RAMON R. DIZON, PLAINTIFF-APPELLANT, VS. LORENZO J. VALDES, VALLESON, INC., AND AUGUSTO J. VALDES, DEFENDANTS-APPELLEES.

The case before us is an incident in a suit for a sum of money
(Civil Case Q-2618, Court of First Instance of Rizal,
Quezon City Branch), entitled “Ramon R. Dizon, Plaintiff, vs. Lorenzo J. Valdes, Valleson, Inc., and Augusto J.
Valdes, Defendant.” Judgment was, on December 2, 1960, there rendered
directing defendants Valleson, Inc. and Augusto J. Valdes (Lorenzo J. Valdes excluded) “to pay
jointly and severally to the plaintiff the amount of P6,260.00 with interest at
the rate of 12% per annum from September 1, 1954 until fully paid and to pay attorney’s
fees in the amount of P600. 00 with costs.” The
counterclaim of defendants Lorenzo J. Valdes and Valleson,
Inc. was dismissed.

On January 11, 1961,
Valleson, Inc. filed its notice of appeal.  Its appeal was perfected on February 11, 1961.

Meanwhile, on January
10, 1961, one day before Valleson’s
notice of appeal, plaintiff petitioned for and the trial court directed the
issuance of a writ of preliminary attachment against the properties, real and
personal, of defendants Augusto J. Valdes and Valleson, Inc. upon an P11,730-bond.  On January 11, said bond having been filed,
the corresponding writ was issued. 
Pursuant thereto, garnishment notices were served by the Manila Sheriff
on one Restituto Sibal and
the Philippine Guaranty Co.

On February 9, 1961,
the judgment debtors moved to dissolve the writ of attachment, upon P11,730-counter-bond subscribed by the Capital Insurance &
Surety Co., Inc.  The following day, February 10, 1961, the trial court
dissolved the writ.

On February 24, 1961,
plaintiff registered a motion to admit its “Claim for Damages”
attached thereto.  Plaintiff’s claim was
that the dissolution of the attachment “put out of the reach of the
plaintiff the properties and assets which may be held to answer for the
adjudged claim”; and that, by reason thereof, “plaintiff suffered and
will suffer damages in the amount of P11,730.00 plus the corresponding 12%
interest thereon and attorney’s fees and costs.” He then prayed that
“defendants and the Capital Insurance & Surety Co., Inc. be ordered to
pay the plaintiff, jointly and severally, the amount of P11,730.00 plus
interests, expenses, and attorney’s fees.”

On March 1, 1961,
the surety, Capital Insurance & Surety Co., Inc., opposed.  Assertion was made that pursuant to the Rules
of Court (then, Section 17, Rule 59; now Section 17, Rule 57), the surety on
any counter-bond shall only become charged and bound to pay plaintiff upon
demand, the amount due under the judgment; and that such amount may be
recovered from the surety after notice and summary hearing in the same action –
only if execution be returned unsatisfied in whole or in part.

On April 25, 1961,
at the hearing fixed by the court, plaintiff presented evidence on the merits
of its claim for damages, in the absence of defendants and surety, who made no
appearance thereat.

The trial court, in its order of May 16, 1961, ruled that plaintiff’s claim for damages was premature, since the main case was then still
pending appeal.

Plaintiff’s motion for reconsideration, filed on July 10, 1961, was thwarted by the
court below on September 16, 1961.

Under the environmental facts, can plaintiff’s claim for damages
on defendants’ counter-bond prosper?  The
answer must be in the negative.

1. By the terms of the counter-bond itself,^[1]
liability thereunder attaches only “in case
the plaintiff recover judgment in the action.”
Indeed, by Section 12 of Rule 59 of the old Rules,^[2]
the law in force at the time the counter-bond was executed, the statutory
counter-bond was made “to secure the payment to the plaintiff of any
judgment he may recover in the action.” Complementary to this legal
precept is Section 17 of the same Rule 59 of the old Rules^[3] –
which should be deemed as read into the bond – viz:

“SEC. 17.  When execution returned unsatisfied,
recovery had upon bond. – If the execution be
returned unsatisfied in whole or in part, the surety or sureties on any bond
given pursuant to the provisions of this rule to secure the payment of the
judgment shall become finally charged on such bond, and bound to pay to the
plaintiff upon demand the amount due under the judgment, which amount may be
recovered from such surety or sureties after notice and summary hearing in the
same action.”

Since at the time the claim for damages was registered, the case was
still pending appeal, it is quite obvious that the motion for the claim for
damages was premature.  And the lower
court thus correctly ruled out plaintiff’s motion.  For, Section 17 contemplates of proceedings
on execution after judgment.  And, it is
only thereafter that liability upon the surety’s bond may be determined.  The key term in Section 17 is the phrase
“[i]f the execution be returned unsatisfied in
whole or in part.” Until such proceeding shall have taken place and unless
unsatis­fied liability under the judgment still exists, no action upon the
counter-bond may be taken against the surety.^[4]

2. We do not follow plaintiff when he says that what controls here
is Section 20 of Rule 57 (then Rule 59). 
By its very terms,^[5]
this obviously refers to the recovery of damages by a party against whom
attachment was issued.  This is a remedy
available to the defendants here, not the plaintiff.

It is therefore not to be doubted that, upon the applicable
rules, the counter-bond does not answer for damages on account of the lifting
of the attachment, but for the payment of the amount due under the judgment
that may be recovered by an attaching creditor.^[6]

3. Nor is importance to be attached to plaintiff’s argument that
the dissolution of the attachment put out of his reach
the properties and assets answerable for his claim.  The counter-bond, it should be emphasized,
precisely stands “in place of the properties so released.”^[7]
Thus, the release of such property cannot really “prejudice the rights of
the attaching party.”^[8]

We accordingly affirm the lower court’s order of May 16, 1961 under review.

Costs against plaintiff-appellant.

SO ORDERED.

Reyes, J.B.L., (Acting C.J.), Makalintal,
and Bengzon, J.P.,  JJ., concur.

^[1] Record on Appeal, pp. 43-47; underscoring supplied.

^[2] Now Section 12, Rule 57.

^[3] Substantially the same as Section 17, Rule 57 of the present Rules.

^[4]
See:  Bautista vs. Joaquin, 46
Phil. 885, 890.

^[5]
Section 20, Rule 59, reads:

“SEC. 20.  Claim for damages on
plaintiff’s bond on account of illegal
attachment. – If the judgment on the action be in favor of the
defendant, he may recover, upon the bond given by the plaintiff, damages
resulting from the attachment.  Such
damages may be awarded only upon application and after proper hearing, and
shall be included in the final judgment. 
The application must be filed before the trial or, in the dis­cretion of
the court, before entry of the final judgment, with due notice to the plaintiff
and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof.  Damages
sustained during the pendency of an appeal may be
claimed by the defendant, if the judgment of the appellate court be favorable to him, by filing an appli­cation therewith,
with notice to the plaintiff and his surety or sureties, and the appellate
court may allow the application to be heard and decided by the trial court.

^[6] Anzures vs. Alto Surety & Insurance Co., Inc.,
92 Phil. 742, 743; Cajefe vs. Fernandez,
L-15709, October 19, 1960.

^[7] Section 12, Rule 59 (now Rule 57); Anzures
vs. Alto Surety & Insurance Co., Inc., supra, at p.
743.

^[8]
Manila Mercantile Co. vs. Flores,
50 Phil. 759, 763.