G.R. No. 159979 - Capital Insurance and Surety Co., Inc. vs. Del Monte Motor Works, Inc.

Capital Insurance and Surety Co., Inc. (“CISCO”), a duly registered insurance and bonding company, is the petitioner.
Del Monte Motor Works, Inc. is the respondent in a suit involving unpaid billings for the fabrication and construction of 35 passenger bus bodies.
The respondent originally filed the case in the Regional Trial Court (RTC) in Quezon City.

On March 3, 1997, the respondent initiated the action against several defendants, including Vilfran Liner, Inc. and the Villegas family, seeking recovery of unpaid services.
The RTC issued a writ of preliminary attachment, resulting in the levy of 10 buses, three parcels of land, and funds via garnishment from various bank accounts of the defendants.
In response, defendant Maura F. Villegas filed an Extremely Urgent Motion to Discharge Upon Filing of a Counterbond, attaching documents purportedly depicting a bond issued by CISCO.

The counterbond in question is identified as CISCO Bond No. JCL(3)00005.
Testimonies revealed that the counterbond was issued by officers of CISCO’s Manila Service Office despite internal rules requiring higher authority approval (President or Chief Operating Officer) for amounts exceeding P5,000,000.00.
Evidence later emerged that the bond was missing from CISCO’s records, with allegations that a photocopy showed a forged signature (specifically, the signature of witness Nelia C. Laxa).

On January 15, 2002, the RTC rendered a decision in favor of the respondent, holding the defendants jointly liable and making the counterbond enforceable.
The RTC ordered that the counterbond be available to satisfy the judgment, and execution proceedings ensued.
A notice of garnishment was issued against CISCO’s security deposit with the Insurance Commission, and the respondent sought its release to pay the judgment.

On August 15, 2002, the sheriff served a notice of garnishment against the petitioner’s security deposit held with the Insurance Commission.
The respondent moved to direct the release of funds from various banks and the security deposit to satisfy the judgment.
On December 18, 2002, the RTC issued a resolution ordering the release of funds from the petitioner’s security deposit.
However, the Insurance Commissioner refused to release the security deposit, citing Section 203 of the Insurance Code, which exempts such deposits from execution.

The petitioner assailed both the validity of the counterbond and the levy on its security deposit.
On September 15, 2003, the CA dismissed the petitioner’s petition for certiorari, upholding:

The validity and binding effect of the counterbond, despite issues concerning internal authorization and the missing document.
The interpretation that the securities (or security deposit) could answer for obligations under the insurance contract.

The petitioner subsequently brought the present appeal seeking reversal of these rulings.

Whether the Court of Appeals erred in holding that the counterbond filed in the trial court was a valid and subsisting obligation of CISCO despite internal rules on signing authority and issues regarding its missing status.
Whether the Court of Appeals erred in ruling that the securities (security deposit) deposited by CISCO, subject to Section 203 of the Insurance Code, may be subject to levy and execution by a judgment creditor.