Cruz v. Pilar
REITERATIONFacts
The Antecedents: Plaintiff-appellee Estanislao de la Cruz filed an unlawful detainer case in the justice of the peace court of Tacloban, Leyte. The court issued a writ of attachment. To secure its dissolution, defendant Apolinario del Pilar and Luzon Surety Co., Inc. executed a counter-bond. The bond's title stated it was for "Defendant's counter-bond for lifting Writ of Attachment." The body of the bond, however, stated that the principal and surety "jointly and severally bind ourselves in the sum of P1,000 Philippine currency, under the condition that we and the plaintiff will pay all the costs which he may sustain by reason of the attachment, if the same shall finally be adjudged to have been issued wrongfully or without sufficient cause." Procedural History: Upon filing the bond, the writ of attachment was dissolved. After trial, the justice of the peace court sentenced the defendant to pay P1,521.00 plus interest and costs. When the judgment became final, the court issued a writ of execution against both the defendant and Luzon Surety Co., Inc. The surety filed a motion to quash the writ of execution against it, arguing that the bond did not hold it liable for the judgment amount. The justice of the peace court denied the motion. The surety appealed to the Court of First Instance, which affirmed the justice of the peace court's order. This judgment of affirmance is the subject of the present appeal. The Petition: Luzon Surety Co., Inc. contended that the bond's wording limited their liability to costs, not the judgment amount, and that the plaintiff was estopped from claiming otherwise due to his silence when the bond was presented. The Supreme Court reviewed the case on appeal.
Issue(s)
Whether the literal but mistaken language of a counter-bond prevails over its expressed title and the statutory purpose of lifting a writ of attachment. Whether the doctrine of mutual mistake and reformation of instruments applies to a surety bond containing clerical errors that contradict the manifest intent of the parties and the law.
Ruling
The Supreme Court affirmed the judgment of the Court of First Instance, holding Luzon Surety Co., Inc. liable for the judgment amount. The writ of execution against the surety was declared valid.
Ratio Decidendi
On Issue 1: The Court ruled that the title and the purpose for which the bond was issued govern the responsibilities of the parties, rather than its mistaken language. It was observed that the title of the instrument explicitly stated it was for 'lifting the writ of attachment,' a proceeding governed by Section 12, Rule 59 of the Rules of Court. Because the writ of attachment was actually dissolved based on this bond, the parties clearly intended to provide the security required by law for such a discharge. The Court noted that in the absence of evidence to the contrary, good faith is presumed, suggesting both parties failed to notice the faulty language in the body of the bond. Therefore, the literal text was a product of a clerical error that did not reflect the actual legal objective of the filing. On Issue 2: The Court held that the discrepancy between the bond's title and its body constitutes a 'mutual mistake,' which justifies the reformation of the instrument. Under Section 22, Rule 123 of the Rules of Court and Article 1381 of the Civil Code of the Philippines, instruments may be reformed to express the true intention of the parties when a mistake has occurred. The Court emphasized that the surety is estopped from denying the bond's intent after it successfully obtained the lifting of the attachment for the principal. To allow the surety to evade liability by relying on a clerical error would be to permit it to enrich itself through its own bad faith. Consequently, the Court declared the bond reformed to hold the surety jointly and severally liable for the judgment amount in accordance with Section 17, Rule 59.
Main Doctrine
A surety bond filed to lift a writ of attachment, despite a mistaken or faulty wording in its body, may be reformed to reflect its true purpose and intent as indicated by its title and the circumstances of its filing, making the surety liable for the judgment amount based on mutual mistake and estoppel.