Case Summary (G.R. No. 212025)
Factual Background
Excellent Quality Apparel contracted Multi-Rich Builders to construct a factory within CPEZA, with an arbitration clause for disputes. After project completion in November 1996, Win Multi-Rich (incorporated February 1997) sued petitioner in January 2004 for unpaid construction fees, secured a writ of preliminary attachment, and obtained an P8.6 million bond from Visayan Surety.
Procedural History
– Petitioner posted its own check bond to lift attachment and moved to discharge on grounds of arbitration clause; RTC denied.
– Petitioner answered with compulsory counterclaim, seeking bond to satisfy damages for wrongful attachment.
– RTC deposited petitioner’s cash bond but released it to Win Multi-Rich upon its filing of a P9 million FESICO counter-bond.
– Petitioner petitioned CA (Rule 65) to annul RTC orders; CA granted but omitted direction to return funds.
– Petitioner elevated to SC (Rule 45); February 2009 SC decision dismissed Win Multi-Rich’s suit and ordered return of garnished amount with 12% interest.
Execution Proceedings and RTC Ruling
Upon finality, petitioner moved for execution against Win Multi-Rich and, if necessary, Visayan Surety and FESICO under their bonds. RTC issued writ of execution (October 19, 2009) but, on reconsideration (January 15, 2010), lifted execution against both sureties for lack of due-process hearing on bond claims.
CA Ruling on Re-execution
CA affirmed RTC’s lifting of execution against Visayan Surety and FESICO. It held that under Section 20, Rule 57, petitioner failed to file a timely damages claim with notice to the sureties before judgment became executory. CA also noted sureties were not parties in the SC case, depriving them of notice.
Issues Presented
- Whether execution against Visayan Surety and FESICO violates due process under Rule 57.
- Whether allowing execution against the sureties gives full effect to the SC judgment.
Legal Analysis
– Section 20, Rule 57 governs claims for unliquidated damages from wrongful attachment: must be filed before trial, before perfecting appeal, or before judgment becomes executory, with notice and hearing for both attaching party and surety. Failure to notify relieves the surety.
– Petitioner incorporated a damages claim in its answer but did not serve Visayan Surety or afford it hearing before finality. Thus, liability under Section 20 cannot be imposed on Visayan Surety.
– Section 12 and 17, Rule 57 address liquidated obligations on counter-bonds securing discharge of attachment. Once a judgment becomes executory, a surety on such counter-bond is liable for payme
Case Syllabus (G.R. No. 212025)
Facts of the Case
- On March 26, 1996, Excellent Quality Apparel, Inc. (petitioner), represented by Max L.F. Ying and Alfiero R. Orden, contracted Multi-Rich Builders, represented by Wilson G. Chua, to construct a garment factory in the Cavite PEZA. The project term was 150 days and included an arbitration clause.
- The factory was completed on November 27, 1996. On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-Rich) was incorporated.
- On January 26, 2004, Win Multi-Rich sued petitioner and Ying for sums and damages before RTC Manila, Branch 32, praying for a writ of preliminary attachment and alleging petitioner’s impending closure and Ying’s risk of absconding.
- Win Multi-Rich secured an attachment bond of ₱8,634,448.20 from Visayan Surety & Insurance Corporation. On February 2, 2004, the RTC issued the writ of preliminary attachment.
- Petitioner deposited Equitable PCI Bank Check No. 160149 for ₱8,634,448.20 to lift attachment and filed an Omnibus Motion (Feb 19, 2004) contesting both attachment and jurisdiction in view of the arbitration clause; the RTC denied relief on April 12, 2004.
- Petitioner filed its Answer with Compulsory Counterclaim on April 26, 2004, seeking lifting of the attachment and damages against Win Multi-Rich’s bond.
- The RTC directed deposit of the garnished funds on April 29, 2004. Win Multi-Rich moved for release; on May 3, 2004, the RTC released petitioner’s deposit upon Win Multi-Rich’s posting of a ₱9,000,000 bond from Far Eastern Surety & Insurance Co., Inc. (FESICO), enabling withdrawal of funds pre-trial.
Procedural History
- June 18, 2004: Petitioner filed a certiorari petition under Rule 65 before the Court of Appeals (CA), challenging RTC’s April 12 and 29 orders.
- March 14, 2006: CA granted relief, annulling both RTC orders and making permanent the writ of preliminary injunction; jurisdiction over the collection suit was affirmed.
- October 11, 2006: CA denied petitioner’s motion for reconsideration. Petitioner