G.R. No. L-24709. October 20, 1977
ASIAN SURETY & INSURANCE CO., INC., PETITIONER, VS. HON. RAMON O. NOLASCO, PRESIDING JUDGE, BRANCH IX, COURT OF FIRST INSTANCE OF MANILA AND JOSE SAN AGUSTIN, SHERIFF OF THE CI…
FERNANDEZ, J.:
This is a petition for certiorari and/or prohibition with
preliminary injunction, praying
that the herein respondents Hon.
Ramon O. Nolasco, Presiding Judge, Branch IX, Court of First Instance of Manila, Jose San Agustin,
Sheriff of the City of Manila, and Ramon C. Dy, refrain from enforcing the
orders issued by said respondent Judge on June 3, 1965 and June 29, 1965 and
after due notice and hearing, a writ of prohibition issue commanding the respondents to desist
absolutely and perpetually from enforcing the judgment in Civil Case No. 54065
of the Court of First Instance of
Manila against petitioners counterbond filed therein.
The facts are:
1) On May 28, 1963, the private respondent Ramon
C. Dy filed a complaint with the Court of First Instance of Manila, assigned to
Branch IX, and docketed as Civil Case No. 54065, entitled “Ramon C. Dy vs.
Jovita Peraldo, doing business under the firm name of ‘Nation’s Pet Shop &
Tinsmith’ and George Uy King, doing business under the firm name of ‘George
Tinsmith Shop’.”
The suit was to collect from the defendants the sum of P10,000.00
on a promissory note plus P500.00 for and as attorney’s fees and the costs of
the suit;[1]
2) On May 29, 1963, upon motion of Ramon C. Dy,
the respondent Judge Ramon O. Nolasco issued an order of attachment against
the defendants therein, Jovita Peraldo and George Uy King. On the strength of this order, the herein
respondent Sheriff of Manila, through his deputy Simon Castillo, attached
certain properties belonging to defendants Jovita Peraldo and George Uy King;[2]
3) On May 31, 1963, the herein petitioner Asian
Surety & Insurance Co., Inc. executed a counterbond for the dissolution of
the aforesaid writ of attachment, binding itself jointly and severally with
therein defendants Jovita Peraldo and George Uy King in the sum of Ten Thousand
Five Hundred Pesos (P10,500.00), Philippine Currency, under the following
terms:
“. . . . that in
case the plaintiff recover judgment in the action the defendant will on demand
redeliver the attached property so released to the officer of the Court to be
applied to the payment of the judgment or in default thereof that the
defendant and surety will on demand pay to the plaintiff the full value of the
property released.”
By virtue of the aforementioned counterbond, respondent Judge
issued an order on June 8, 1963, discharging the attachment.[3]
4) On May 11, 1964, after hearing, respondent
Judge Ramon O. Nolasco rendered his decision in Civil Case No. 54065, the
dispositive portion of which reads:
“IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby
rendered in favor of the plaintiff and against the defendants, ordering the
said defendants, jointly and severally, to pay the plaintiff the sum of
P10,000.00, with legal rate of interest from the date of the filing of the
complaint until fully paid, together with the sum of P500.00 as and for
attorney’s fees, and to pay the costs of these proceedings.
SO ORDERED.”[4]
5) Upon the aforecited decision becoming final
and executory, a writ of execution was issued.
The writ was returned not satisfied because the sheriff could not locate
the defendants’ place of business or their residence in the City of Manila and
could not locate after due diligence any property of said defendants which may
be levied upon to satisfy the execution.[5]
6) On November 26, 1964, the herein respondent
Ramon C. Dy filed a motion with the court a quo for the execution
of the aforementioned decision or judgment
against the herein petitioner’s counterbond, which motion was opposed
by petitioner Asian Surety & Insurance Co., Inc. on the ground that the
property attached and released on its counterbond was then in custodia legis
in another pending case and, therefore, could not be redelivered to the officer
of the court in accordance with its undertaking.[6]
7) On February 23, 1965, the herein private
respondent Ramon C. Dy filed a reply to petitioner’s opposition alleging that
the property released by the latter’s counterbond was different from that under
custodia legis in another case;[7]
8) On April 20, 1965, the respondent Judge
issued an order setting for hearing the aforementioned motion of private
respondent Ramon C. Dy for execution of the judgment against the counterbond in
order to determine “the existence and the contents of the Sheriff’s Return
allegedly executed by Deputy Sheriff Simon Castillo in relation to the order of
attachment issued in the case.”[8]
9) On June 3, 1965, respondent Judge Nolasco
issued art order granting the motion for execution of petitioner’s
counterbond. Hence on June 15, 1965 the
herein petitioner filed an “Urgent Motion for Reconsideration” of
said order on the ground that it cannot be made liable on its counter-bond
unless the award be made after notice and hearing and before the final entry of
judgment in the case, citing Section 20, Rule 57 of the Rules of Court.[9]
10) On June 29, 1965, respondent Judge Ramon O.
