Title
Zaragoza vs. Fidelino
Case
G.R. No. L-29723
Decision Date
Jul 14, 1988
A replevin case involving a car sale dispute where the surety, Mabini Insurance, was held jointly liable after posting a counter-bond, despite appealing jurisdiction and finality of judgment.
replevin action
surety company
jurisdiction

Case Summary (G.R. No. L-29723)

The Underlying Replevin Action and the Counter-Bond

Zaragoza’s complaint alleged that the automobile had been sold to Fidelino but the latter failed to pay the purchase price as stipulated. Acting on the plaintiff’s application for a writ, the sheriff took the car from Fidelino’s possession pursuant to a writ of delivery. The car was subsequently returned to Fidelino on the basis of a surety bond posted in her behalf by Mabini Insurance & Fidelity Co., Inc.

The trial court rendered judgment in favor of Zaragoza. The dispositive portion ordered Fidelino to pay P19,417.46 as the balance of the purchase price of the car, including interest thereon, collection charges, notarial fees, and sheriffs fees and expenses connected with the recovery of the vehicle; to pay liquidated damages of P6,471.84 equivalent to 33 1/3% of the balance outstanding; and to pay the costs of the suit.

The Motion to Amend the Decision to Include the Surety

Within the period to perfect an appeal, Zaragoza moved to amend the decision so as to include Mabini Insurance & Fidelity Co., Inc. as a party jointly and severally liable with Fidelino for the sums awarded in the judgment. Despite having been furnished copies of the motion and the notice of hearing, neither Fidelino nor the surety company filed an opposition, and neither appeared at the hearing.

The trial court found the motion meritorious and granted it. The Order of April 16, 1968 amended the dispositive portion to hold that Zaragoza’s judgment was payable jointly and severally by Maria Angela Fidelino and her surety, Mabini Insurance & Fidelity Co., Inc., covering the same amounts adjudged against the defendant.

The Surety’s Appeal and Its Assignments of Error

The surety did not question the amendment only as to amount. It challenged the trial court’s authority and the manner by which it was brought within the judgment obligation. It asserted that the lower court had never acquired jurisdiction over it because no summons was served on it, and that the filing of a counter-bond did not amount to voluntary submission to the court’s jurisdiction. It further argued that Zaragoza failed to comply with the proper procedure and notice required by Section 20, Rule 57 of the Rules of Court before finality of the original judgment. Lastly, it maintained that when the order amending the judgment was promulgated, the judgment had already become final and the period to appeal had not been suspended by Zaragoza’s motion to amend decision.

Applicable Rules on Surety Liability: Rule 60 and Rule 57

The Court held that the surety’s challenge had to be examined under the procedural rules governing surety liability on a bond in cases under Rule 60. The surety’s position that the case was governed by Section 10, Rule 60, in relation to Section 20, Rule 57, was acknowledged as correct in principle. Section 10, Rule 60 provides that any recovery against sureties on a bond filed under that rule must be claimed, ascertained, and granted under the same procedure as prescribed in Section 20, Rule 57.

On its face, the Court recognized that Section 20, Rule 57 refers to damages on account of illegal attachment and to judgments “in favor of the party against whom attachment was issued.” The Court observed that, in the case at bar, the writ of delivery was not claimed to be illegal, and the judgment was adverse rather than favorable to the party against whom the writ was enforced. This superficial reading suggested that Section 20, Rule 57 might not apply. The Court rejected that restrictive approach. It ruled that even when a party is adjudged liable in the main action, damages may still be recoverable by the party prejudiced by a wrongful attachment or analogous provisional process, if it is later established that the preliminary restraint was wrongful and caused injury. The Court cited Baron v. David, 51 Phil. 1, and Javellana v. D.O. Plaza Enterprises, 32 SCRA 261, to support the validity of that proposition.

The Court then emphasized that the second and third sentences of Section 20, Rule 57, when read in relation to Section 10, Rule 60, were relevant to determining the procedure for liability of a surety on a counter-bond for the release of property. Under that combined framework, the surety’s liability for damages required: the filing of an application by the party seeking recovery in the court with jurisdiction; the filing of that application before the judgment became executory (or before trial, or before appeal was perfected); the inclusion in the application of facts showing the applicant’s right to damages and the amount thereof; due notice to the attaching creditor and the surety or sureties; and a proper hearing at which the attaching creditor and sureties could be heard.

Correct Governing Provision for Counter-Bonds in Rule 60 Setting

While applying Section 20, Rule 57 as procedural guidance, the Court stressed a more specific point. The enforcement of a surety’s liability on a counter-bond given for the release of property seized under a writ of preliminary attachment was not governed by Section 20, Rule 57, but by Section 17 of Rule 57. The Court quoted Section 17, Rule 57: if execution on the judgment becomes returned unsatisfied in whole or in part, the surety or sureties on the counter-bond become charged on that counter-bond and are bound to pay the judgment creditor upon demand, with recovery after notice and summary hearing in the same action.

The Court tied this principle to the facts. The surety had bound itself “jointly and severally” with Fidelino in a specified sum—stated in the decision as P48,600.00—as double the value of the property stated in the plaintiff’s affidavit for the delivery, or for the payment of such sum to Zaragoza as might be recovered against the defendant and the costs of the action.

Accordingly, the Court held that the surety’s liability attached upon promulgation of the verdict against Fidelino. The Court ruled that enforcement did not require a separate action, which it said was proscribed. It required an application in the action, with due notice to the surety and a proper hearing—procedural steps that ensured due process by informing the surety that it was being held responsible for the adjudicated prestation of its co-principal.

Compliance With Due Process: Notice, Hearing, and Waiver

The Court found substantial compliance with the procedural requisites. It noted that Mabini Insurance & Fidelity Co., Inc. received a copy of Zaragoza’s motion to amend decision. The motion expressly sought amendment to include the surety as jointly and severally liable with the defendant, based on the terms of the counter-bond that bound the surety jointly and severally “for the payment of such sum” as might be recovered against the defendant and for the costs of the action.

The decision further recorded that the notice at the foot of the motion set the hearing for March 23, 1968 at 8:30 a.m. Counsel for Zaragoza would submit the motion for consideration. The Court cited the trial court’s observation that neither Fidelino’s counsel nor the surety company filed an opposition or appeared at the hearing, and therefore the motion was deemed submitted for resolution. The Court treated the surety’s failure to appear despite notice as a waiver of its right to be heard on the motion.

Jurisdiction Over the Surety: Voluntary Submission Through the Counter-Bond

The surety’s jurisdictional argument—that no summons was served and therefore it never became subject to the trial court’s authority—was rejected. The Court held that the terms of the counter-bond voluntarily filed by the sur

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