PATRICIO ESTIOCO, ET AL., PLAINTIFFS-APPELLANTS, VS. SINAI C. HAMADA, ET AL., DEFENDANTS-APPELLEES.

This is an action for damages brought before the Court of First Instance of
Baguio by plaintiffs against defendants on the ground of fraud in the
preparation and execution of certain indemnity agreement. The complaint contains
three causes of action: the first is for damages arising from an indemnity
agreement which was declared null and void in Civil Case No. 279; the second is
for damages arising from an alleged malicious suit instituted at the instigation
of defendants (Case No. 293); and the third is for damages arising from
attachment levied on plaintiffs’ properties in Case No. 293.

Defendants moved to dismiss the complaint upon the grounds (1) that the
complaint states no cause of action; and (2) that the alleged causes of action
are already barred for failure of plaintiffs to set them up as a counterclaim in
Case No. 279. The court found the motion well founded and dismissed the
complaint. Plaintiffs appealed the case to the Court of Appeals but the case was
certified to us on the ground that it involves only questions of law.

The present case is closely related to Civil Cases Nos. 279 and 293
instituted in 1951 before the Court of First Instance of Baguio. Civil Case No.
293 was an action instituted by the Alto Surety & Insurance Co., Inc. for
the collection of a sum of money based upon an indemnity agreement which Julio
Guariño, Patricio Estioco and Lucina V. Siapno executed and delivered to said
bonding company. It was originally instituted in the Municipal Court of Baguio
on September 26, 1951, and the said court decided said case in favor of
plaintiffs and against defendants. From said decision, the said defendants
appealed to the Court of First Instance of Baguio. While said case was pending
determination in the Municipal Court of Baguio, Civil Case No. 279 was
instituted in the Court of First Instance of Baguio by two of the defendants in
the former case, namely, Patricio Estioco and Lucina V. Siapno, against the Alto
Surety & Insurance Co., Inc. for the annulment of the indemnity agreement
involved in the former case. These two cases were tried jointly and, on October
7, 1952, decision was rendered wherein defendants Patricio Estioco and Lucina V.
Siapno were absolved from the complaint and the indemnity agreement was
declared, null and void. The case having been appealed to the Court of Appeals ,
the decision ms affirmed. A petition for review on certiorari was dismissed by
the Supreme Court on November 10, 1954.

The present action is now an offshoot of the dismissal of Civil Case No. 293
against Patricio Estioco and Lucina V. Siapno and the annulment of the indemnity
agreement in Civil Case No. 279, and the action is levelled not against the Alto
Surety & Insurance Co., Inc. but against Sinai C. Hamada, who acted as its
counsel in the two civil cases above-mentioned, Guillermo F. de Guzman, who
acted as his co-counsel in the same cases, and Leoncio Esquejo, who as Deputy
Sheriff of Baguio actively intervened in the procurement and execution of the
indemnity agreement subject matter of litigation in said cases. They are made
responsible for damages for their alleged illegal participation in the
preparation of said agreement and in the attachment of plaintiffs’
properties.

The question now to be determined is whether the lower court erred in
dismissing the cases on the ground that the causes of action setforth therein
are now barred for failure of plaintiffs to set them up as a counterclaim in
Cases Nos. 279 and 293 which gave rise to the present action.

There is no merit in this appeal. The present action is for damages based on
the ground that defendants took an active part in the illegal preparation and
execution of the indemnity agreement which was declared null and void in Civil
Case No. 279, and also because they had caused to have a writ of attachment
levied on the properties of plaintiffs maliciously and without any justifiable
motive. On the other hand, Civil Case No. 279 was instituted by plaintiffs
against the Alto Surety & Insurance Co., Inc. for the annulment of the
indemnity agreement which is claimed to have been illegally executed. In the
latter case, it must have been claimed and proven that said indemnity agreement
was executed and prepared because of the active participation of Attys. Hamada
and De Guzman who have taken advantage of the ignorance and good faith of
plaintiffs for which reason the court declared said agreement null and void and
without effect. The issues involved in the two cases are therefore connected and
interrelated and could have been threshed out only in one case. It is for this
reason that the court a quo said that “after a study of the same (it) holds that
the actions for damages in all the causes of action are in the nature of a
counterclaim necessarily connected with the main causes of action in Cases Nos.
279 and 293. The failure to set them up in said cases bars their being brought
up in a separate action.” This finding is correct. To hold otherwise would be to
pass on the same issues in two separate cases, a situation which our rules seek
to avoid (Rule 10, Section 6).

It is true that in Civil Case No. 279 the only party defendant was the Alto
Surety & Insurance Co., Inc., whereas in the present action the parties
defendants are the attorneys of said company, namely, Sinai C. Hamada and
Guillermo F. de Guzman, but this situation could have been remedied had
plaintiffs in the former case brought them in as parties defendants, as it was
their duty to do, in order that judgment, if any, could be rendered against
them. This is also allowed by our rules (Rule 3, Section 6). Their failure to do
so constitute a bar to the present action.

The same thing may be said with regard to the third cause of action which
arises from the alleged participation of defendants in the improper attachment
of the properties of plaintiffs in Civil Case No. 293. If it is true, as
claimed, that plaintiffs had suffered damages as a result of said illegal
attachment, the duty of plaintiffs was to file their claim in the same case in
order that the award, if proper, may be included in the final judgment. The
claim must be filed before entry of the final judgment with due notice to the
parties affected. This is necessary in order to avoid multiplicity of actions
(Rule 59, section 20).

“Upon mature consideration, vie have reached the conclusion that under the
terms of section 20 of Rule 59, the application for damages and the notice to
the sureties should be filed in the trial Court by the party damnified by the
wrongful or improper attachment either ‘before the trial1 or, the latest,
‘before entry of the final judgment’, which means not later than the date when
the judgment becomes final and executory (sec. 2, Rule 35). Only in this way
could the award against the sureties be included in the final judgment’ as
required by the first part of sec. 20 of Rule 59. 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 (as expressly provided by Art. 2084 of the
new Civil Code, and Art. 1856 of the old one), 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 whosoever he considers in a better
situation to pay it.

“It should be observed that the requirements of section 20 of Rule 59 appear
designed to avoid multiplicity of suits. But to enable the defendant to secure a
hearing and judgment against the sureties in the attachment “bond, even after
the judgment for damages against the principal has become final, would result in
as great a multiplicity of actions as would flow from enabling him to sue the
principal and the sureties in separate proceedings.” (Domingo del Rosario v.
Gonzalo P. Nava, et al., G. R. No. L-5513, August 18, 1954)

Wherefore, the order appealed from, is affirmed, without pronouncement as to
costs.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Labrador,
Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ.,
concur.