[ G.R. No. L-9950, July 31, 1959 ]
ALLIANCE INSURANCE & SURETY CO., INC., PETITIONER VS. HON. EDMUNDO S. PICCIO, IN HIS CAPACITY AS JUDGE OF THE COURT OF FIRST INSTANCE OF CEBU CITY. VICENTE E. R. ZOSA, IN HIS CAPACITY AS SHERIFF OF CEBU AND ANATOLIO YNCLINO, RESPONDENTS.
D E C I S I O N
BAUTISTA ANGELO, J.:
This is a petition for certiorari seeking to set aside an order entered by respondent Judge on September 14, 1955 directing that a writ of execution be issued against petitioner on the bond filed by it in the amount of P1,000.00.
On May 22, 1940, a complaint for possession and damages was originally filed by Rufina Vergara against Jose Alcos and Maria Georfo before the Court of First Instance of Cebu. Upon plaintiff's petition, a writ of preliminary injunction was issued so that plaintiff may take possession of the property pendente lite. In the meantime, Rufina Vergara died and was substituted as party-plaintiff by Anatolio Ynclino.
On November 28, 1945, the writ of preliminary injunction was lifted upon defendants' filing a counterbond which was subscribed by bondsmen Bernabe Nengasca and Ismael Abendan. Later these bondsmen were allowed to withdraw on condition that defendant file a counterbond, and in compliance with this order defendants on September 6, 1952 caused the Alliance Insurance & Surety Co., Inc., petitioner herein, to file said counterbond subject to the condition that in case plaintiff should suffer damages by reason of the lifting of the preliminary injunction the principal and surety jointly and severally shall be responsible therefor in an amount not exceeding P1,000.00.
During the trial of the case wherein plaintiff presented evidence not only as to his right of possession but also as to his claim for damages, defendants were present, assisted by their counsel, who likewise presented evidence in their behalf, but not the surety who was not notified thereof. And on May 13, 1953, the trial court rendered judgment ordering defendants to deliver the possession of the property to plaintiff and to pay the amount of P8,416.00 as damages. The Court of Appeals affirmed this judgment in toto on appeal taken by defendants.
After the case was remanded to the court of origin, the decision having become final and executory, plaintiff filed a motion for execution of the judgment against defendants, which was granted, but the writ was returned by the sheriff with the statement that defendants had no property which may be subject of execution. Thereupon, plaintiff filed another motion praying that an alias writ of execution be issued against the surety in view of the Insolvency of defendants, to which petitioner filed an opposition upon the main ground that the decision does not contain any award of damages arising from the lifting of the writ of preliminary injunction and that, even if it does, no notice was given of the hearing thereof to the surety before entry of final judgment as required by section 20, Rule 59 of the Rules of Court. But this opposition notwithstanding, the court granted the motion. Hence the present petition for certiorari.
Petitioner now contends that the award of damages contained in the decision cannot be enforced against it for the reason that no notice was given to it of the hearing relative to said damages as required by section 9, Rule 60, in relation to section 20, Rule 59, of the Rules of Court. And since said decision has already become final and executory, plaintiff's claim for damages can net longer be enforced against the petitioner who is deemed relieved from its liability under the bond, Section 9, Rule 60, provides:
And it has been held that this remedy is exclusive and by failing to file a motion for the determination of damages on time and while the judgment is still under the control of the court, the claimant loses his right to such damages.[1]
In the recent case of Visayan Surety & Insurance Corporation vs. Pascual, et al., 47 Off. Gaz. 5075, this Court made a restatement of the procedure to be followed as prescribed in section 20, Rule 59, in the following wise:
This is the issue that was resolved by this Court in a more recent case wherein after making a review of all the decisions of this Court on matters pertaining to the execution of the bond that may be filed in relation to attachment, injunction, and replevin, reached the conclusion that such failure is fatal in that it has the effect of relieving the surety from liability.[2] A brief statement of the facts of that case will not be amiss if only to show the close parallelism that exist between that case and the instant one.
The facts in the Nava case are:
This claim overlooks the fact that the aforesaid section refers to the bond executed in behalf of defendant in favor of the plaintiff wherein the surety binds himself to pay the amount of the judgment that may be rendered in favor of the plaintiff, which bond is given as a result of the issuance of a writ of preliminary attachment, and because it refers to the very judgment the surety is bound by it once it is rendered. On the other hand, section 20, Rule 59, refers to the damages that may be suffered by defendant on account of the levy of, the attachment.
