G.R. No. 167131 - Spouses Flores vs. Stronghold Insurance Co., Inc.

Spouses Napoleon M. Flores, Sr. and Veronidia J. Flores, doing business as Flojos Garments Manufacturing (FGM), and Alexander J. Flores in his capacity as attorney-in-fact executed a Memorandum of Agreement (MOA) with Stephen Liu on April 28, 1995.
The MOA involved the sale of all rights and interests in their garments manufacturing business—including licenses, permits, machinery, supplies, spare parts, real property, and other accessories—for a purchase price of P8,500,000.00.
Under the MOA, Liu assumed repayment obligations relating to the spouses’ liabilities with Metropolitan Bank and Trust Company and was to pay the remaining balance within 120 days of the MOA’s execution.

On September 7, 1995, Liu filed a complaint against the Flores couple and Alexander J. Flores, seeking specific performance and damages for the alleged failure to execute necessary conveyance or transfer documents.
Alleging acts of harassment and obstruction by the petitioners, Liu requested the issuance of a temporary restraining order, writ of preliminary injunction, and writ of preliminary attachment.
On October 3, 1995, the Regional Trial Court (RTC) granted Liu’s prayer by issuing orders for a writ of preliminary injunction and attachment, subject to the posting and approval of an injunction bond (P2,000,000.00) and an attachment bond (P3,000,000.00).

In their Answer, the spouses Flores contended that Liu failed to perform his obligations under the MOA by not paying the balance of the purchase price, thereby causing them actual damages, loss of expected profits, and incurring additional liabilities.
They also asserted claims for moral damages, alleging mental anguish, reputational harm, and other injuries. Furthermore, they interposed counterclaims, arguing that the grounds for the issuance of preliminary attachment were non-existent at the time of the suit.
On October 13, 1995, the spouses filed a Motion to Lift the Preliminary Injunction and Attachment, expressing their willingness to post a bond and a counterbond for the lifting of such orders.

On June 25, 1999, the RTC rendered judgment declaring the MOA rescinded and held that Liu had breached the agreement by failing to pay the balance due.
The decision ordered Liu to pay actual damages—including sums covering payments to creditors and compensation for lost materials and machinery—as well as attorney’s fees and costs.
The trial court emphasized that the spouses Flores had complied fully with their obligations while Liu’s failure to discharge his payment duties constituted the breach of the MOA.

On July 16, 1999, after receiving the RTC’s decision copy on July 1, 1999, the spouses Flores filed an application for damages against the bonds posted by respondent Stronghold Insurance Corporation, Inc. (SICI).
In their pleading, they alleged that by posting the injunction and attachment bonds, Liu and SICI had bound themselves to be jointly and severally liable for any damages arising from the issuance of such orders.
SICI opposed the application, arguing that the petition was premature, factually unsubstantiated, and time-barred—asserting that the RTC decision had already become final and executory by the time the damage application was filed.

On November 10, 2004, the CA nullified the RTC’s order on the damages application, holding that the spouses’ motion was filed after the decision had become final and executory, as they did not appeal the judgment.
The spouses Flores then filed a motion for reconsideration before the CA, which was subsequently denied on February 17, 2005.
Petitioners then elevated the issue to the Supreme Court via a petition for review on certiorari, contending that the CA erred in characterizing the application for damages as time-barred.

Was the application for damages against the bonds posted by SICI, filed on July 16, 1999, timely filed under Section 20, Rule 57 of the 1997 Rules of Civil Procedure?

Whether the computation of the 15-day period for filing such an application—counting from the receipt of the RTC decision—supports the timeliness of the filing.
Whether the RTC still had jurisdiction to entertain the damage application given that the appeal period had not lapsed when the application was filed.