Zenith Insurance v. Court of Appeals
REITERATIONFacts
The Antecedents: William B. Murphy filed a collection case against Pedro F. Mejorada, praying for a Writ of Preliminary Attachment, for which petitioner Zenith Insurance Corporation (Zenith) posted a P250,000.00 bond. The trial court dismissed Murphy's complaint, declared an agreement null and void, and ordered Murphy to pay Mejorada various sums, including P250,000.00 for cash advances and P146,092.48 for spare parts, P330,000.00 for unrealized profits, P20,000.00 for attorney's fees. Crucially, regarding the attachment bond, the trial court ordered Murphy and Zenith to pay Mejorada jointly and severally against the attachment bond, but not exceeding P250,000.00, for actual damages, interest, compensatory damages for injury to business and goodwill, damages for properties sold in haste, moral damages, exemplary damages, and attorney's fees. Procedural History: Both Murphy and Zenith appealed to the Court of Appeals (CA). Pending appeal, P115,680.55 was partially executed. The CA affirmed the trial court's decision in toto. Murphy's subsequent appeal to the Supreme Court was denied for late filing. Mejorada then proceeded against Zenith's attachment bond, collecting P80,000.00 and P54,319.45, totaling the full P250,000.00 bond amount, and acknowledged the last payment as "in full satisfaction of the writ of execution issued." The Petition: Despite the full satisfaction of the bond, Mejorada filed a Motion for Issuance of an Alias Writ of Execution. The trial court initially denied it, stating Zenith's liability was confined to the bond amount. However, upon reconsideration, the trial court granted the alias writ, holding Zenith liable for more than the bond amount, citing "malice and bad faith." The CA affirmed this, stating Zenith's "solidary liability" was pronounced in a previous appellate case. Zenith filed a petition for certiorari and prohibition, arguing that the alias writ was issued without or in excess of jurisdiction, as private respondent had already been paid the full value of the bond, and the alias writ sought to enforce the judgment on counterclaims beyond the bond's limit.
Issue(s)
Whether the respondent Court committed grave abuse of discretion in ordering the issuance of an Alias Writ of Execution making the petitioner solidarily liable for all costs and damages exceeding the amount of its bond. Whether the petitioner's liability as a surety on the attachment bond is limited to the face value of the bond, especially after the full amount of the bond has already been paid and acknowledged as full satisfaction.
Ruling
The Petition is granted. The questioned Order of April 9, 1981 of the Court of First Instance of Rizal, Branch VI, and the Decision of the Court of Appeals in CA-G.R. No. SP-12295 are REVERSED and SET ASIDE. The Temporary Restraining Order heretofore issued is made permanent.
Ratio Decidendi
On the Issue of Surety Liability and the Alias Writ of Execution: The Supreme Court found that the dispositive portion of the trial court's decision clearly and correctly limited Zenith Insurance Corporation's liability to P250,000.00, the amount secured by the attachment bond. The Court emphasized that "a guaranty is not presumed, it must be express and cannot extend to more than what is stipulated therein," citing Article 2055 of the Civil Code. The phrase "all damages" used in the appellate court's previous ruling referred specifically to damages resulting from the wrongful issuance of the writ of attachment, not all possible damages that might be adjudged against the principal. The Court reiterated that the extent of a surety's liability is determined solely by the terms of the contract of suretyship and cannot be extended by implication. Unlike in the case of PNB vs. Luzon Surety Co., Inc., where increased liability for interest was due to default and judicial collection, Zenith had already settled its obligation in full, satisfying the bond's coverage. Therefore, issuing an alias writ to collect more than the bond amount, after full payment and acknowledgment of satisfaction, constituted grave abuse of discretion. On the Limitation of Liability to the Bond Amount: The Court firmly established that liability on an attachment bond is contractual and restricted to the express obligations assumed therein. Citing Rocco vs. Meads, the Court stated that the obligor has the right to stand on the very terms of its contract, and its liability will not be extended beyond the fair import of the words used. The bond itself explicitly stated that the payment was "not exceeding the amount secured thereby in the sum of P250,000.00." This express limitation in the judgment, coupled with the subsequent full payment and acknowledgment of satisfaction by the respondent, precluded any further claim against Zenith beyond the bond's value. The Court distinguished this case from PNB vs. Luzon Surety Co., Inc., where the increased liability stemmed from the surety's default in payment, a situation not present here.
Main Doctrine
The liability of a surety on an attachment bond is strictly limited to the amount stipulated in the bond and cannot be extended by implication or beyond the express terms of the contract, unless specifically provided for by law or jurisprudence in cases of default or judicial collection.