Those two sections therefore refer to different subjects and they should not be confused one with the other. Moreover, section 17 refers exclusively to attachment and has no application whatsoever to injunction which is the subject of the instant case.
It is claimed by the distinguished dissenter that "in counterbonds * * * the surety is presumed to have actual knowledge of the claims for damages explicitly made in the complaint, for that is the only and very purpose of the counterbond. If the surety has that knowledge, what is the use of a further notice? He also knows that if insisted upon, such claim would be proven during the trial of the case. So if he is in any way interested in resisting the claim, he should see to it that he attend the hearing through a prior request to the Clerk of Court for such notice."
The flaw we find in this claim is that it presupposes that the surety in a counterbond is deemed to be a party to the case and as such he is not entitled to notice of hearing of the claim for damages, which claim has no legal basis because our rules do not consider him as such party. There is nothing in said rules that would require a surety under a counterbond to be so regarded and to be present in the case throughout the proceedings. To so hold would be an unwarranted amendment of the rules.
That the stand we take on the matter is the correct one may be seen by considering the case of a defendant who, having his property been preliminary attached, applied for dissolution of the attachment upon filing a counterbond "to secure payment to the plaintiff of any judgment he may recover in the action," as prescribed in section 12, Rule 59. In such case the rule does not consider the surety as a party to the case so much that "if the execution be returned unsatisfied" the surety can only be bound under the bond "after notice and summary hearing in the same action" (section 17, Rule 59). This proves, contrary to minority's claim, that even in a counterbond notice to the surety is necessary.
With regard to the cases cited in the minority opinion to support the theory that no notice to the surety is necessary to hold it liable for damages under its counterbond, suffice it to say that they are either favorable to our theory or are not in point.
Take for instance the Aguasin case(1) Here the surety objected to the execution on the bond because it was not notified of the hearing on the claim for damages and this Court upheld the objection and relieved the surety from liability holding that notice to the surety is indispensable if it should be given due process. And while the Court added the obiter dictum that "This case is different from those in which the surety, by law and/or by the term of his contract has promised to abide by the judgment against the principal renounced the right to be sued or cited," this cannot here apply because no such renunciation appears in the bond under consideration.
The case of Lawyers Cooperative Publishing Company (2) is not also in point. That is a case where the surety bound itself to guarantee the return of certain law books in the event that the return is adjudged to the plaintiff, and judgment having been rendered ordering the return of the books, the Court said that the bondsmen are liable under the bond. The bond, therefore, refers to something definite and not to something to be proven, as in the instant case. Moreover, the issue of lack of notice was not raised therein.
The same thing may be said with regard to the Mercado case(3) wherein the sureties bound themselves to pay to plaintiff in case of judgment the amount of $912.40. And so this Court held that they were liable because "the liability of the sureties was fixed and conditioned on the finality of the judgment rendered regardless of whether the decision was based on the consent of the parties, or on the merit." Clearly this case is inapplicable.
To follow the theory advocated in the minority opinion would be to add more confusion to the already befuddled state in which the bar is now found on the point in controversy. Our duty is to dispel any vestige of doubt rather than indulge in subtle distinctions. This we did in the Nava case (supra) which in our opinion represents a fair interpretation of our rule. No other course is left to us than to uphold it.
Wherefore, petition is granted. The order of respondent Judge dated September 14, 1955 is set aside. No costs.
Bengzon, Padilla, Montemayor and Concepcion, JJ., concur.
[1] Casimiro Japco vs. The City of Manila, 48 Phil., 851, 855 citing Santos vs. Moir, 36 Phil., 350; Somes vs. Crossfield, 9 Phil., 13, Macatangay vs. Municipality of San Juan de Bocboc, 9 Phil., 19; Visayan Surety & Insurance Corp. vs. Lacson, et al., 96 Phil., 878.
[2] Del Rosario vs. Nava, 95 Phil., 637.
(1)Aguasin vs. Velasquez, 88 Phil., 357.
(2) Lawyers Cooperative Publishing Company vs. Fernando Periquet and Luzon Surety Co.,
Inc., 71 Phil., 204.
(3) Mercado, et al. vs. Macapayag, et al., 40 Off. Gaz. (6th Supp. 108.)
On May 22, 1940, a complaint for possession and damages was originally filed by Rufina Vergara against Jose Alcos and Maria Georfo before the Court of First Instance of Cebu. Upon plaintiff's petition, a writ of preliminary injunction was issued so that plaintiff may take possession of the property pendente lite. In the meantime, Rufina Vergara died and was substituted as party-plaintiff by Anatolio Ynclino.
