LUNETA MOTOR COMPANY, PLAINTIFF AND APPELLE, VS. ANTONIO MENENDEZ AND CARLOS BARANDA, DEFENDANTS, LUZON SURETY CO. INC., DEFENDANT AND APPELLANT.

Appeal from an order of the
Manila Court of First Instance directing the Luzon Surety Co., Inc. to
pay the Luneta Motor Co. the amount of P3.098.00 plus 12% interest
thereon from July 29, 1953 and another 20% thereof for attorney’s fees,
plus costs of suit.

It appears that Antonio Menendez obtained a loan from the Luneta Motor
Co. in the amount of P6,200.00 with which to complete payment for a
motor vehicle which the former had purchased from a certain Salud vda.
de Vergara. A promissory note was executed to evidence the loan
secured, by a chattel mortgage on the same motor vehicle. Of the said
loan, only P3,012.00 and interest up to July 29, 1953 was paid by
Menendez, and as he failed
to settle the balance of P3,098.00, plus interest, in spite of repeated
demands, the Luneta Motor Co., on October 6, 1953, instituted action
for foreclosure of the chattel mortgage to satisfy the indebtedness and
for replevin. Co-defendant of Menendez in this action was Carlos
Baranda who was in actual possession of the car, claiming ownership
thereof thru purchase prior to the execution of the chattel mortgage in
favor of the plaintiff.

For the manual delivery of the motor car, pending trial, the
plaintiff Luneta Motor Co. posted a bond of P8,000.00. Hence, the
sheriff of Manila, on October 8, 1953, by order of the court, seized
the said motor vehicle for delivery to the plaintiff. Whereupon,
Baranda, to regain possession thereof, filed a counterbond of P8,000.00
subscribed by the Luzon Surety Co., Inc. to secure delivery of the car
if adjudged, and to pay whatever amount may be awarded in favor of the
plaintiff, plus costs of suit. Accordingly, the order of seizure was
set aside by the court and the car was returned to Baranda.

The case came up for hearing, although, apparently, trial was had
without notice to the surety. On October 21, 1955, judgment was
rendered against defendants Menendess and Baranda, the dispositive part
of which reads as follows:

“For the foregoing, the court orders the defendant
Antonio Menendez to pay the plaintiff Luneta Motor Co., Inc. the sum of
P3,098 00 plus 12% interest per annum from July 29, 1953, until the sum
is fully paid, plus 20% of this amount as attorney’s fees and plus
costs. Defendants Antonio Menendez and Carlos S. Baranda are hereby
ordered to deliver the car in question to the Sheriff of Manila who
shall proceed to sell it as the law directs and the net proceeds of the
sale shall he paid in payment of the sum adjudged to the plaintiff in
this decision. If the proceeds of the sale is not enough or the car
cannot be delivered to the Sheriff, the amount adjudged to the
plaintiff in this decision or any unpaid balance, shall be satisfied by
the levy on the counterhond put up by the defendant Carlos S. Baranda
and subscribed by his bondsman, Luzon Surety Co., Inc. The said Luzon Surely Co., Inc. shall be notified find served a copy of this decision.” (Italics supplied.)

Despite the last statement in the above quotation, the Luzon Surety was not furnished a copy of the decision.

Not satisfied with said decision, Baranda interposed an appeal to the
Court of Appeals. On August 14, 1959, said court affirmed the decision in toto. Again, the record does not show that the surety was served a copy of the same.

Pending finality of the Court of Appeals decision (copy of which was
furnished plaintiff on August 17, 1959, so that it was to become final
on September 2, 1959), the plaintiff filed with the trial court
a motion for leave to claim damages from the Luzon Surety Co. Against
the surety’s opposition, the claim was admitted by the trial court on
August 29, 1959, but action thereon was held in abeyance until the
record of the case was returned from the Appeals Court. On September 1,
1959, or a day before the decision was to be final and executory, the
plaintiff filed with the Court of Appeals a motion to ihave the record
of the case remanded to the trial court for proper action on the claim.
The said court, however, allowed first the decision to become final and
executory on September 2, before remanding the record of the case to
the lower court. This was effected only on September 5, 1959.

On September 8, 1959, the Luzon Surety Co., Inc. moved for the
reconsideration of the trial court’s order of August 29, 1959 admitting
plaintiff’s claim for damages. The motion was denied, but movant’s
attorney was allowed to file his answer to plaintiff’s claim for
damages. Hearing was had after the decision in the main case had
already become final and executory, and it was only several months
thereafter, or on January 7, 1960, that an order for damages against
the Luzon Surety Co. was issued. The said order is now the subject of
the present appeal interposed by the said surety.

Appellant surety prays for the annulment of the order holding it liable
for damages upon the bond subscribed by it for defendants on the
grounds that (1) the plaintiff-appellee has not sufficiently complied
with the procedure prescribed for the recovery of damages against
sureties; and that (2) the Court of First Instance has no jurisdiction
to pass upon appellee’s claim against the said bond.

