Towers Assurance Corp. v. Ororama Supermart
REITERATIONFacts
The Antecedents: See Hong, proprietor of Ororama Supermart, filed a collection case against spouses Ernesto Ong and Conching Ong for P58,400. See Hong sought and obtained a writ of preliminary attachment against the Ong spouses' properties. Procedural History: To lift the attachment, the Ong spouses posted a counterbond for P58,400 with Towers Assurance Corporation as surety, binding themselves solidarity to pay See Hong. The Ong spouses were declared in default for failure to appear at pre-trial. The lower court rendered a decision ordering the Ong spouses and Towers Assurance Corporation to pay See Hong P58,400, plus litigation expenses and attorney's fees. Ororama Supermart filed a motion for execution, which was granted, and a writ of execution was issued against the judgment debtors and their surety. The Petition: Towers Assurance Corporation filed a petition for certiorari assailing the decision and writ of execution, arguing it was denied its right to be heard.
Issue(s)
Whether the trial court acted with grave abuse of discretion in issuing a writ of execution against the surety on a counterbond without notice and a summary hearing.
Ruling
The Court held that the lower court acted with grave abuse of discretion in issuing a writ of execution against Towers Assurance Corporation without first giving it an opportunity to be heard. The order and writ of execution, insofar as they concerned Towers Assurance Corporation, were set aside, and the lower court was directed to conduct a summary hearing on the surety's liability on its counterbond.
Ratio Decidendi
On Issue 1: The Supreme Court held that the lower court acted with grave abuse of discretion in issuing the writ of execution against the surety without first providing an opportunity to be heard. Under Section 17, Rule 57 of the Rules of Court, recovery against a surety on a counterbond requires that execution first be returned unsatisfied, followed by a demand on the surety, and finally, notice and a summary hearing in the same action. The Court clarified that while the first requisite—prior execution against the principal—does not apply when the surety assumes solidary liability (citing Article 2059 of the Civil Code and Luzon Steel Corporation vs. Sia), the procedural requirement of notice and hearing remains mandatory. This is because a surety is not an original party to the underlying litigation between the creditor and the debtor. Notice and hearing constitute the essence of procedural due process, ensuring that no person is deprived of property without being given a chance to contest the liability. Therefore, the trial court must conduct a summary hearing before any execution can be validly issued against the petitioner surety.
Main Doctrine
A surety is entitled to notice and a summary hearing before a writ of execution can be issued against it, even if it assumed solidary liability, as notice and hearing are essential components of procedural due process.