On November 28, 1945, the writ of preliminary injunction was lifted upon defendants' filing a counterbond which was subscribed by bondsmen Bernabe Nengasca and Ismael Abendan. Later these bondsmen were allowed to withdraw on condition that defendant file a counterbond, and in compliance with this order defendants on September 6, 1952 caused the Alliance Insurance & Surety Co., Inc., petitioner herein, to file said counterbond subject to the condition that in case plaintiff should suffer damages by reason of the lifting of the preliminary injunction the principal and surety jointly and severally shall be responsible therefor in an amount not exceeding P1,000.00.
During the trial of the case wherein plaintiff presented evidence not only as to his right of possession but also as to his claim for damages, defendants were present, assisted by their counsel, who likewise presented evidence in their behalf, but not the surety who was not notified thereof. And on May 13, 1953, the trial court rendered judgment ordering defendants to deliver the possession of the property to plaintiff and to pay the amount of P8,416.00 as damages. The Court of Appeals affirmed this judgment in toto on appeal taken by defendants.
After the case was remanded to the court of origin, the decision having become final and executory, plaintiff filed a motion for execution of the judgment against defendants, which was granted, but the writ was returned by the sheriff with the statement that defendants had no property which may be subject of execution. Thereupon, plaintiff filed another motion praying that an alias writ of execution be issued against the surety in view of the Insolvency of defendants, to which petitioner filed an opposition upon the main ground that the decision does not contain any award of damages arising from the lifting of the writ of preliminary injunction and that, even if it does, no notice was given of the hearing thereof to the surety before entry of final judgment as required by section 20, Rule 59 of the Rules of Court. But this opposition notwithstanding, the court granted the motion. Hence the present petition for certiorari.
Petitioner now contends that the award of damages contained in the decision cannot be enforced against it for the reason that no notice was given to it of the hearing relative to said damages as required by section 9, Rule 60, in relation to section 20, Rule 59, of the Rules of Court. And since said decision has already become final and executory, plaintiff's claim for damages can net longer be enforced against the petitioner who is deemed relieved from its liability under the bond, Section 9, Rule 60, provides:
"SEC. 9. Judgment to damages against party and sureties. Upon the trial the amount of damaged to be awarded to the plaintiff, or to the defendant, as the case may be, upon the bond of the other party, shall be claimed, ascertained, and awarded under the same procedure as prescribed in section 20 of Rule 59."Section 20, Rule 59, provides:
"SEC. 20 Claim for damages on plaintiff's bond on account of illegal attachment. If the judgment on the action be in favor of the defendant, he may recover, upon the bond given by the plaintiff, damages resulting from the attachment. Such damages may be awarded only upon application and after proper hearing, and shall be included in the final judgment. The application must be filed before the trial or, in the discretion of the court, before entry of the final judgment, with due notice to the plaintiff and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Damages sustained during the pendency of an 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 beard and decided by the trial court."It really appears from the above that the application for damages resulting from the issuance of a writ of preliminary injunction must be filed before the trial or before entry of final judgment, with due notice to the other party and his surety, setting forth the facts showing his right to the damages and the amount thereof. It likewise appears that the damages may be awarded only upon proper application and after proper hearing, and shall be included in the final judgment, the philosophy pf this ruling being that the court had acted on the provisional remedy which caused the damages has the exclusive jurisdiction to assess them because of its control of the case. (Moran's Comment, Vol. II, page 50, 1957 ed.).
And it has been held that this remedy is exclusive and by failing to file a motion for the determination of damages on time and while the judgment is still under the control of the court, the claimant loses his right to such damages.[1]
In the recent case of Visayan Surety & Insurance Corporation vs. Pascual, et al., 47 Off. Gaz. 5075, this Court made a restatement of the procedure to be followed as prescribed in section 20, Rule 59, in the following wise:
"(1) That damages resulting from preliminary attachment, preliminary injunction, the appointment of a receiver, or the seizure of personal property, the payment of which is secured by judicial bond, must be claimed and ascertained in the same action with due notice to the surety;The question that now arises is: Since plaintiff's claim for damages has already been awarded in the main decision without notice to the surety and the decision has become final, can said claim still be pressed against the surety by setting the same for hearing and giving the surety notice thereof? Does the failure to notify the surety on time relieve the surety from his liability under the bond?