We find merit in the appeal.

The procedure for the enforcement of the surety’s liability, under a
bond for delivery of personal property is described in section 10, Rule
62, in connection with Section 20, Rule 59 of the Rules of Court, said
provisions reading as follows:

“Judgment to include recovery against sureties.—The
amount, if any, to be awarded to either party upon any bond filed by
the other in accordance with the provisions of this rule, shall be
claimed, ascertained, and granted under tlie same procedure as
prescribed in Section 20, of Rule 59.” (Section 10, Rule 62)

“Claim for damages on plaintiff’s bond on accent of illegal attachment.&mdashIf
the judgment on the action be in favor of the defend ant, he may
recover, upon the fcond given by the plaintiff, damages resulting from
the attachment. Such damages may be awarded only upon application
and after proper hearing, and shall he included in the final judgment.
The application must be filed before the trial or, in the discretion of
the court, before entry of final judgment, with due notice to the
plaintiff and his surety sureties, setting forth the facts showing
his right to damages and the amount thereof. Damages sustained during
the pendency of the 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. (Italics supplied.) (Section 20, Rule
59)

Under these provisions, in order to recover on a replevin bond, the following requisites must be complied with:

1. Application for damages must be filed before trial or before entry of final judgment;
2. Due notice must be given the other party and his surety; and
3. There must be proper hearing and award of damages, if any, must be included in the final judgment. (Alliance Surety Co., Inc. vs. Piccio, et al., 105 Phil., 1192.)

There is no question that the plaintiff-appellee here, in claiming
damages against the surety, has complied with the first two requisites
above stated. But although there was ahearing on the claim, the award
of damages was not included in the decision of the Court of Appeals,
which became final and executory on September 2, 1959.

The purpose of the Rules in requiring notice and hearing before the
entry of final judgment on a bond is to include in said judgment the
award, if any, that the claimant may recover from both or either the
principal and the surety.

“* * * The rule plainly calls for only one judgment
for damages against the attaching party and his sureties; which is
explained by the fact that the attachment bond is a solidary
obligation. Since a judicial bondsman has no right to demand the
exhaustion of the property of the principal debtor, there is no
justification for the entering of separate judgments against them. With
a single judgment against principal and sureties, the prevailing party
may choose, at his discretion to enforce the award of damages against
whomsoever he considers in a better situation to pay it.” (Alliance
Insurance & Surety Co., Inc. vs. Piccio, supra.)

In other words, it is not only the filing of the claim
before final judgment that is required. The claimant on the bond must
see to it that the award against the surety be included in the final
judgment. In Joseph Abelow vs.
de la Riva, 105 Phil., 159, this Court has ruled that the surety may
only be held liable if, before the judgment becomes final, an order
against the surety is entered after a hearing with notice to the surety
(See also Cajefe, etc, et al. vs. Fernandez, etc., et al., 109 Phil., 743.)

The plaintiff-appellee could have very well obtained an award for
damages in the main decision had it taken the right step in filing its
claim against the surety. It was improper for said appellee to file its
claim with the Court of First Instance after the case had been appealed
to the Court of Appeals. At that stage, the trial court had no more
jurisdiction over the case than to adopt conservatory measures to
protect the rights of the parties. It has been settled in the case of
Rivera vs.
Talavera, G. R. Nos. L-16280 and L-16805, promulgated on May 30, 1961,
that application for damages against the surety may not be made to the
Court of First Instance when the case is pending with the appellate
court, unless expressly allowed by the latter: and that without express
permission from, or reference by, the appellate court, the Court of
First Instance can not validly hear or determine such claims against
the surety.

It is true that the appealed case was, on
September 5, 1959, remanded by the Court of Appeals to the trial court,
upon request of the plaintiff-appellee, for the purpose of holding a
hearing on its claim against the Luzon Surety. But the hearing, which
was held thereafter, can have no effect on the final decision of the
Court of Appeals on the main case which became final and executory on
September 2, 1959. The non-incorporation of the award for damages
against the appellee Luzon Surety Co. in the main decision has been
brought about by plaintiff-appellee’s own mistake of filing its claim
therefor with the Court of First. Instance few days before the finality
of the decision of the Court of Appeals.

In summary, the
application for damages against the surety must be filed in the Court
of First Instance before trial, or even after trial, but before
judgment becomes executory; and if appeal is taken, then application
must be made in the appellate court, but always before judgment of the
latter becomes final and executory so that the award, if any, may be
included in said judgment.

The plaintiff-appellee having failed to comply with the procedure
above-summarized, the appealed order is declared null and void and the
same is hereby set aside. Costs against the plaintiff-appellee.

Benqzon, C.J., Labrador, Concepcion, Paredes, and Makalintal, J.J., concur.