G.R. No. L-16716 - Jao vs. Royal Ficing Corp.

A bond issued specifically to secure a preliminary injunction cannot be executed to satisfy a defendant's mortgage claim.
The bond's purpose is limited to covering damages incurred by the defendant due to the injunction if it is later deemed wrongfully issued.
Legal principles dictate that guarantees cannot extend beyond their explicit terms (Art. 2055, new Civil Code).

For a surety to be liable for damages under a bond related to attachment, injunction, or similar actions, specific conditions must be met:
- The application for damages must be filed in the same case where the bond was issued.
- The application must be submitted before the final judgment is entered.
- A hearing must be conducted with notice given to the surety.

If the prevailing party does not file an application for damages against the bond before the final judgment, the surety is relieved of any further liability.
This principle is supported by case law, which emphasizes the importance of timely applications for damages.

Claims against a bond for damages must be substantiated by competent evidence to ensure they are legitimate and not fabricated.
The absence of a proper hearing to assess the validity of the damages claim undermines the court's ability to hold the surety liable.

Plaintiffs Pedro R. Jao and Catalina Sia executed a promissory note secured by a chattel mortgage in favor of Royal Financing Corporation.
Following an extrajudicial foreclosure, the plaintiffs sought a preliminary injunction to prevent the sale of their mortgaged properties, posting a bond for this purpose.
The trial court granted the injunction, but the defendants later moved for judgment against the surety's bond after the properties were reported missing.

The trial court ordered the execution of the bond to satisfy the defendant's mortgage claim, which the surety contested as erroneous.
The surety argued that the bond was not intended to secure the mortgage credit and that the execution of the bond was premature.

The bond was explicitly intended to secure the defendants against damages resulting from the injunction, not to serve as collateral for the mortgage.
The court found that the bond's terms did not support the execution for mortgage claims, reinforcing the principle that guarantees cannot extend beyond their stated purpose.