Central Surety and Insurance Co. v. Ubay
REITERATIONFacts
The Antecedents: Ong Chi, doing business as "Tableria de Luxe," sued Francisco Reyes, Jr. for a sum of money. Ong Chi secured a writ of attachment, leading to the seizure of a jeep belonging to Reyes. Reyes moved to dissolve the attachment and posted a counterbond amounting to P6,465.00, with Central Surety and Insurance Company, Inc. as surety. The condition of the counterbond was that Reyes would redeliver the attached property upon demand for application to the judgment, or in default thereof, Reyes and the surety would pay the plaintiff the full value of the released property. Procedural History: The City Court of Caloocan City rendered judgment in favor of Ong Chi, ordering Reyes to pay P6,964.18 plus legal interest, attorney's fees, and costs. Reyes appealed to the Court of First Instance of Rizal, which affirmed the City Court's decision in toto. Upon finality, a writ of execution was issued. The attached jeep was sold at sheriff's sale for P4,000.00, which was credited against the judgment. The Petition: Central Surety and Insurance Company, Inc. filed a motion to cancel its counterbond, arguing it had fulfilled its obligation. Ong Chi opposed and moved for a deficiency judgment against the surety for the remaining P5,730.00. The surety opposed this, asserting it had met the bond's conditions. Despite the opposition, the respondent judge ordered the surety to pay the deficiency. A motion for reconsideration was denied, leading to the instant petition for certiorari.
Issue(s)
Whether the petitioner surety is liable for the deficiency judgment beyond the terms stipulated in the counterbond. Whether Section 17 of Rule 57 of the Rules of Court overrides the specific stipulations of the counterbond.
Ruling
The Supreme Court granted the petition, set aside the questioned orders of the respondent judge, and ordered the cancellation of the petitioner's counterbond. The Court ruled that the surety is not liable for the deficiency judgment beyond the terms stipulated in the counterbond.
Ratio Decidendi
On Issue 1: The Court held that the stipulation in the counterbond is the law between the parties. The petitioner surety company bound itself jointly and severally with the principal obligor in the sum of P6,465.00, under the condition that Reyes would redeliver the attached property upon demand for application to the judgment, or in default thereof, pay the plaintiff the full value of the property released. The primary obligation of the surety was to ensure the jeep was available for execution. Since the jeep was made available and sold, the surety had discharged its obligation under the bond. The amount of P6,465.00 was merely the limit of the surety's liability in case the property could not be reached. Furthermore, even if the surety were liable, its obligation could not exceed the bond amount of P6,465.00. Given that the sale of the jeep yielded P4,000.00, the maximum liability of the surety, at most, would be P2,465.00, not the P5,730.00 deficiency ordered by the respondent judge. The obligation of a surety cannot extend beyond what is stipulated. On Issue 2: The Court clarified that the specific stipulation in the counterbond governs the surety's liability, not the general provisions of Section 17 of Rule 57 of the Rules of Court. While Section 17 provides for recovery upon a counterbond when execution is returned unsatisfied, this provision is subject to the terms agreed upon by the parties in the bond itself. The counterbond's condition was for the redelivery of the property or payment of its value, not an absolute guarantee of the judgment amount. Since the property was delivered and sold, the condition was met, and the surety's obligation was discharged according to the terms of the bond.
Main Doctrine
The Supreme Court held that the specific stipulations in a counterbond, not the general provisions of the Rules of Court, define the extent of a surety's liability. In this case, the surety's obligation was to ensure the redelivery of the attached property or, in default thereof, to pay the value of the property released. Since the property was made available for execution, the surety had fulfilled its obligation under the bond, and its liability was limited to the bond amount, not the entire deficiency in the judgment.