Nolasco, issued an order finding no valid reason to disturb his order of June
3, 1965, considering that the order of execution in question was issued under
the provisions of Section 17 and not Section 20 of Rule 57 of the Rules of
Court. The urgent motion for
reconsideration was denied and his order of June 17, 1965 suspending the writ
of execution against the Asian Surety & Insurance Co., Inc. was set
aside. Hence, this petition for certiorari and/or prohibition with
preliminary injunction.[10]
Assailing the orders of June 3, 1965 and June 29, 1965, the
petitioner Asian Surety & Insurance Co. Inc. avers that the court a quo
acted without or in excess of its jurisdiction, or with grave abuse of
discretion in holding that petitioner is liable beyond the terms of its
undertaking on the counterbond in question.
Petitioner contends that under the terms of the surety contract,
its undertaking is that, in the event that the plaintiff in the action recovers
judgment against the defendants therein and the latter fail to deliver the
property so released to the officer of the court, jointly and severally, it
“will on demand pay to the plaintiff the full value of the property so released.” It insists
that its undertaking under the counterbond is to pay solidarily to the
plaintiff, Ramon C. Dy, the full value of the property released under the
counterbond. By the order of respondent
Judge dated June 3, 1965, the counterbond is made liable for the payment of the
judgment in the sum of P10,000.00, with legal interest from the filing of the
complaint until fully paid, together with the sum of P500.00 as and for
attorney’s fees and the costs of the litigation which is, according to herein
petitioner, contrary to the terms of its undertaking. Petitioner submits that since a surety on any
bond, whether judicial or otherwise, cannot be held liable beyond the terms of
its undertaking, this order of respondent Judge was an act beyond or without
jurisdiction, or in grave abuse of discretion.
To support its stand, petitioner cited Art. 1305 of the Civil Code of the
Philippines and the rulings in Gerardo vs. Plaridel Surety & Ins. Co.,
Inc., G. R. No. L-7807, Oct. 31, 1956 and Santos and Frias vs. Hon. Mejia, et
al., G. R. No. L-6383, Dec. 29, 1953, 53 O. G. 3770.
Petitioner contends that the stipulation in the counterbond is
not that it is to “secure the payment of any judgment that the attaching
creditor may recover in the action” as required by Section 17 of Rule 57
of the Rules of Court and insisted on by the herein respondents, but that it
bound itself jointly and severally with the defendants in the action to
redeliver the released property to the officer of the court to be applied to
the payment of the judgment or in default thereof pay on demand to the
plaintiff the full value of the property released; and that the bond filed by
it is not one contemplated under Section 12 of Rule 57 of the Rules of Court
but since the same was approved by respondent Judge and the other party in
whose favor it was executed did not object, it is therefore accountable only according
to the terms of its undertaking, citing Santos and Frias vs. Hon. Mejia, et
al., G. R. No. L-6383, Dec. 29, 1953, 53 O.G. 3770.
With respect to the matter of notice and hearing, petitioner
claims that there must be prior notice and hearing before a surety can be held
liable under the bond. It alleges that
it was not given an opportunity to be heard before its counter-bond was
charged.
