Posting of a counterbond

Posting of a counterbond | Preliminary Attachment (RULE 57) | PROVISIONAL REMEDIES

Comprehensive Discussion on the Posting of a Counterbond to Discharge a Preliminary Attachment under Rule 57 of the Philippine Rules of Court

1. Overview of Preliminary Attachment

Preliminary attachment is a provisional remedy governed by Rule 57 of the Rules of Court. It allows a plaintiff (or defendant asserting a counterclaim) to have the property of an adverse party attached as security for the satisfaction of any judgment that may be recovered in certain actions. Typically, it is availed of where there is a likelihood that the defendant may remove or dispose of property to the detriment of the plaintiff’s claim.

Key grounds for preliminary attachment (under Section 1, Rule 57) include:

  1. The defendant is about to depart from the Philippines with intent to defraud creditors.
  2. The defendant conceals or removes property to defraud creditors.
  3. The action is against a party guilty of fraud in contracting the debt or incurring the obligation.
  4. The action is for recovery of property, and the property is in danger of being lost, removed, or disposed of by the defendant.
  5. Other grounds specifically mentioned in Section 1, Rule 57.

Once granted, attachment creates a lien or custodia legis over the defendant’s property, placing it under the control of the court, subject to the final outcome of the case.

2. Right to Discharge or Release the Attachment

A defendant (or any party whose property is attached) is not without remedy if a writ of attachment is issued against his or her property. Under the Rules, there are two principal ways to seek dissolution or discharge of the attachment:

  1. By a motion to set aside/dissolve the attachment on the ground that it was improperly or irregularly issued, or that the attachment was improperly or irregularly enforced.
  2. By posting a counterbond (or making a cash deposit) sufficient to cover the amount fixed in the order of attachment.

This discussion focuses on posting a counterbond, which allows the party whose property was attached to secure the release of that property even if the attachment was properly issued.

3. Statutory Basis: Sections 12 and 13, Rule 57

The key provisions on the posting of a counterbond are found in Sections 12 and 13 of Rule 57.

A. Section 12: Discharge of Attachment Upon Giving Counterbond

  1. When to Post Counterbond

    • At any time after the order of attachment is granted and before or after property has been actually attached, the party whose property is subject to the writ (or a person appearing on his behalf) may seek to discharge the attachment by providing a counterbond.
    • This can be done even after final judgment, subject to certain conditions.

  2. Amount of the Counterbond

    • The counterbond must be in an amount equal to that fixed by the court in the plaintiff’s attachment bond (i.e., typically, an amount sufficient to answer for any judgment that the plaintiff may recover, plus allowable costs).
    • In some instances, the court may require a different amount if circumstances warrant, as the bond should be reasonably commensurate to the claim secured by the attachment.

  3. Form of the Counterbond

    • The counterbond is typically executed either (a) by a surety authorized by the Supreme Court to transact surety business, or (b) by a cash deposit.
    • A surety bond must be issued by a reputable and accredited surety company.
    • If the party opts to post a cash deposit, it must be for the full amount required.

  4. Approval of the Counterbond

    • The adverse party (the attaching creditor) is notified and given an opportunity to oppose the sufficiency of the bond or the sureties.
    • If the court is satisfied with the sufficiency of the surety or bond, it will order the discharge of the attachment over the property or the release of the property already levied upon.

  5. Effect of the Discharge

    • Once the court approves the counterbond, the attached property is released from custody and returned to the possession of the party from whom it was taken.
    • The discharge of the attachment does not deprive the attaching creditor of security; rather, the counterbond now stands in place of the property to answer for any eventual judgment in favor of the attaching creditor.

B. Section 13: Increase or Reduction of Attachment or Counterbond

  1. Increase or Reduction

    • If, during the proceedings, it appears that the amount of the bond or counterbond is insufficient or excessive, the court may order the increase or reduction of the attachment bond or the counterbond.
    • This ensures that the bond accurately reflects the potential liability.

  2. Consequences of Non-Compliance

    • If the attaching creditor fails to increase the attachment bond when ordered to do so, the attachment may be lifted or discharged.
    • Conversely, if the party seeking to discharge the attachment (through the counterbond) fails to comply with a court order to increase the counterbond, the attachment may be reinstated or continued.

4. Procedure for Posting the Counterbond

  1. Filing of a Motion

    • The party whose property is attached files a motion to discharge or lift attachment on the ground that he or she is posting a counterbond.
    • This motion must be served upon the adverse party or counsel.

  2. Attachment of the Proposed Counterbond

    • A copy of the surety bond (or proof of cash deposit) is typically attached to the motion for the court’s consideration.

  3. Hearing and Determination by the Court

    • The motion is set for hearing. The adverse party may oppose by challenging the sufficiency of the sureties or the amount of the bond.
    • The court evaluates the objections (if any) and, if satisfied that the bond is adequate, issues an order approving the counterbond and discharging the attachment.

  4. Release of the Attached Property

    • Upon issuance of the court’s order, the Sheriff or the proper officer executes a Release of Attachment and returns the property to its rightful owner or possessor.

5. Legal Effects and Implications

  1. Property Freed, but Bond Remains

    • Once the bond is approved, the specific property previously under attachment is effectively freed from the lien of the attachment; however, the bond remains liable to answer for the judgment.

