G.R. No. 84979 - Stronghold Insurance Co., Inc. vs. Court of Appeals

Case Digest (G.R. No. 84979)
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Facts:

Nature of the replevin case and parties

Stronghold Insurance Co., Inc. acted as surety for a replevin bond in a case filed against Jose Orosa in the Regional Trial Court of Manila, Branch 3, presided over by Hon. Clemente M. Soriano.
The replevin suit was initiated by FCP Credit Corporation as plaintiff.
Jose Orosa was the private respondent/defendant in the trial court and the party seeking damages on the bond.

Filing of the complaint and issuance of the writ of replevin

FCP Credit Corporation filed a complaint against Jose Orosa dated November 13, 1984, docketed as Civil Case No. 84-28188, seeking issuance of a writ of replevin over a motor vehicle covered by a chattel mortgage executed in favor of plaintiff.
Stronghold Insurance Co., Inc. furnished an affidavit of merit and a replevin bond in the amount of P210,000.00.
Upon compliance, the trial court issued a writ of replevin (issued on January 7, 1985).

Trial court judgment on the merits (March 25, 1988)

On March 25, 1988, the trial court rendered judgment with the dispositive portion:

Dismissal of the complaint for lack of merit.
Declaration that the plaintiff was not entitled to the writ of replevin issued on January 7, 1985, and consequent liability to defendant for actual damages under the replevin bond it filed.
On defendant’s counterclaim, ordering plaintiff to pay P400,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 as attorney’s fees.
Ordering plaintiff to return to defendant the subject 1983 Ford Laser Sedan (Motor or Serial No. SUNKBT 14584) either in kind or value, in cash as of the date of decision, and to pay costs.

Receipt of copy of the decision:

Jose Orosa received the decision on April 11, 1988.
Stronghold Insurance Co., Inc. received the decision on April 13, 1988.

Motion for execution pending appeal and petitioner’s opposition

On April 14, 1988, Jose Orosa filed a motion for execution of the judgment pending appeal, alleging possible ineffectiveness because FCP Credit Corporation was already liquidating its business affairs.
Jose Orosa expressed willingness to file a bond for the purpose.
Stronghold Insurance Co., Inc. opposed the motion through a “Motion for Partial Reconsideration of the Decision and Opposition to the Motion for Execution” filed on April 26, 1988, and cited grounds as summarized by the respondent court:

Alleged liability adjudged without hearing and violation of Rule 57, Section 20 in relation to Section 10, Rule 60 of the Rules of Court.
Alleged lack of procedural basis since petitioner was allegedly not a party to the proceedings.
Allegation that the motion’s claims of ineffectiveness were speculative, self-serving conclusions without factual basis.
Alleged failure to specify the surety’s exact liability under the bond.

Application for judgment on the bond and scheduling of hearing

Jose Orosa later filed an application for judgment on the bond on April 26, 1988, adopting by reference his motion for execution pending appeal and the trial court’s findings.
Stronghold Insurance Co., Inc. opposed the application, contending:

Appeal had been perfected, so the trial court allegedly lost jurisdiction to hear the defendant’s motion.
The application for damages allegedly failed to set forth facts showing right thereto and the amount.
The motion allegedly was fatally defective due to lack of the requisite three (3) days notice.

The hearing on the application was scheduled on April 29, 1988.
During the scheduled hearing, Jose Orosa and counsel failed to appear.
Petitioner's counsel orally moved for denial of the application, but the trial court denied the motion and declared all incidents submitted for resolution.

Status of notice of appeal and trial court action in parallel

Action on plaintiff’s notice of appeal and motion to elevate the records was held in abeyance by the court.
In a special order dated June 3, 1988, the trial court ordered issuance of a writ of execution pending appeal upon Jose Orosa’s filing of a bond in the amount of P500,000.00.
The trial court cited special reasons for immediate execution:

Defendant’s willingness to file a bond to answer for damages in case of reversal.
Plaintiff’s imminent danger of insolvency or dissolution.

Petitioner's “Motion for Partial Reconsideration” filed on April 26, 1988 was denied on June 3, 1988 for lack of merit.
On June 6, 1988, the trial court held that Jose Orosa’s right to recover damages on the replevin bond, and petitioner’s liability for the damages and all sums of money recovered by defendant against plaintiff in the lower court (jointly and severally with plaintiff and to the extent of the bond value), was unquestionable.
On June 7, 1988, the trial court issued a “supplemental decision” stating, in accordance with Sec. 10, Rule 60, that:

The surety (Stronghold Insurance Co., Inc.) and plaintiff were ordered, jointly and severally, to return the 1983 Ford Laser 1.5 Sedan, or its equivalent in kind or in cash as of March 25, 1988.
The surety and plaintiff were ordered to pay the damages specified in the decision.
Payment was “to the extent of the value of the replevin bond which is P210,000.00.”
Costs were assessed against the surety.

Levy, garnishment, and the certiorari petition with injunction

Deputy Sheriff Jaime K. Del Rosario levied and garnished petitioner’s funds upon issuance of execution pending appeal.
The levy and garnishment were on June 17, 1988, involving Far East Bank and United Coconut Planters Bank.
On June 22, 1988, petitioner filed a petition for certiorari with prayer for preliminary injunction and/or restraining order in the Court of Appeals, docketed as CA-G.R. SP No. 14938.
Petitioner sought annulment of the trial court orders dated June 3 and June 6, 1988, the supplemental d...(Subscriber-Only)

Issues:

Whether the surety could be held liable on the replevin bond and damages after the trial court ruled in favor of defendant

Whether the trial court properly held petitioner liable under the replevin bond after dismissal of the complaint and declaration that plaintiff was not entitled to the writ.
Whether the proper procedure under Sec. 10, Rule 60 in relation to Sec. 20, Rule 57 was complied with for holding the surety liable on the bond.

Application with the court having jurisdiction.
Timeliness before the judgment became executory and before appeal was perfected.
Statement of facts showing right to damages and the amount.
Due notice to the attaching creditor and surety.
Proper hearing allowing surety to be heard.

Whether the application for judgment on the bond and the motion for immediate execution were timely and affected by perfection of appeal

Whether plaintiff’s notice of appeal had already been perfected so that the trial court lost jurisdiction.
Whether the filing of the application for judgment on the bond functioned as a motion for reconsideration that interrupted the period to appeal.

Whether petitioner’s right to hearing and cross-examination was violated in the hearing on the application for judgment on the bond

Whether the trial court satisfied the requirement of a “proper hearing” for surety proceedings.
Whether petitioner’s claimed inability to cross-examine warranted reversal, in light of petitioner’s failure to present new defenses and its reaction to Jose Orosa’s non-appearance.
Whether petitioner could question the supplemental judg...(Subscriber-Only)

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