Petitioner Asian Surety & Insurance Co. contends that
respondent Judge had assumed erroneously that under Section 17, Rule 57 of the
Rules of Court, there is no need to file an application against the counterbond
before the trial or before appeal is
perfected or before judgment becomes executory as provided for under Section
20 of the same Rule 57 and hence, respondent Judge’s order holding the
counter-bond liable under Section 17 of said Rule 57 is an abuse of discretion. It is the stand of petitioner herein that
under the terms of its undertaking, it assumes only the payment of the
“full value of the property released” and therefore takes it out of
the “ambit” of said Section 17 and brings it within the contemplation
of Section 20 of the same Rule 57. Considering
that the pre-requisite of applying against the counterbond before appeal had
been perfected or before the judgment becomes executory as provided for under
said Section 20 had not been complied with, the petitioner maintains that the
respondent Judge committed a grave abuse of discretion, or acted beyond or
without jurisdiction in holding the counterbond liable for the payment of the
judgment.[11]
The herein respondents countered that the real issue is not
whether a bonding company may be or may not be held liable beyond the terms of
its undertaking but what the herein petitioner, under the terms of the bond in
question, undertook to do, considering the Rules under which the bond was
issued, the circumstances of its issuance and the terms of the undertaking
pursuant to Section 12, Rule 57 of the Rules of Court.
The respondents argue that:
“The Rules simply require a bond ‘in an amount equal to the
value of the property attached.’ Defendants and petitioner could have proved
that the value of the property attached is so much. Without asking for the determination of the
value of the property attached, defendants and petitioner filed the bond in
question in the amount of P10,500.00.
Can it not be said that defendants and petitioner voluntarily fixed the
value of the property attached at P10,500.00?”[12]
On the question of notice and hearing before the surety may be
held liable under its bond, respondents herein distinguish the provisions of
Section 20 of Rule 57 and Section 17 of the same Rule.
Respondents say that Section 20 deals with the procedure for
claiming damages on a bond filed to secure the issuance of a writ of
preliminary attachment whereas Section 17 provides for the procedure in
executing a bond filed to lift an attachment.
Hence, Section 17 of Rule 57 applies in the present case and not Section
20 of the same Rule as contended by the petitioner.[13]
Further, respondents aver:
“Petitioner was duly served with a copy of the amended and
supplemental motion for execution of counterbond filed by the plaintiff (Annex
“G” of the petition).
Petitioner duly filed its opposition (Annex “H” of the
petition). Petitioner was likewise
served with a copy of plaintiff’s reply (Annex “I” of the petition),
and petitioner filed its rejoinder (Annex “J” of the petition). Petitioner was likewise served with a copy
of the order of respondent Judge (Annex “K” of the petition) setting
case for hearing on May 20, 1965 at 8:30 a.m. before the Deputy Clerk of Court,
who was commissioned to receive evidence, for the parties to prove the
existence and the contents of the Sheriff’s return . . .”
“Neither petitioner nor its counsel appeared at the hearing
of May 20, 1965. Hence, it should not
now be heard to question the ruling of the Judge based on the evidence
presented therein by interposing an absolution that it was not given the
opportunity to be heard.”[14]
From the foregoing, it appears clear that there are only two
contentious issues in this case:
1) Is petitioner Asian Surety & Insurance
Co., Inc. liable on its counterbond to pay the amount of P10,500.00?
2) Is prior notice and hearing essential to hold
the surety liable under its bond?
We shall first determine the question of whether or not there had
been notice to the petitioner and hearing in the present case.
In Rule 57, two separate bonds are mentioned. Section 17 speaks of a counterbond filed and
executed in behalf of the defendant in favor of the plaintiff to secure payment
of the judgment which plaintiff may obtain should the execution be returned
unsatisfied while Section 20 provides for
the procedure to recover on a bond executed by the plaintiff to secure the
payment of damages that the defendant may suffer by reason of the levy on his
property under the writ of attachment.
The counterbond filed to lift the writ of attachment executed by the
herein plaintiff Asian Surety & Insurance Co., Inc., for and in behalf of
the defendants below and in favor of the therein plaintiff Ramon C. Dy is
clearly the bond contemplated under Section 17 of said Rule 57 which reads:
“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 counterbond given pursuant
to the provisions of this rule to secure the payment of the judgment shall
become charged on such counterbond, and bound to pay to the judgment creditor
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.”
This section allows the counterbond to be charged only after
notice and hearing, summary though the latter might be.
