Title
Capital Insurance and Surety Co., Inc. vs. Del Monte Motor Works, Inc.
Case
G.R. No. 159979
Decision Date
Dec 9, 2015
A dispute over unpaid bus body fabrication led to a writ of attachment, countered by CISCO’s bond. SC ruled CISCO’s security deposit immune from levy, protecting policyholders, while upholding the bond’s validity.
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Case Digest (G.R. No. 159979)

Facts:

  1. Background of the Case:

    • The respondent, Del Monte Motor Works, Inc., sued Vilfran Liner, Inc., Hilaria F. Villegas, and Maura F. Villegas for unpaid billings related to the fabrication and construction of 35 passenger bus bodies.
    • The Regional Trial Court (RTC) issued a writ of preliminary attachment, leading to the levy of 10 buses and three parcels of land belonging to the defendants.
    • Maura F. Villegas filed a motion to discharge the attachment by posting a counterbond, which was issued by the petitioner, Capital Insurance and Surety Co., Inc. (CISCO).
  2. Judgment and Execution:

    • On January 15, 2002, the RTC ruled in favor of the respondent, ordering the defendants to pay P11,835,375.50, including interest, litigation fees, attorney’s fees, and costs of suit.
    • The judgment was enforceable against the counterbond posted by CISCO.
    • The respondent moved for execution, and the RTC granted the motion, leading to the levy of CISCO’s personal properties and a notice of garnishment against its security deposit in the Insurance Commission.
  3. Dispute Over the Counterbond:

    • CISCO contested the validity of the counterbond, claiming it was not properly issued and that the signatures on the bond were unauthorized.
    • CISCO also argued that the security deposit was immune from execution under Section 203 of the Insurance Code.
  4. RTC and CA Rulings:

    • The RTC ordered the release of funds from CISCO’s accounts and its security deposit in the Insurance Commission.
    • The Court of Appeals (CA) affirmed the RTC’s decision, holding that the counterbond was valid and that the security deposit could be levied to satisfy the judgment.

Issue:

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Ruling:

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Ratio:

  1. Immunity of Security Deposit:

    • Section 203 of the Insurance Code explicitly provides that the security deposit is exempt from levy by any judgment creditor or claimant.
    • The deposit is held as a contingency fund to answer for the obligations of the insurance company to all its policyholders, not just a single claimant.
    • Allowing a single claimant to levy the deposit would prejudice other policyholders and beneficiaries, undermining the purpose of the law.
  2. Validity of the Counterbond:

    • The counterbond issued by CISCO was valid and enforceable, as there was no sufficient evidence to prove that it was fraudulently issued or unauthorized.
    • CISCO failed to inform the court of the alleged loss of the bond, which weakened its claim of invalidity.
  3. Role of the Insurance Commissioner:

    • The Insurance Commissioner has the duty to hold the security deposit for the benefit of all policyholders and ensure its integrity.
    • The Commissioner’s refusal to release the deposit was justified, as releasing it would violate the statutory protection afforded to the deposit under the Insurance Code.


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