were fulfilled. On the other hand, MIS argued that Tsuneishi failed to sufficiently prove fraud and that Tsuneishi knew that the proper remedy for the enforcement of its maritime lien was through an arrest of the vessel under the Ship Mortgage Decree.

ISSUES:

1. Whether a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced through a writ of preliminary attachment under Rule 57 of the Rules of Court.

2. Whether Tsuneishi complied with the requirements for the issuance of a writ of preliminary attachment.

3. Whether a maritime lien can only be operationalized by granting a writ of preliminary attachment under Rule 57 of the Rules of Court.

4. Whether Tsuneishi complied with the requirements for the issuance of a writ of preliminary attachment.

5. Whether the affidavit accompanying the application for a writ of preliminary attachment sufficiently alleged the existence of fraud.

6. Whether the factual circumstances of the case warrant the issuance of a writ of preliminary attachment based on fraud.

7. Whether the refusal of MIS to pay Tsuneishi is a ground for the issuance of a writ of preliminary attachment.

8. Whether the trial court acted with grave abuse of discretion in issuing the writ of preliminary attachment.

RULING:

1. The petition is denied.

2. A maritime lien exists in accordance with the provision of the Ship Mortgage Decree and is enforced by filing a proceeding in court. The existence of a maritime lien should not be considered as another ground for the issuance of a writ of preliminary attachment under the Rules of Court. The Ship Mortgage Decree already provides for the simple procedure of filing an action in rem before the court to enforce a maritime lien. The issuance of a writ of preliminary attachment in this case was superfluous and not necessary.

3. The Bitera Affidavit, which was submitted by Tsuneishi to support its application for a writ of preliminary attachment, did not state that the debtor had no other sufficient security for the claim sought to be enforced. This is a requirement under Section 3, Rule 57 of the Rules of Court. Tsuneishi failed to comply with this requirement, thus its application for a writ of preliminary attachment should be denied.

4. The affidavit failed to allege the existence of fraud with sufficient specificity. It merely stated that the respondent refused to pay its obligation because it sought to set off its obligation against the petitioner's liability for losses caused by the delay in the turn-over of the vessel. There is no showing of any act of fraud committed by the respondent.

5. The factual circumstances do not warrant the issuance of a writ of preliminary attachment based on fraud. The respondent's refusal to pay and insistence on setting off its obligation against the petitioner's liability for losses is not an act of fraud. It is a claim asserted by the respondent under the belief that it has the right to do so under the law.

6. The refusal of MIS to pay Tsuneishi is not a ground for the issuance of a writ of preliminary attachment. The remedies available to Tsuneishi under civil law such as payment of the obligation, damages, and legal interest are sufficient.

7. The trial court acted with grave abuse of discretion in issuing the writ of preliminary attachment since the requisites for its issuance were not present.

PRINCIPLES:

• A lien is a legal claim or charge on property as collateral or security for the payment of a debt or obligation.

• Section 21 of the Ship Mortgage Decree establishes a maritime lien on a vessel when a person provides repairs, supplies, towage, use of dry dock, or other necessaries to the vessel.

• A maritime lien may be enforced through a suit in rem and requires the allegation or proof that credit was given to the vessel.

• A writ of preliminary attachment is a provisional remedy that may be issued under Rule 57 of the Rules of Court.

• To obtain a writ of preliminary attachment, the applicant must establish that there is a sufficient ground for attachment and comply with the procedural requirements set forth in the rules.

• In an application for a writ of preliminary attachment, the applicant has the burden of proving the existence of fraud or that the debtor is about to abscond.

• A hearing may be necessary in an application for a writ of preliminary attachment if the allegations in the complaint and affidavit are mere general averments, and if the motion to discharge the attachment directly contests the allegations.

• A maritime lien exists in accordance with the provision of the Ship Mortgage Decree and is enforced by filing a proceeding in court.

• A writ of preliminary attachment is issued to create a lien and is used as a provisional remedy in a pending action.

• When a lien already exists, it is already equivalent to an attachment and there is no need for the issuance of a writ of preliminary attachment.

• The requirements for the issuance of a writ of preliminary attachment include stating that the debtor has no other sufficient security for the claim sought to be enforced.

• To justify the issuance of a writ of preliminary attachment based on fraud, there must be evidence clearly showing the factual circumstances of the alleged fraud. Mere failure to comply with an obligation is not sufficient.

• Fraud cannot be presumed from a party's mere failure to comply with its obligation. It must be specifically alleged with particularity in accordance with the Rules of Court.

• Fraud is defined as the voluntary execution of a wrongful act or willful omission, knowing and intending the effects that naturally and necessarily arise from that act or omission. It includes acts and omissions involving a breach of legal or equitable duty, trust, or confidence, resulting in damage or undue advantage over another.

• The mere fact of failure to pay an obligation, despite becoming due and after several demands, is not enough to warrant the issuance of a writ of preliminary attachment.

• An affidavit accompanying an application for a writ of preliminary attachment must contain concrete and specific grounds showing fraud to sustain the issuance of the writ.

• The rules on the issuance of a writ of preliminary attachment must be strictly construed against the applicants. This is because the remedy of attachment is harsh, extraordinary, and summary in nature. If all the requisites for the granting of the writ are not present, the court acts in excess of its jurisdiction.

• A court that issues a writ of preliminary attachment when the requisites are not present acts in excess of its jurisdiction.

• The issuance of a writ of preliminary attachment is not warranted unless there is a showing of circumstances that justify interference with the property prior to a determination of actual liability.