Stronghold Insurance Co., Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Leisure Club, Inc. filed a replevin case against Northern Motors Inc. for office furniture and equipment. The lower court ordered the delivery of the properties to Leisure Club, Inc. upon posting of a replevin bond. Leisure Club, Inc. posted a P42,000.00 bond from Stronghold Insurance Co., Inc. (SICI Bond No. 11652). A writ of replevin was issued, and Leisure Club, Inc. took possession of the properties. Northern Motors, Inc. filed a counterbond for the release of the properties, but Leisure Club, Inc. disappeared. Procedural History: Leisure Club, Inc. was declared non-suited for failure to appear. Northern Motors, Inc. presented evidence ex-parte. The lower court ruled in favor of Northern Motors, Inc., ordering Leisure Club, Inc. to pay actual value of property (P20,900.00), exemplary damages (P10,000.00), attorney's fees (P10,000.00), and costs. Northern Motors, Inc. filed a motion for execution against the surety bond. The lower court found Stronghold Insurance Co., Inc. liable for P42,000.00, the amount of the replevin bond. Stronghold Insurance Co., Inc. appealed to the Court of Appeals, which affirmed the lower court's order. This petition for review on certiorari followed. The Petition: Stronghold Insurance Co., Inc. assails the Court of Appeals' decision, arguing that the lower court erred in awarding damages against it due to the absence of evidence, in adopting the previous decision's dispositive portion as basis, and in awarding exemplary damages and attorney's fees against the bond.
Issue(s)
Whether the lower court erred in awarding damages against petitioner Stronghold Insurance Co., Inc. despite the alleged absence of evidence. Whether the lower court erred in adopting the dispositive portion of the June 9, 1986 decision as the basis for the award of damages against petitioner. Whether the lower court erred in awarding exemplary damages in favor of Northern Motors, Inc. and against petitioner Stronghold Insurance Co., Inc. Whether the lower court erred in awarding attorney's fees of P10,000.00 as damages against the bond.
Ruling
The petition is denied for lack of merit. The Court of Appeals did not err in affirming the order of the lower court finding Stronghold Insurance Co., Inc. liable under its surety bond.
Ratio Decidendi
On the alleged absence of evidence for damages: The Court held that the record sufficiently supports the award of damages. Northern Motors, Inc. presented evidence during the hearing of the case and the motion for execution against the replevin bond. Stronghold Insurance Co., Inc. failed to present any contrary evidence or to cross-examine the witness presented by Northern Motors, Inc. The terms of the replevin bond itself, which bound Stronghold Insurance Co., Inc. to answer for "such sum as may in the cause be recovered against the plaintiff and the costs of the action," make it liable for sums adjudged against the principal obligor, Leisure Club, Inc. The Court reiterated the principle that in proceedings against a surety, the hearing is summary and limited to new defenses not previously set up by the principal. On adopting the dispositive portion of the June 9, 1986 decision: The Court found no error in this regard. The decision dated June 9, 1986, established Northern Motors, Inc. as the prevailing party and quantified the damages it suffered. The motion for execution against the bond was treated as an application for damages, which is a proper remedy under Section 10, Rule 60 in relation to Section 20, Rule 57 of the Rules of Court. The application was filed before the judgment became final and executory, and before any appeal was perfected by the plaintiff. On the award of exemplary damages: The Court affirmed the award of exemplary damages, finding that Leisure Club, Inc.'s act of filing a replevin suit without intent to prosecute but merely to disappear with the recovered property to evade lawful obligations constituted a wanton, fraudulent, reckless, oppressive, and malevolent breach of contract. This conduct justified the award of exemplary damages under Article 2232 of the Civil Code. On the award of attorney's fees: The Court found the award of attorney's fees to be warranted under Article 2208 of the New Civil Code. The trial court had already decided with finality that the circumstances justifying the award existed. The obligation of Stronghold Insurance Co., Inc. under the bond specifically assured "the payment of such sum as may in the cause be recovered against the plaintiff, and the costs of the action," which includes attorney's fees awarded as part of the recoverable damages.
Main Doctrine
A surety company is liable under its bond for damages awarded to the prevailing party when the principal obligor fails to prosecute the action, disappears, and the subject property is not returned, especially when the award includes actual and exemplary damages, attorney's fees, and costs, provided the claim against the bond is made before the judgment becomes final and executory.