LEONARDO C. PADILLA, PETITIONER, VS. RIZAL SURETY & INSURANCE CO., RESPONDENT.

Padilla versus Rizal Surety and Insurance

The Case

This is Padilla versus Rizal Surety and Insurance Company, a petition for certiorari brought by Leonardo C. Padilla to review a decision of the Court of Appeals. The dispute began as a collection and replevin action by the surety company against Evaristo Zulueta, who had defaulted on an indemnity agreement, and against Padilla, who had bought the mortgaged automobile. The case matters to a reviewee because it teaches the rule on finality of judgment: a decision that has become final and executory can no longer be appealed, and a later order that merely implements a reservation in that decision does not reopen the period to appeal the judgment itself.

Procedural History

The action was filed by Rizal Surety and Insurance Company in the Court of First Instance of Manila. After trial, the court rendered judgment on September 13, 1956, ordering Zulueta to pay the amount of the promissory note, ordering Padilla to deliver the Oldsmobile car or, failing delivery, to pay its value of 1,500 pesos with legal interest, and reserving to the plaintiff the right to proceed against Padilla and his surety on the redelivery bond. Copies of the decision were received on September 14, 1956. On October 22, 1956, the plaintiff moved for leave to prove damages on the counterbond. On November 24, 1956, the trial court issued an order sentencing Padilla and the Manila Surety and Fidelity Company to pay 1,500 pesos with interest and to pay actual damages of 3,000 pesos. Padilla's motion for reconsideration was denied, and only on January 25, 1957 did he file a notice of appeal.

The Court of Appeals refused to consider the first four assigned errors, holding that the decision of September 13, 1956 had already become final as to Padilla because he did not appeal within the thirty-day period. It also set aside the order awarding damages, finding no hearing or evidence to support the 3,000 pesos, and remanded the case to the trial court for determination of the damages on the redelivery bond. Padilla then came to the Supreme Court by petition for certiorari.

Facts

On March 19, 1948, Rizal Surety and Insurance Company executed a promissory note as indorser, guarantor and joint maker in favor of the Philippine National Bank for 4,000 pesos, with interest at six percent per annum, in consideration of its guarantee of a loan of 4,000 pesos granted to Evaristo Zulueta. Zulueta signed an indemnity agreement binding himself to indemnify the company against all damages, losses, penalties, charges and expenses. He also executed a chattel mortgage over the Oldsmobile car he had purchased with the loan. The mortgage was registered in the Office of the Register of Deeds of Manila on June 1, 1948, but was not reported to the Motor Vehicles Office until April 25, 1952.

On June 16, 1948, Zulueta sold the car to Filemon M. Salcedo, and the certificate of registration was issued in Salcedo's favor. On February 1, 1949, Salcedo sold the car to Leonardo C. Padilla, and the certificate of registration was issued in Padilla's favor.

The company sued on May 24, 1952. The trial court ordered the sheriff to take custody of the car, but Padilla filed a third-party claim, and Zulueta posted a redelivery bond under Section 5 of Rule 62, signed jointly by Padilla and the Manila Surety and Insurance Company, allowing Padilla to retain possession. The trial court then rendered the judgment of September 13, 1956, and later the order of November 24, 1956 awarding damages on the bond.

Issues

• Whether or not the order of November 24, 1956, fixing damages on the redelivery bond, operated to amend the decision of September 13, 1956, so that the decision could still be appealed within thirty days from that order.
• Whether or not the Court of Appeals erred in holding that the decision of September 13, 1956 had become final and executory as against Padilla, barring him from questioning the order to return the automobile or pay its value.
• Whether or not the Court of Appeals erred in setting aside the award of 3,000 pesos in actual damages and remanding the case to the trial court for the submission of evidence.

Applicable Provisions

Section 5 of Rule 62 of the Rules of Court, on the redelivery bond, provides:

If the defendant objects to the plaintiff's claim for the delivery of the property, or if the property is claimed by another person, the defendant may retain possession thereof by giving a bond executed to the plaintiff in an amount double the value of the property, conditioned for the return of the property to the plaintiff if the delivery is adjudged, or for the payment of its value if the return is not complied with.

This bond is the source of the undertaking enforced against Padilla and his surety, and it explains why the later order did not touch the judgment ordering the return of the car.

Section 10 of Rule 62, on the disposition of the property and the reservation of damages, provides:

If the property has been delivered to the plaintiff, the defendant may, upon motion, have the same returned to him by filing a bond, and the court may reserve the right of the plaintiff to proceed against the defendant and his surety on the bond for damages.

The trial court's reservation of the plaintiff's right to proceed on the counterbond was made under this provision, and the order of November 24, 1956 was issued in pursuance of that reservation.

Ruling

On the first issue, the Court held that the order of November 24, 1956 did not modify the decision of September 13, 1956. The decision contained two parts as to Padilla: the first ordering him to return the car or pay its value of 1,500 pesos, and the second reserving to the plaintiff the right to proceed against Padilla and his surety on the counterbond. The order of November 24, 1956 fixed the damages recoverable on that bond and was issued in pursuance of the second part. The Court explained:

The award of damages does not modify or change that part of the decision ordering Padilla to return the automobile or pay its value.

On the second issue, the Court affirmed the Court of Appeals. Since Padilla received the decision on September 14, 1956, and filed no motion for reconsideration and no notice of appeal until January 25, 1957, the decision had long become final and executory against him. The first three assigned errors, which questioned the effect of the unrecorded chattel mortgage, could therefore no longer be considered.

On the third issue, the Court noted that it did not fully agree with the Court of Appeals, because it did not appear that the plaintiff ever offered any evidence to support the claim for actual damages. Nevertheless, the Court refused to interfere with the discretion of the Court of Appeals in ordering a remand for the submission of evidence by both parties.

Doctrine

A judgment becomes final and executory upon the lapse of the period to appeal, and once final it can no longer be modified or appealed. A subsequent order that merely implements a reservation made in the original decision, such as an award of damages on a redelivery bond under Section 10 of Rule 62, is not a modification of the judgment and does not reopen the period to appeal the judgment itself. The order to return the property or pay its value, being contained in the original decision, must be appealed within the reglementary period; the later award on the bond is a separate matter against the defendant and his surety jointly and severally.

Disposition

The petition for certiorari was denied, and the decision of the Court of Appeals was affirmed, with costs against the petitioner.

Remember This

Memorize this line: a later order implementing a reservation in the judgment does not revive the period to appeal the judgment, which has already become final. Examiners use this case to test finality of judgment and the distinction between a judgment and an order enforcing a redelivery bond.