G.R. No. 57957. December 29, 1982
ZENITH INSURANCE CORPORATION, PETITIONER, VS. HON. COURT OF APPEALS, HON. RICARDO J. FRANCISCO, AS PRESIDING JUDGE OF BRANCH VI, COURT OF FIRST INSTANCE OF RIZAL, PROVINCIAL SHE…
MELENCIO-HERRERA, J.:
The issue for resolution
is the correctness of the Order for the issuance of the Alias Writ of Execution
by the Court of First Instance of Rizal, Branch VI, in Civil Case No. 9490,
which was affirmed by the Court of Appeals in CA-G.R. No. SP-12295, making
petitioner Zenith Insurance Corporation liable for more than the amount of the
bond it had issued in favor of its principal, William B. Murphy.
The controversy stemmed
from the following facts:
On September 5, 1966,
William B. Murphy filed a case for collection of a sum of money, accounting and
damages, in the Court of First Instance of Rizal, Branch VI, Pasig, against
private respondent Pedro Mejorada (Civil Case No. 9490). Murphy likewise prayed for a Writ of
Preliminary Attachment, which the Trial Court granted upon a bond of
P250,000.00 issued by petitioner Zenith Insurance Corporation in favor of
Murphy.
After hearing on the
merits, the Trial Court rendered its Decision, the dispositive portion of which
reads:
“WHEREFORE, judgment
is hereby rendered:
1. Dismissing
the plaintiff’s Complaint dated September 3, 1966 and filed on September 5,
1966;
2. Declaring the Agreement dated July 20, 1966
(Exhs. B and 30) null and void and without any legal effect whatsoever;
3. Ordering the plaintiff to pay the defendant
P25,000.00 for cash advances and P146,092.48 for spare parts and materials;
4. Ordering plaintiff to pay the defendant
P330,000.00 representing unrealized profits;
5. Ordering plaintiff to pay defendant P20,000.00
by way of attorney’s fees; and
6. On the action of defendant against the
attachment bond, ordering the plaintiff and the respondent Zenith Insurance
Corporation to pay the defendant, jointly and severally against the attachment
bond but not exceeding the amount secured thereby in the sum of P250,000.00,
the following amounts:
a. P67,822.65 as actual damages plus interest of
6% per annum on the yearly premiums paid by the defendant on the two
counterbounds posted, from their dates of payment until satisfied by the
plaintiff and/or his surety;
b. Actual damages representing the simple legal
interest of 6% per annum on P93,336.85, posted by the defendant in securing his
initial counterbond for the same amount, from September 12, 1966 when the writ
of preliminary attachment was served on the defendant’s bank until January 8,
1970 when said writ was dissolved;
c. P30,000.00 as compensatory damages for
injury to the business and goodwill of the defendant;
d. P66,526.00 as compensatory damages for the
unrealized value(s) of the properties of the defendant which were sold in
haste, or auctioned in public bidding(s) therefor;
e. P30,000.00
as moral damages;
f. P30,000.00
as exemplary or corrective damages; and
g. P20,000.00
as attorney’s fees.
Plaintiff shall pay costs.”
From the said Decision,
Murphy and petitioner, as surety, appealed to the Court of Appeals (CA-G.R. No.
53497-R). Pending appeal, and upon motion
of respondent, judgment was partially executed in the amount of P115,680.55.
On May 22, 1979, the
Court of Appeals rendered judgment affirming in toto the Decision of the Trial Court, thus:
“WHEREFORE, the decision appealed from being in accordance with
law and evidence, the same is AFFIRMED in toto subject to the
partial execution in the sum of P115,680.55 earlier enforced. No costs.”
Murphy moved for
reconsideration. This was denied by the
Court of Appeals. Murphy then appealed
by way of Certiorari to this Court (G.R. No. 53536). The petition was denied for late filing in
this Court’s Resolution of June 13, 1980.
Thereafter, private respondent proceeded against the balance of
petitioner’s attachment bond coverage, and collected P80,000.00 on July 24,
1980 and P54,319.45 on August 15, 1980, adding up to the full value of the bond
of P250,000.00, including the amount of P115,680.55 already partially
executed. Private respondent acknowledged
the last payment on August 15, 1980 to be “in full satisfaction of the
writ of execution issued.”
On November 26, 1980, private respondent filed a Motion for the
Issuance of an Alias Writ of Execution to enforce the judgment award. The Trial Court initially denied alias
execution as against petitioner on January 26, 1981, reasoning that, in
executing the judgment, only the dispositive portion is to be looked into in
the absence of such ambiguity as would justify resort to the body of the
Decision, and that as the judgment is clear, the liability of petitioner is
confined to the amount of the bond.
Private respondent moved for reconsideration. On April 9, 1981, the Trial Court issued the
questioned Order reconsidering its Order of January 26, 1981, and granting the
Motion for the issuance of an Alias Writ of
Execution, petitioner’s liability “not (being) limited to the amount of the bond it has put up but includes all the actual and consequential damages suffered
by private respondent, there having intervened malice and bad faith” on
petitioner’s part. Alias Writ was issued
and served upon petitioner. The latter’s
cash deposit at the Commercial Bank and Trust Company, Escolta Branch, and at
the Philippine Bank of Communications, Juan Luna Branch, were garnished.
Petitioner filed with the Court of Appeals, a Petition for
“Certiorari and Prohibition with Preliminary Mandatory
Injunction” (CA-G.R. No. SP-12295) imputing grave abuse of discretion to
respondent Judge in the issuance of the Order of April 9, 1981 granting the
Alias Writ.
