Case Digest (G.R. No. L-16716)
Facts:
- On October 30, 1957, spouses Pedro R. Jao and Catalina Sia executed a promissory note in favor of Royal Financing Corporation, secured by a chattel mortgage dated October 31, 1957.
- Following a default, the defendant initiated an extra-judicial foreclosure, announcing a public auction for July 11, 1958.
- On July 7, 1958, the plaintiffs filed a complaint against the defendant and the Sheriff, seeking to declare the promissory note and chattel mortgage null and void, claiming they had settled the obligation.
- The plaintiffs sought to prevent the sale of their properties and demanded damages, including attorney's fees.
- To halt the auction, the plaintiffs posted a bond for preliminary injunction amounting to P2,500.00, with Associated Insurance & Surety Co., Inc. as the surety.
- The trial court granted the injunction, suspending the sale.
- The defendants counterclaimed for damages, asserting that the plaintiffs were still indebted.
- On June 11, 1959, the trial court dismissed the case due to the plaintiffs' failure to appear at a scheduled hearing.
- Following dismissal, the defendant corporation moved for judgment against the surety bond, claiming the mortgaged properties were no longer in the plaintiffs' possession.
- The surety company opposed, arguing the motion was premature since the counterclaim was unresolved.
- The trial court ruled in favor of the defendant, ordering execution of the bond to satisfy its mortgage claim.
- The surety company appealed, raising legal questions regarding the bond's nature and the judgment's execution.
Issue:
- (Unlock)
Ruling:
- Yes, the trial court erred in holding that the bond was intended to secure the defendant corporation's mortgage credit.
- No, the trial court was incor...(Unlock)
Ratio:
- The Supreme Court clarified that the bond was intended to secure the defendant's right to damages from the preliminary injunction, not to secure mortgage credit.
- The bond's language explicitly stated it was to cover damages if the plaintiffs were found not entitled to the injunction.
- A guaranty cannot ...continue reading
Case Digest (G.R. No. L-16716)
Facts:
On October 30, 1957, spouses Pedro R. Jao and Catalina Sia (plaintiffs) executed a promissory note in favor of Royal Financing Corporation (defendant), which was secured by a chattel mortgage dated October 31, 1957. Following a default, the defendant initiated an extra-judicial foreclosure of the chattel mortgage, with the Sheriff of Manila announcing a public auction of the mortgaged properties scheduled for July 11, 1958. In response, on July 7, 1958, the plaintiffs filed a complaint (Civil Case No. 36800) against the Royal Financing Corporation and the Sheriff, seeking to declare the promissory note and chattel mortgage null and void, claiming they had already settled the obligation. They also sought to prevent the sale of their properties and demanded damages, including attorney's fees. To halt the auction, the plaintiffs posted a bond for preliminary injunction amounting to P2,500.00, with Associated Insurance & Surety Co., Inc. as the surety. The trial court granted the injunction, suspending the sale.
Subsequently, the defendants filed their answers, asserting that the plaintiffs were still indebted to the corporation and counterclaimed for damages. On June 11, 1959, the trial court dismissed the case due to the plaintiffs' failure to appear at a scheduled hearing, despite proper notification. Following the dismissal, the defendant corporation moved for judgment against the surety bond, citing that the mortgaged properties...