G.R. No. 257136 - Domingo vs. Office of the Deputy Ombudsman for Military and Other Law Enforcement Offices

On October 6, 1948, Cesareo Fabricante sold a parcel of land measuring approximately 423.5790 hectares in Cabusao, Camarines Sur to the Bureau of Hospitals for the sum of P42,350.
The deed of purchase and sale (Exhibit A) contained an express warranty against eviction and included a promise to secure the warranty with a bond.

On January 4, 1949, Cesareo Fabricante executed a bond (Exhibit B) in the amount of P80,000 with Alto Surety & Insurance Co., Inc. as surety to guarantee his performance under the contract.
The bond stated several key conditions:

The bond was executed pursuant to a recommendation of the Department of Justice dated June 17, 1948, which required that if the Court declared the land did not belong to the vendor, the purchase price would be returned to the Bureau of Hospitals along with damages and expenses.
The obligation of the surety was to be null and void upon Fabricante’s full compliance with all contract undertakings; otherwise, it would remain in effect.
The surety’s liability was limited to expire one (1) year after the land was registered in the name of the Bureau of Hospitals. The bond further required that registration proceedings commence within one (1) year from the date of the bond.
In the event a third party successfully claimed a portion of the land, both the principal and the surety were to respond proportionally, at a maximum rate of P100 per hectare.
The surety’s liability was expressly stated to not exceed that of the principal.

On July 22, 1952, the Republic of the Philippines filed Civil Case No. 2172 in the Court of First Instance of Camarines Sur against Sulpicio Roco to quiet title, as Roco claimed ownership of a 55-hectare portion of the land.
Cesareo Fabricante was later made a party to the proceedings.
On October 6, 1954, the lower court rendered a decision declaring that the disputed 55 hectares belonged to Roco.
Upon notification of the decision and a demand by the Bureau of Hospitals for indemnity as provided in the bond, Alto Surety & Insurance Co., Inc. (the defendant) objected by asserting several defenses.

The filing of Civil Case No. 2172 was not the type of land registration case contemplated by the bond provisions, hence it was filed “out of time.”
The plaintiff failed to notify the defendant of the pendency of the case.
The plaintiff neglected to appeal the decision rendered in the quiet title action, despite repeated requests by the defendant.

The liability under the bond was limited to the maximum rate of P100 per hectare, which for a 55-hectare portion amounted to P5,500.
Since no actual payment had been made to Roco in execution of the judgment, the plaintiff had not suffered any actual damage.

The Court of First Instance of Camarines Sur held the defendant liable under the surety bond for the loss sustained by the plaintiff due to its eviction from the 55-hectare portion, ordering the defendant to pay P5,500 plus the costs of the action.

The defendant appealed the decision, raising five distinct points of error, central among which were:

The contention that the filing of Civil Case No. 2172 constituted a breach of the bond and thus should release the surety from liability.
The assertion that non-notification of the defendant and the failure to appeal the quiet title decision had operated as a waiver of liability.

The record was subsequently certified to the Court of Appeals on the ground that the issues involved were purely questions of law.

Whether the filing of Civil Case No. 2172 (a quiet title action) constituted a violation of the conditions of the surety bond (Exhibit B) thereby releasing the surety, Alto Surety & Insurance Co., Inc., from its liability.
Whether the plaintiff’s failure to notify the defendant of the pendency of the civil action as stipulated in the bond discharges the surety from its obligations.
Whether the plaintiff’s failure to appeal from the decision rendered in Civil Case No. 2172—as repeatedly urged by the defendant—relieves the surety of its liability under the bond.
Whether the bond’s specified limitation of liability at P100 per hectare (applicable to the disputed 55 hectares) should preclude the enforcement of claims arising from the decision in Civil Case No. 2172.
Whether the lower court erred in ordering the surety to pay the sum of P5,500 plus the costs of the suit given the contexts of the bond conditions and subsequent legal proceedings.