Asian Surety & Insurance Co. v. Nolasco
REITERATIONFacts
The Antecedents: Ramon C. Dy filed a complaint against Jovita Peraldo and George Uy King for the collection of P10,000.00 plus attorney's fees and costs. A writ of attachment was issued. Asian Surety & Insurance Co., Inc. (petitioner) executed a counterbond for P10,500.00 to dissolve the attachment, binding itself jointly and severally with the defendants. The terms stipulated that if the plaintiff recovered judgment and the defendants failed to redeliver the attached property, the defendant and surety would, on demand, pay the plaintiff the full value of the property released. Procedural History: The Court of First Instance of Manila rendered judgment in favor of the plaintiff, ordering the defendants to pay P10,000.00 with legal interest, P500.00 as attorney's fees, and costs. Subsequently, the plaintiff filed a motion for execution of the counterbond. The respondent Judge issued orders on June 3, 1965, and June 29, 1965, holding the petitioner liable for the judgment amount. The Petition: Asian Surety & Insurance Co., Inc. filed a petition for certiorari and/or prohibition, assailing the respondent Judge's orders. It argued that the court acted without or in excess of jurisdiction, or with grave abuse of discretion, in holding the petitioner liable beyond the terms of its undertaking on the counterbond. Petitioner contended that its liability was limited to the 'full value of the property released' and not the entire judgment, and that it was not given prior notice and hearing before its counterbond was charged.
Issue(s)
Whether the petitioner Asian Surety & Insurance Co., Inc. is liable on its counterbond to pay the amount of P10,500.00, including legal interest and attorney's fees. Whether prior notice and hearing are essential to hold the surety liable on its bond under Section 17 of Rule 57 of the Rules of Court. Whether the petitioner is liable for legal interest on the judgment amount, even if it increases the surety's liability beyond the maximum of its undertaking.
Ruling
The Supreme Court ruled that the respondent Judge did not err in holding the petitioner surety liable for the full amount of the counterbond of P10,500.00, which covers the principal of P10,000.00 and attorney's fees of P500.00. The Court further held that the petitioner is liable for legal interest on the judgment amount from the date of receipt of the order of June 3, 1965, until fully paid. The petition was dismissed, and the orders of June 3, 1965, and June 29, 1965, were affirmed.
Ratio Decidendi
On the liability of the petitioner on its counterbond: The Court held that the petitioner is liable for the full amount of the counterbond. When the petitioner executed the counterbond in the amount of P10,500.00, it is presumed that the full value of the property attached was P10,500.00. The petitioner has the burden to prove that the value of the property attached is less than P10,500.00, which it failed to do. The bond filed under Section 12, Rule 57, Revised Rules of Court, is required to be in an amount equal to the value of the property attached as determined by the judge to secure the payment of any judgment. The defendants and the petitioner must have considered the full value of the property attached when they filed the bond in the specified amount. Therefore, the respondent Judge did not err in holding the petitioner liable for the P10,500.00, covering the principal and attorney's fees. On the requirement of prior notice and hearing: The Court clarified that the counterbond filed to lift the writ of attachment is governed by Section 17 of Rule 57, which allows the counterbond to be charged only after notice and summary hearing. The Court found that the requirement of notice and hearing was substantially complied with. The petitioner Asian Surety & Insurance Co. was served with a copy of the amended and supplemental motion for execution of the counterbond and filed an opposition. It was also served with a copy of the order setting a hearing to receive evidence regarding the Sheriff's return. Although the petitioner and its counsel failed to attend the hearing, this did not negate the substantial compliance with the notice and hearing requirement, as established in Luzon Steel Corp. vs. Sia. Therefore, the petitioner cannot claim it was not given an opportunity to be heard. On the issue of interest: The Court reiterated its ruling that a surety is liable for interest on the principal obligation, even if it increases the liability beyond the maximum of its undertaking. This increased liability arises not from the contract itself but from the surety's default and the necessity of judicial collection. Citing Philippine National Bank vs. Luzon Surety Co., Inc., the Court held that if a surety fails to pay upon demand, it can be held liable for interest. In this case, the petitioner is liable for interest from the time demand was made upon it until the principal obligation is fully paid. The Court specified that the liability for interest is from the date of receipt by the petitioner of the order of June 3, 1965.
Main Doctrine
A surety on a counterbond filed to dissolve a writ of attachment is liable for the judgment amount, including legal interest from the time demand is made, even if it exceeds the principal obligation, provided the bond was executed in an amount equal to the value of the property attached as determined by the judge. The surety is presumed to have considered the full value of the property when filing the bond. Furthermore, notice and summary hearing are substantially complied with if the surety was served with the motion for execution and filed an opposition, and was notified of the hearing for the reception of evidence, even if it failed to appear.