On May 21, 1981,
respondent Court of Appeals upheld the Alias Writ of Execution, petitioner’s
“solidary liability (having) been clearly pronounced by this Court in
case CA-G.R. No. 53497-R” when it held that petitioner is equally liable
for all the damages that resulted from the wrongful issuance of the writ (of
attachment).” Petitioner moved for reconsideration arguing that liability
on the attachment bond is not to be confounded with liability on the judgment,
and that its liability cannot exceed the amount of the attachment bond. Reconsideration was denied for lack of merit.
Petitioner filed the present Petition stating that respondent
Judge acted without or in excess of jurisdiction in issuing the Order for the
issuance of the Alias Writ of Execution for the further enforcement of the
judgment against petitioner; and that respondent Court of Appeals acted with
grave abuse of discretion or erred in sustaining the said Order considering
that:
“1) private
respondent has been paid the full value of the P250,000.00 attachment bond
posted by petitioner for plaintiff, as required by the judgment and has, upon
receipt of the last installment completing such payment, acknowledged the same
to be ‘in full satisfaction of the writ of execution’;
2) the alias writ of execution would have
petitioner surety company satisfy, not the judgment with respect to the damages
resulting from the wrongful issuance of the writ of attachment, but the
judgment on the causes of action asserted by defendant (herein private
respondent) in his counterclaims against plaintiff;
3) the alias writ of execution would have
petitioner surety company pay more than the value of the attachment bond, in
disregard of the express limitation in the judgment of its liability to the
value of the bond as well as of settled jurisprudence.”
On September 16, 1981, we issued a Temporary Restraining Order
enjoining enforcement of the Order dated April 9, 1981, and on November 4,
1981, we resolved to give due course and required the filing of Memoranda by
the parties, which they have done.
The only issue to be
determined in this Petition is whether or not respondent Court committed grave
abuse of discretion in ordering the issuance of the Alias Writ of Execution
making petitioner solidarily liable for all costs and damages, or, for more
than the amount of its bond.
We find for petitioner.
Paragraph “6”
of the dispositive portion of the Trial Court’s Decision, which states:
“6. On the action of the defendant against the
attachment bond, ordering the plaintiff and the respondent Zenith Insurance
Corporation to pay defendant, jointly and severally against the attachment bond
but not exceeding the amount secured thereby in the sum of P250,000.00,
the following amounts:”
xxx xxx xxx
is
clear and correct. There is no ambiguity
that would “justify resort to the entire contents of the decision in order
to determine the extent of the liability of a party litigant”.[1] The liability of petitioner is expressly
limited to P250,000.00, the amount of the attachment bond. “A guaranty is not presumed, it must be
express and cannot extend to more than what is stipulated therein.”[2]
It is true that in CA-G.R. No. 53497-R (the appeal from the Trial
Court’s Decision), petitioner was pronounced “equally liable with its
principal for all damages sustained resulting from the wrongful issuance of
the Writ (of Preliminary Attachment)”.
The phrase “all damages” refers to those resulting from the
undertaking itself. It does not mean
that the surety is answerable for all costs and damages that may be adjudged
against its principal over and above what is adjudged against it in the
dispositive portion of the Decision, as it would be unreasonable to expand
petitioner’s liability for any and all amounts arising from the case as if it
were a “solidary judgment debtor.”
When a surety executes a
bond, it does not guarantee that the plaintiff’s cause of action is meritorious,
and that it will be responsible for all the costs that may be adjudicated
against its principal in case the action fails.[3] The extent of a surety’s liability is
determined only by the clause of the contract of suretyship.[4] It cannot be extended by implication,
beyond the terms of the contract.[5]
Specifically, this Court
in Rocco vs. Meads, supra, ruled:
“Liability on the bond
is contractual in nature, and is ordinarily restricted to the obligation
expressly assumed therein. Liability on
an attachment bond is created by, and rests on, its stipulations. The obligor has a right to stand on the very
terms of his contract, and his liability will not be extended beyond the fair
import of the words used; his liability is one not to be extended by
implication, and it will not be inferred that he agreed to do more than that
which is fairly expressed in the bond.”
The ruling in PNB vs.
Luzon Surety Co., Inc. 68 SCRA 207 (1975), which increased the surety’s liability
beyond the maximum of the bond by making it liable to pay interest because of
its failure to pay its obligation on demand, does not apply in this case,
because petitioner herein has settled its obligation, and its liability had
already been fully satisfied, unlike in the cited case where the increased
liability was “not because of the contract but because of the default and
the necessity of judicial collection”.
WHEREFORE, the Petition is hereby granted. The questioned Order of April 9, 1981 of the
Court of First Instance of Rizal, Branch VI, in Civil Case No. 9490, entitled
“William B. Murphy vs. Pedro F. Mejorada, defendant, and Zenith Insurance
Corporation, Surety” and the Decision of the Court of Appeals in CA-G. R.
No. SP-12295, entitled “Zenith Insurance Corporation vs. Hon. Judge
Ricardo Francisco, et. als.,” are hereby REVERSED and SET ASIDE. The “Temporary Restraining Order”
heretofore issued is hereby made permanent.
No costs.
SO ORDERED.
Teehankee, (Chairman), Plana, Vasquez, Relova, and Gutierrez, Jr., JJ., concur.
[1]
Decision, CA-G.R. No. SP-12295, p. 6.
[2]
Art. 2055, Civil Code.
[3]
Rocco vs. Meads, 96 Phil. 884 (1955).
[4]
Republic vs. Umali, 22 SCRA 922 (1968).
[5]
Magdalena Estate, Inc. vs. Rodriguez, 18 SCRA 967 (1966); Jao vs.
Royal Financing Corporation, 4 SCRA 1210 (1962).