G.R. No. L-28030 - Imperial Insurance, Inc. vs. De los Angeles

Case Summary (G.R. No. L-28030)

Factual Background

Private respondents obtained writs of preliminary attachment against properties of defendant Felicisimo V. Reyes in two civil actions (Civil Cases Nos. Q-5213 and Q-5214). To procure dissolution of those attachments, the defendant and petitioner Imperial Insurance executed counterbonds (dated June 30, 1960): one binding jointly and severally the defendant and the insurer in the sum of P60,000 (Q-5213) and another for P40,000 (Q-5214). The trial yielded judgment for the plaintiffs; the decision was affirmed on appeal and became final. The writs of execution issued by the trial court were returned "unsatisfied in whole or in part" by the Provincial Sheriff of Bulacan on August 20, 1966. Private respondents then moved for recovery on the surety (Sept. 9, 1966), eventually obtaining an order rendering judgment against the bonds (Nov. 10, 1966). Petitioner filed motions for reconsideration and notice of intent to appeal; a writ of execution against the bonds was ordered on Jan. 19, 1967. Petitioner sought certiorari with preliminary injunction in the Court of Appeals, which dissolved the injunction and dismissed the petition; that Court of Appeals decision was brought here for review.

Procedural History

Attachments levied; counterbonds posted to dissolve attachments (June 30, 1960).
Final judgment for plaintiffs in underlying cases; writs of execution issued (June 24, 1966); writs returned unsatisfied (Aug. 20, 1966).
Motion for recovery on surety bonds filed (Sept. 9, 1966); opposition by petitioner (Sept. 24, 1966).
Trial court rendered judgment against bonds (Nov. 10, 1966); petitioner moved for reconsideration (Nov. 23, 1966) which was denied (Jan. 9, 1967).
Trial court ordered issuance of writs of execution against the bonds (Jan. 19, 1967).
Petitioner sought certiorari with preliminary injunction in the Court of Appeals (Jan. 25, 1967); injunction initially issued but later dissolved by the Court of Appeals (decision July 19, 1967).
This Court reviewed the Court of Appeals decision by certiorari.

Issues Presented

Whether the trial judge could issue a writ of execution against the petitioner as surety on the basis of an ex parte motion that allegedly was not served on petitioner nor set for hearing.
Whether plaintiffs/creditors may proceed directly against the surety on a counterbond without first exhausting the defendant’s properties.
Whether the orders (Nov. 10, 1966 judgment against the counterbonds; Jan. 9, 1967 denial of reconsideration; Jan. 19, 1967 execution order) were final and appealable under Section 2, Rule 41, Revised Rules of Court.
Whether, upon the defendant’s death during trial and prior to substitution, the sheriff’s procedure to execute “surviving claims” should follow the same process as Section (f), Rule 57 for execution of a writ of preliminary attachment in custodia legis.

Court’s Analysis — Issue 1 (Notice and Hearing for Execution on Counterbond)

The Court found that the notice-and-hearing requirement under Section 17, Rule 57 (allowing recovery from sureties after "notice and summary hearing in the same action") was substantially complied with. The records show that private respondents filed a motion for recovery (Sept. 9, 1966) which was heard (Sept. 24, 1966); petitioner filed opposition and later a motion for reconsideration (Nov. 23, 1966) which the trial court set for hearing in conjunction with the ex parte motion for writ of execution; notice of that hearing was received by petitioner (Registry Return No. 40122). The Court therefore overruled petitioner’s contention that issuance of execution was procedurally improper for lack of notice or hearing.

Court’s Analysis — Issue 2 (Direct Action Against Surety; Excussion Rule)

The Court distinguished ordinary counterbonds (where sureties incur subsidiary liability) from counterbonds in which the surety expressly bound itself "jointly and severally" (solidarily) with the principal. The bonds here contained express joint-and-several (in solidum) undertakings. Under Article 2059(2) of the Civil Code, excussion (prior exhaustion of the debtor’s property) is not required where the guarantor has bound himself solidarily with the debtor. Section 17, Rule 57 (which prescribes recovery after execution is returned unsatisfied and after notice and summary hearing) cannot be read to override the substantive civil-law rule that solidary sureties are liable without prior excussion. Consequently, because the Imperial Insurance had bound itself solidarily with the defendant, the creditors lawfully proceeded directly against the insurer upon establishment of the other requisites; petitioner cannot escape liability on the bonds by invoking the excussion rule.

Court’s Analysis — Issue 3 (Finality and Appealability of Orders)

The Court held that recovery on counterbonds is properly had in the same underlying action (Section 17, Rule 57) and that, after the judgment in the main actions became final and the writs of execution were returned unsatisfied, the demand on the surety and summary proceeding sufficed to fix liability. Therefore, the order rendering judgment against the counterbonds (Nov. 10, 1966) was effectively superfluous because liability attached automatically once the writs were returned unsatisfied and demand had been made. The Court further affirmed that an order of execution is generally not appealable (to prevent endless litigation), except where execution varies the tenor of the judgment or where the judgment’s terms are ambiguous. Neither exception applied here. The Court concluded that the orders in question were not appealable, and that issuance of the writ of execution was procedurally proper and consistent with the judgment.

