Centennial Guarantee v. Universal Motors
REITERATIONFacts
The Antecedents: Nissan Specialist Sales Corporation (NSSC) and its President, Reynaldo A. Orimaco, filed a Complaint for Breach of Contract with Damages against Universal Motors Corporation (UMC) and others. The Regional Trial Court (RTC) issued a Temporary Restraining Order (TRO), later converted to a Writ of Preliminary Injunction, upon NSSC and Orimaco posting a P1,000,000.00 injunction bond from Centennial Guarantee Assurance Corporation (CGAC). Procedural History: The Court of Appeals (CA) dissolved the writ of preliminary injunction, finding that the RTC committed grave abuse of discretion in issuing it absent a clear legal right. Subsequently, respondents filed an application for damages against the injunction bond. The RTC dismissed NSSC and Orimaco's complaint for lack of merit but ruled that respondents were entitled to damages against the injunction bond. The RTC ordered NSSC, Orimaco, and CGAC to jointly and severally pay damages. Upon motion, the RTC granted execution pending appeal, citing NSSC's imminent insolvency, cessation of business, Orimaco's migration, and failure to file a supersedeas bond. The Petition: CGAC assailed the order for execution pending appeal before the CA, questioning the existence of good reasons and the propriety of enforcing it against a mere bondsman whose liability is limited. The CA affirmed the execution pending appeal but limited CGAC's liability to P1,000,000.00. CGAC filed a motion for reconsideration, which was denied, leading to the present petition.
Issue(s)
Whether or not good reasons exist to justify execution pending appeal against CGAC, a mere surety. Whether or not CGAC's liability on the bond should be limited to P1,000,000.00.
Ruling
The petition is unmeritorious. The Decision dated February 25, 2009 and the Resolution dated August 14, 2009 of the Court of Appeals in CA-G.R. SP No. 02459-MIN are affirmed.
Ratio Decidendi
On the existence of good reasons for execution pending appeal against CGAC: The Court held that the execution of a judgment pending appeal requires "good reasons" which consist of compelling circumstances justifying immediate execution to prevent the judgment from becoming illusory. The "good reason" yardstick imports a superior circumstance demanding urgency that will outweigh injury to the adverse party. In this case, the factual findings that NSSC is under rehabilitation, has ceased business operations, and that its President, Orimaco, had migrated abroad with his family, constitute such superior circumstances. These facts present a risk of non-satisfaction of the judgment by the time the appeal is decided. The Court reiterated that as a surety, CGAC is considered by law as being the same party as the debtor in relation to the obligation, and their liabilities are inseparable. Therefore, execution pending appeal against NSSC and Orimaco is warranted against CGAC. On the limitation of CGAC's liability: The Court affirmed the CA's ruling that CGAC's liability should be confined to the amount of P1,000,000.00, the face value of the injunction bond. Section 4(b), Rule 58 of the Rules of Court provides that the injunction bond is answerable for all damages occasioned by the improper issuance of a writ of preliminary injunction. The Court has held that the bond insures that the defendant may sustain no ultimate loss if the injunction is finally dissolved. In this case, the RTC adjudged NSSC and Orimaco liable for damages to both UMC and NCOD, Rolida, and Yap. The total amount of damages awarded, when considered against the P1,000,000.00 injunction bond, exhausts the full amount of the bond. Therefore, CGAC's liability is correctly limited to the P1,000,000.00 face value of the bond.
Main Doctrine
Execution pending appeal may be granted against a surety whose principal is facing imminent insolvency or has absconded, as the surety's liability is directly and primarily responsible with the principal debtor. The surety's liability on an injunction bond is limited to the face value of the bond.