(2) That if the surety is given such due notice, he is bound by the judgment that may be entered against the principal, and writ of execution may issue against said surety to enforce the obligation of the bond; and ,
(3) That if, as in this case, no notice is given to the surety of the application for damages, the judgment that may be entered against the principal cannot be executed against the surety* without giving the latter an opportunity to be heard as to the reality or reasonableness of the alleged damages. In such case, upon application of the prevailing party, the court must order the surety to show cause why the bond should not respond for the judgment for damages. If the surety should contest the prevailing party, the court must set the application and answer for hearing. The hearing will be summary and will be limited to such new defense, not previously set up by the principal, as the surety may allege and offer to prove. The oral proof of damages already adduced by the claimant may be reproduced without the necessity of an opportunity to cross-examine the witness or witnesses if it so desires.
To avoid the necessity of such additional proceedings, lawyers and litigants are admonished to give due notice to the surety of their claim for damages on the bond at the time such claim is presented."
This is the issue that was resolved by this Court in a more recent case wherein after making a review of all the decisions of this Court on matters pertaining to the execution of the bond that may be filed in relation to attachment, injunction, and replevin, reached the conclusion that such failure is fatal in that it has the effect of relieving the surety from liability.[2] A brief statement of the facts of that case will not be amiss if only to show the close parallelism that exist between that case and the instant one.
The facts in the Nava case are:
"Domingo del Rosario had instituted an ejectment suit against Gonzalo P. Nava in the Municipal Court of Manila, Civil Case No. 4467, and on January 30, 1948, he secured a writ of attachment upon due application and filing of an attachment bond for P5,000, with the Alto Surety and Insurance Co., Inc., as surety. Attachment was levied and after the case was tried, the Municipal Court rendered judgment against the defendant Nava. The latter appealed to the Court of First Instance of Manila, where the case was docketed with number 4949. In the Court of First Instance, Nava filed a new answer with a counterclaim, alleging that the writ of attachment was obtained maliciously, wrongfully, and without sufficient cause, and that its levy had caused him damages amounting to P5,000. No notice was served upon the surety of the attachment bond, Alto Surety and Insurance Co., Inc.In holding that notice to the surety should be given either before the trial or, at the latent, before entry of the final judgment, in all cases where damages are claimed arising from the issuance ox a bond, this Court made the following comment:
By decision of July 21, 1960, the Court of First Instance found that the attachment was improperly obtained, and awarded P5,000 damages and costs to the defendant Nava. The judgment having become final, a writ of execution was issued, but it had to be returned unsatisfied on January 19, 1951, because no leviable property of the plaintiff Del Rosario could be found. On November 7, 1951, Nava filed, through counsel, a motion in Court setting forth the facts and praying that the Alto Surety and Insurance Co., Inc. be required to show cause why it should not respond for the damages adjudged in favor of the defendant and against the plaintiff. The surety company filed a written opposition on the ground that the application was filed out of time, it being claimed that under sec. 20, Rule 59 of the Rules of Court, the application and notice to the surety should be made before trial, or at the latest, before entry of the final judgment. After written reply and rejoinder, the Court of First Instance, on December 10, 1951, issued the assailed order, rejecting Gonzalo P. Nava's motion to require the . Alto Surety and Insurance Co., Inc. to show cause, because it was filed out of time. Nava then appealed to this Court."
"It will be seen that the rulings above quoted are silent on the application and notice to the surety should be filed in those cases where a judgment for damages has already been rendered against the plaintiff as principal of the attachment bond. Upon mature consideration, we 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 trial or, at 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 36). 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 cans 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 whomsoever he considers in a better situation tor pay it."This Court made the following conclusion:
"In view of the foregoing, we hold that while the prevailing party may apply for an award of damage against the surety even after an award has been already obtained against the principal, as ruled in Visayan Surety and Insurance Corp. vs. Pascual, G. R. No. L-3694, still the application and notice against the surety must be made before the judgment against the principal becomes final and executory, so that all awards, for damages may be included in the final judgment. Wherefore, the Court below committed no error in refusing to entertain the appellant Nava's application for an award of damages against the appellee surety Company ten months after the award against the principal obligor had become final."An attempt was made by some members of this Court to make this case fall under section 17, Rule 59, which provides:
"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 bond given pursuant to the provisions of this rule to secure the payment of the judgment shall become finally charged on such bond, and bound to pay to the plaintiff 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."by arguing that even in a case where a judgment has been returned unsatisfied the surety may still be bound to the plaintiff under the bond "after notice and summary hearing in the same action."