This Court has ruled that the requirement of notice and hearing
is substantially complied with from the time the surety was allowed to move for
the quashing of the writ of execution and for the cancellation of its
obligation.[15]
In the present case, the petitioner Asian Surety & Insurance Co. was served
with a copy of the amended and supplemental motion for execution of the
counter-bond and had in fact filed an opposition thereto. Petitioner was likewise served with a copy of
the order of respondent court setting the date for hearing to receive evidence
of the existence and contents of the Sheriff’s Return with respect to the order
of execution to enforce the court’s decision on the principal action. Both said surety and the defendants therein,
according to the records of the case, failed to attend. We are satisfied that, in accordance with the
rule laid down in Luzon Steel Corp. vs. Sia, supra, the requisite
of notice and summary hearing had substantially been complied with and,
therefore, the herein petitioner cannot be heard to complain that it had not
been notified and given its day in court.
The submission of the petitioner that there being no evidence as
to the full value of the property attached, it is not liable on its counterbond
has no merit.
The petitioner surety has the burden to prove that the value of
the property attached is less than P10,500.00.
When the petitioner executed the counterbond in the amount of P10,500.00,
it is presumed that the full value of the property attached was
P10,500.00. The petitioner cannot now
complain that there was no evidence on the full value of the property attached. Precisely, under Section 12, Rule 57, Revised
Rules of Court, the judge shall, after hearing, order the discharge of the
attachment if a counterbond executed to the attaching creditor is filed on
behalf of the adverse party with the clerk or judge of the court where the
application is made in an amount equal to the value of the property attached as
determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action.
The defendants in Civil Case No. 54065 and the petitioner surety must
have considered the full value of the property attached when they filed the
bend in the amount of P10,500.00. The
defendants and the petitioner would not have filed a counterbond in the said
amount if the value of the property attached were less.
In view of the foregoing, the respondent Judge did not err in
holding the petitioner surety liable for the full amount of the counterbond of
P10,500.00 which covers the principal of P10,000.00 and the attorney’s fees in
the amount of P500.00.
Anent the issue of interest, this Court has ruled that the surety
is liable for interest on the principal obligation although that would
increase the liability of the surety to more than the maximum of its
undertaking under the bond.[16] Citing the rulings of this Court in Tagawa
vs. Aldanese, 43 Phil. 852; and Plaridel Surety & Insurance Co., vs. P. L.
Galang Machinery Co., 100 Phil. 679, 682, We held:
“If a surety upon demand fails to pay, he can be held liable
for interest, even if in thus paying, the liability becomes more than that in
the principal obligation. The increased
liability is not because of the contract but because of the default and the
necessity of judicial collection.”
It is the holding of this Court that if a surety, upon demand,
fails to pay, he can be held liable for interest, even if in thus paying, the
liability becomes more than the principal obligation. The increased liability is not because of the
contract but because of the default. In
the present case, the Asian Surety & Insurance Co., Inc., petitioner
herein, is liable for interest only from the time demand was made upon it until
the principal obligation is fully paid.
The petitioner, however, shall not be liable to pay costs.
WHEREFORE, the orders of June 3, 1965 and June 29, 1965
are hereby affirmed but the amount of P10,500.00 shall bear legal interest only
from the date of the receipt by the petitioner, Asian Surety & Insurance
Co., Inc., of the order of June 3, 1965 until the said amount is fully paid,
without pronouncement as to costs.
SO ORDERED.
Teehankee, (Chairman), Makasiar, Muñoz Palma, Martin, and Guerrero, JJ., concur.
[1]
Petition, p. 2, Rollo, pp. 1-2.
[2]
Ibid., p. 2.
[3]
Ibid., p. 3.
[4]
Ibid., Annex “D”, Rollo, p. 26.
[5]
Ibid., p. 4, Annex “E”, Rollo,
p. 33.
[6]
Ibid., p. 4, Annexes “F” and
“H”, Rollo, pp.
34 and 39, respectively.
[7]
Ibid., pp. 4-5.
[8]
Ibid., p. 5, Annex “K”, Rollo,
pp. 53-55.
[9]
Ibid., pp. 5-6.
[10]
Ibid., p. 7, Annex “P”, Rollo,
p. 78.
[11]
Ibid., pp. 7-19.
[12]
Reply Memorandum for the Respondents,
p. 3, Rollo, p. 153.
[13]
Ibid., pp. 6-7.
[14]
Ibid., p. 7.
[15]
Luzon Steel Corp. vs. Sia,
L-26549, May 15, 1969, 28 SCRA 58.
[16]
Philippine National Bank vs.
Luzon Surety Co., Inc., November 28, 1975, 68 SCRA 207.