  2. Continuing Liability of the Counterbond

    • If the party who obtained the attachment ultimately prevails in the main action and is awarded a sum of money, the prevailing party may move against the counterbond if the other party fails to satisfy the judgment.
    • The sureties may be held to pay or deliver so much as may be sufficient to satisfy the judgment (including costs and damages).

  3. No Waiver of Defenses

    • Posting the counterbond and discharging the attachment does not operate as a waiver of any substantive or procedural defense the defendant may have. It merely replaces the property with a security bond.

  4. Interaction with Other Remedies to Dissolve Attachment

    • Even if a defendant moves to dissolve the attachment on the grounds that it was improperly or irregularly issued, he or she may also post a counterbond to obtain the immediate release of the property—without prejudice to the resolution of the motion attacking the validity of the attachment.
    • If the court later finds that the attachment was improperly issued, it can award damages against the attaching creditor’s bond.

6. Practical Considerations

  1. Choosing a Reputable Surety

    • Courts often scrutinize surety companies to ensure they are accredited and have sufficient assets. Using a known, reputable surety avoids delays and objections.

  2. Cash Deposit vs. Surety Bond

    • Posting a cash deposit with the court may be more straightforward, but it ties up the party’s liquidity.
    • A surety bond is often more practical, but it involves paying a premium and possibly providing collateral to the surety company.

  3. Timely Opposition by the Attaching Party

    • If the attaching party believes the bond is insufficient, they must timely challenge it; otherwise, the court will likely approve the counterbond.

  4. Handling Potential Increases

    • The attaching creditor may file a motion to increase the amount of the defendant’s counterbond if there are changed circumstances (e.g., the claim’s value has increased or additional costs/damages are foreseeable).
    • The defendant should be ready to adjust the bond or risk reinstatement of the attachment.

  5. Compliance with Court Orders

    • Speedy and complete compliance with any order from the court to adjust the bond is essential to prevent the attachment from remaining in force or being reinstated.

7. Sample Basic Form: Motion to Discharge Attachment Upon Posting of Counterbond

Below is a simplified template. Actual practice may require additional details or attachments.

Republic of the Philippines
Regional Trial Court
___ Judicial Region
Branch __, ___ (City/Province)

[CASE TITLE]
Plaintiff,
– versus –
Defendant.
Civil Case No. ___

MOTION TO DISCHARGE ATTACHMENT UPON POSTING OF COUNTERBOND

The defendant, through undersigned counsel, respectfully states:

  1. On _______________, this Honorable Court issued a Writ of Attachment against the property of the defendant.
  2. Pursuant to Section 12, Rule 57 of the Rules of Court, defendant is posting a Counterbond in the amount of PHP ________, executed in favor of plaintiff, to answer for any judgment that may be rendered in this case.
  3. A copy of the proposed Counterbond, duly issued by [Name of Surety Company], accredited by this Honorable Court, is hereto attached as Annex “A.”
  4. Defendant respectfully prays that upon approval of the Counterbond, the Writ of Attachment be discharged and any property levied upon be released and restored to defendant.

PRAYER

WHEREFORE, defendant prays that this Honorable Court approve the Counterbond, discharge the attachment issued against his/her property, and grant such other relief as may be just and equitable.

Respectfully submitted.

Counsel for Defendant
Roll No. ________ / IBP No. ___ / PTR No. ___
[Address & Contact Details]

Copy furnished:
[Opposing Counsel / Plaintiff]

8. Key Jurisprudence Points

  • Sufficiency of the Counterbond: Courts have discretion in determining the sufficiency of the amount and the sureties’ solvency. As held in various Supreme Court rulings, what is essential is that the counterbond is adequate to secure the claim and has been approved by the court.
  • Liability of the Sureties: Once judgment is rendered in favor of the attaching creditor, the sureties on the counterbond become directly and primarily liable if the principal fails to satisfy the judgment.
  • Separate from Issues of Wrongful Attachment: Posting a counterbond does not bar the defendant from seeking damages for wrongful attachment if it is later proven that the writ was improperly issued.

9. Ethical and Professional Responsibilities

For lawyers handling cases involving posting a counterbond:

  1. Duty of Candor: Ensure that the counterbond or surety is genuine and adequate, and that the motion filed with the court contains accurate information.
  2. Avoidance of Forum Shopping: The remedy of posting a counterbond is purely procedural for discharge of attachment in the same court; it does not open the door to multiple parallel actions on the same cause.
  3. Prompt Service and Diligence: Opposing counsel must be promptly furnished with the motion and supporting documents to allow them a fair opportunity to oppose or comment.

10. Conclusion

Posting a counterbond under Rule 57 is a critical mechanism allowing a defendant (or any party whose property is under attachment) to regain possession and control of their property without having to litigate first the regularity of the attachment order. By substituting a bond for the attached property, the interests of the attaching creditor remain secured.

Understanding the procedures, requirements, and legal implications of this remedy is paramount for both parties:

  • For the defendant, it offers a chance to continue business or personal dealings unencumbered by the attachment while still providing adequate security for the plaintiff’s claim.
  • For the plaintiff, it ensures that if they prevail on the merits, they still have a bond to look to in satisfying the judgment.

The mechanism reflects a balance between the plaintiff’s right to secure future satisfaction of a favorable judgment and the defendant’s right to immediate possession of property, conditioned upon providing the necessary security.

Disclaimer: This discussion is for general legal information. For advice tailored to specific circumstances, consultation with a qualified legal professional is recommended.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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