Court’s Analysis — Issue 4 (Procedure After Death of Defendant)

The Court declined to rule on the procedural

Case Syllabus (G.R. No. L-28030)

Procedural Posture

Petition for certiorari filed with the Supreme Court to review the Court of Appeals decision in CA-G.R. No. 38824-R promulgated July 19, 1967, which dismissed petitioner’s petition and dissolved the writ of preliminary injunction issued on January 31, 1967.
Underlying litigation: Civil Case Nos. Q-5213 and Q-5214 (joined for trial) in the Court of First Instance of Rizal, Branch IV, Quezon City, in which private respondents obtained judgments against defendant Felicisimo V. Reyes.
After finality of those judgments and issuance of writs of execution, return by the Provincial Sheriff was "unsatisfied in whole or in part," and private respondents moved for recovery on counterbonds (surety bonds) posted to dissolve attachments.
The trial judge issued orders (including an order dated November 10, 1966 rendering judgment against the counterbonds and an order dated January 19, 1967 granting writs of execution against the bonds). Petitioner sought reconsideration, notice of intention to appeal, and ultimately certiorari relief in the Court of Appeals; the latter dissolved the preliminary injunction and dismissed the petition. The Supreme Court reviewed and affirmed the Court of Appeals decision.

Statement of Facts

Private respondent Rosa V. Reyes was plaintiff in Civil Case No. Q-8213 and obtained a writ of preliminary attachment against defendant Felicisimo V. Reyes; Pedro V. Reyes and Consolacion V. Reyes likewise in Civil Case No. Q-5214 obtained attachments against the same defendant.
To dissolve attachments, Felicisimo V. Reyes (principal) and The Imperial Insurance, Inc. (surety/petitioner) posted counterbonds described as "defendant's bond for dissolution of attachment": P60,000.00 in Civil Case No. Q-5213 and P40,000.00 in Civil Case No. Q-5214.
Civil Cases Q-5213 and Q-5214 were jointly tried; judgment was rendered in favor of the plaintiffs and affirmed on appeal, after which records were remanded for execution.
The Court below issued writs of execution on June 24, 1966; on August 20, 1966 the Provincial Sheriff of Bulacan returned the writs "unsatisfied in whole or in part."
On September 9, 1966 private respondents filed a "motion for recovery on the surety bonds"; petitioner filed an "opposition" on September 24, 1966.
Respondent Judge rendered judgment against the counterbonds on November 10, 1966. Petitioner filed a motion for reconsideration on November 23, 1966, denied January 9, 1967. Petitioner filed notice of intention to appeal on January 11, 1967.
On January 19, 1967 respondent Judge issued an order granting issuance of writs of execution against the bonds. Petitioner filed a petition for certiorari with prayer for preliminary injunction in the Court of Appeals on January 25, 1967; Court of Appeals granted a writ of preliminary injunction on January 30 (or January 31), 1967 and later dissolved it by decision dated July 19, 1967.
During the trial the defendant Felicisimo V. Reyes died; he was substituted by his surviving spouse, Emilia T. David, administratrix of his intestate estate.

Issues Presented (Assignments of Error by Petitioner)

Whether the respondent judge could legally issue a writ of execution against petitioner as surety on the basis of an ex parte motion for execution that was neither served upon the surety nor set for hearing.
Whether a plaintiff who obtained judgment against the defendant may legally proceed directly against the surety in a counterbond without prior exhaustion (excussion) of the defendant’s properties.
Whether the orders dated November 10, 1966 (judgment against counterbonds) and January 9, 1967 (denial of reconsideration), and the order of writ of execution dated January 19, 1967 are "final orders" appealable under Section 2, Rule 41 of the Revised Rules of Court.
Whether, in the absence of an express provision of the Rules, the procedure for execution against "surviving claims" when the defendant died during trial should follow the procedure set out in Section (f), Rule 57 respecting execution of a writ of preliminary attachment of properties in custodia legis.

Applicable Statutory and Codal Provisions Cited

Section 12, Rule 57, Revised Rules of Court — Discharge of attachment upon giving counterbond (text supplied in the source), including requirement that upon filing counterbond a copy be served on the attaching creditor or his lawyer and that counterbond "stand in place of the property so released."
Section 17, Rule 57, Revised Rules of Court — When execution returned unsatisfied, recovery had upon bond (text supplied in the source): surety on counterbond becomes charged and amount may be recovered after notice and summary hearing in the same action.
Article 2059, paragraph 2, Civil Code — Excussion shall not take place if the guarantor has bound himself solidarily with the debtor (text and citation included).
Article 1216, New Civil Code referenced as authority for solidary obligations.
Section 2, Rule 41, Revised Rules of Court referenced regarding appealability (petitioner's contention that certain orders are final and appealable).
Case law cited in the decision and discussion: Luzon Steel Corporation v. Sia (28 SCRA 58), Tijan v. Sibonghanoy (CA-G.R. No. 23669-R, Dec. 11, 1927), Cajefe v. Judge Fernandez (109 Phils. 743), Corpus v. Alikpala (22 SCRA 104).
Secondary authority: Moran, Comments on the Rules of Court, Vol. 3, 1980 Edition (pages cited in the record).

Court’s Findings on Notice and Hearing (as to Section 17, Rule 57)

The Court found the requirements of notice and summary hearing under Sec. 17, Rule 57 substantially complied with in the case:
- Private respondents filed a motion for recovery on the surety bonds on September 9, 1966, to which petitioner filed opposition on September 24, 1966 and was duly notified and heard on September 24, 1966.
- Petitioner filed a motion for reconsideration on November 23, 1966 of the November 10, 1966 order which was denied January 9, 1967.
- The respondent judge set the hearing of the ex parte motion for writ of execution together with the motion for reconsideration for December 17, 1966 at 8:30 a.m.; petitioner r
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