Luzon Surety v. Marbella
REITERATIONFacts
The Antecedents: In Civil Case No. 3186, the Court of First Instance of Negros Occidental rendered judgment finding Fidela Morin Vda. de Marbella as the rightful heir to the properties of the deceased Matias Morin and ordering the defendants to reconvey the properties or pay their value. The estate was placed under receivership, and Leopoldo Anoche was appointed receiver. Anoche filed a P5,000 bond subscribed by Luzon Surety Co., Inc. as surety. Procedural History: The decision was affirmed with modifications by the Supreme Court (G.R. No. L-11141), becoming final on August 6, 1958. Receiver Anoche filed his final statement of accounts. Plaintiff Morin Vda. de Marbella moved for the confiscation of the bond, alleging that the receiver admitted missing money and titles. The lower court ordered the receiver to answer and deposit cash, to which the receiver responded that he had no more money. The court then endorsed the case for investigation for misappropriation and issued an order for a writ of execution for the amount posted by the receiver, stating the defendants were not responsible as the receiver was appointed at the plaintiff's instance. The provincial sheriff served a writ of execution on Luzon Surety Co., Inc., garnishing its account. The Petition: Luzon Surety Co., Inc. filed a petition for certiorari, claiming the proceedings against its bond were null and void for lack of prior notice and violation of procedural rules (Section 20, Rule 59 in conjunction with Section 9, Rule 61 of the Rules of Court).
Issue(s)
Whether the procedure outlined in Section 20, Rule 59, in conjunction with Section 9, Rule 61 of the Rules of Court, applies to the execution of a receiver's bond. Whether the writ of execution against the surety's bond is null and void for lack of prior notice and hearing to the surety. Whether certiorari is the proper remedy despite the failure to file a motion for reconsideration in the lower court.
Ruling
The Supreme Court set aside the order of execution against the petitioner's bond for being null and void and remanded the case to the court of origin for a hearing on the petitioner's liability. The Court granted the petition for certiorari.
Ratio Decidendi
On the applicability of Section 20, Rule 59, in conjunction with Section 9, Rule 61: The Court held that the procedure outlined in Section 20, Rule 59, is applicable only to bonds filed by either party in a case, such as the bond of the applicant for receivership or a counter-bond posted by the opposing party. This procedure requires claims to be ascertained and granted under the same procedure as prescribed in Section 20 of Rule 59, which necessitates notice to the surety. The bond filed by the receiver himself and his surety, under Section 5 of Rule 61, is distinct. Damages arising from the misconduct or negligence of the receiver are the responsibility of the receiver and his sureties, and their bond is valid and enforceable for these damages. The Court clarified that the cited rules pertain to bonds filed by parties to secure the adverse party against damages from the appointment of a receiver, not the receiver's own faithful performance bond. On the validity of the writ of execution without prior notice: The Court found that even though the surety's liability is solidary, it does not imply condemnation without a hearing. The solidary nature of the liability dispenses with the necessity of levying first upon the property of the principal (beneficio de excusion), but it does not dispense with the surety's elementary right to be heard and to be informed that the party seeking indemnity would hold it liable and was going to prove the grounds and extent of its liability. The Court emphasized that the material question of joint and several obligation only comes into play after both principal and surety have been legally adjudged liable by a lawful judgment entered after due hearing. The surety, as a solidary debtor, may avail itself of defenses derived from the nature of the obligation or personal to it. Condemning the surety without notice deprives it of the opportunity to set up such defenses. On the propriety of certiorari without prior motion for reconsideration: While a motion for reconsideration in the lower court is generally a condition precedent for certiorari, the rule is not absolute. The Court held that this rule does not apply where the order or judgment subject of review is a patent nullity. In this case, the deprivation of the petitioner's fundamental right to due process, which rendered the proceedings against it null and void, coupled with the extreme urgency due to the issuance of the execution and garnishment, constituted sufficient reasons to bring the case outside the purview of the general rule. The Court concluded that the order of execution was a patent nullity, justifying the immediate resort to certiorari.
Main Doctrine
Execution against a surety on a receiver's bond requires prior notice and hearing to the surety, as the procedure for executing bonds filed by parties to a case does not apply to bonds posted by the receiver himself and his surety.