This claim overlooks the fact that the aforesaid section refers to the bond executed in behalf of defendant in favor of the plaintiff wherein the surety binds himself to pay the amount of the judgment that may be rendered in favor of the plaintiff, which bond is given as a result of the issuance of a writ of preliminary attachment, and because it refers to the very judgment the surety is bound by it once it is rendered. On the other hand, section 20, Rule 59, refers to the damages that may be suffered by defendant on account of the levy of, the attachment.
Those two sections therefore refer to different subjects and they should not be confused one with the other. Moreover, section 17 refers exclusively to attachment and has no application whatsoever to injunction which is the subject of the instant case.
It is claimed by the distinguished dissenter that "in counterbonds * * * the surety is presumed to have actual knowledge of the claims for damages explicitly made in the complaint, for that is the only and very purpose of the counterbond. If the surety has that knowledge, what is the use of a further notice? He also knows that if insisted upon, such claim would be proven during the trial of the case. So if he is in any way interested in resisting the claim, he should see to it that he attend the hearing through a prior request to the Clerk of Court for such notice."
The flaw we find in this claim is that it presupposes that the surety in a counterbond is deemed to be a party to the case and as such he is not entitled to notice of hearing of the claim for damages, which claim has no legal basis because our rules do not consider him as such party. There is nothing in said rules that would require a surety under a counterbond to be so regarded and to be present in the case throughout the proceedings. To so hold would be an unwarranted amendment of the rules.
That the stand we take on the matter is the correct one may be seen by considering the case of a defendant who, having his property been preliminary attached, applied for dissolution of the attachment upon filing a counterbond "to secure payment to the plaintiff of any judgment he may recover in the action," as prescribed in section 12, Rule 59. In such case the rule does not consider the surety as a party to the case so much that "if the execution be returned unsatisfied" the surety can only be bound under the bond "after notice and summary hearing in the same action" (section 17, Rule 59). This proves, contrary to minority's claim, that even in a counterbond notice to the surety is necessary.
With regard to the cases cited in the minority opinion to support the theory that no notice to the surety is necessary to hold it liable for damages under its counterbond, suffice it to say that they are either favorable to our theory or are not in point.
Take for instance the Aguasin case(1) Here the surety objected to the execution on the bond because it was not notified of the hearing on the claim for damages and this Court upheld the objection and relieved the surety from liability holding that notice to the surety is indispensable if it should be given due process. And while the Court added the obiter dictum that "This case is different from those in which the surety, by law and/or by the term of his contract has promised to abide by the judgment against the principal renounced the right to be sued or cited," this cannot here apply because no such renunciation appears in the bond under consideration.
The case of Lawyers Cooperative Publishing Company (2) is not also in point. That is a case where the surety bound itself to guarantee the return of certain law books in the event that the return is adjudged to the plaintiff, and judgment having been rendered ordering the return of the books, the Court said that the bondsmen are liable under the bond. The bond, therefore, refers to something definite and not to something to be proven, as in the instant case. Moreover, the issue of lack of notice was not raised therein.
The same thing may be said with regard to the Mercado case(3) wherein the sureties bound themselves to pay to plaintiff in case of judgment the amount of $912.40. And so this Court held that they were liable because "the liability of the sureties was fixed and conditioned on the finality of the judgment rendered regardless of whether the decision was based on the consent of the parties, or on the merit." Clearly this case is inapplicable.
To follow the theory advocated in the minority opinion would be to add more confusion to the already befuddled state in which the bar is now found on the point in controversy. Our duty is to dispel any vestige of doubt rather than indulge in subtle distinctions. This we did in the Nava case (supra) which in our opinion represents a fair interpretation of our rule. No other course is left to us than to uphold it.
Wherefore, petition is granted. The order of respondent Judge dated September 14, 1955 is set aside. No costs.
Bengzon, Padilla, Montemayor and Concepcion, JJ., concur.
[1] Casimiro Japco vs. The City of Manila, 48 Phil., 851, 855 citing Santos vs. Moir, 36 Phil., 350; Somes vs. Crossfield, 9 Phil., 13, Macatangay vs. Municipality of San Juan de Bocboc, 9 Phil., 19; Visayan Surety & Insurance Corp. vs. Lacson, et al., 96 Phil., 878.
[2] Del Rosario vs. Nava, 95 Phil., 637.
(1)Aguasin vs. Velasquez, 88 Phil., 357.
(2) Lawyers Cooperative Publishing Company vs. Fernando Periquet and Luzon Surety Co.,
Inc., 71 Phil., 204.
(3) Mercado, et al. vs. Macapayag, et al., 40 Off. Gaz. (6th Supp. 108.)