G.R. No.

212025

EXCELLENT QUALITY APPAREL, INC., Petitioners,

vs.
VISAYAN SURETY & INSURANCE CORPORATION, and FAR EASTERN SURETY &
INSURANCE CO., INC., Respondent.

DECISION

MENDOZA, J.:

The present case involves the wrongful attachment and release of the petitioner's funds to the adverse
party and its plight to recover the same. It seems that when misfortune poured down from the skies,
the petitioner received a handful. The scales of justice, however, do not tilt based on chance; rather
on the proper application of law, jurisprudence and justice.

This is a petition for review on certiorari seeking to reverse and set aside the October 21, 2013
Decision1 and the April 1, 2014 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV No. 95421,
which affirmed the January 15, 20103 and May 19, 20104 Orders of the Regional Trial Court of Manila,
Branch 32 (RTC), in Civil Case No. 04-108940.

The Facts

On March 26, 1996, petitioner Excellent Quality Apparel, Inc. (petitioner), then represented by Max
L.F. Ying (Ying), Vice-President for Productions, and Alfiero R. Orden, Treasurer, entered into a
contract with Multi-Rich Builders (Multi-Rich), a single proprietorship, represented by Wilson G. Chua,
its President and General Manager, for the construction of a garment factory within the Cavite
Philippine Economic Zone Authority (CPEZA). The duration of the project was for a maximum period
of five (5) months or 150 consecutive calendar days. Included in the contract was an Arbitration Clause
in case of dispute.

On November 27, 1996, the construction of the factory building was completed.

On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-Rich) was incorporated with the
Securities and Exchange Commission (SEC).

On January 26, 2004, Win Multi-Rich filed a complaint for sum of money and damages against
petitioner and Ying before the RTC.5 It also prayed for the issuance of a writ of attachment, claiming
that Ying was about to abscond and that petitioner had an impending closure.

Win Multi-Rich then secured the necessary bond in the amount of P8,634,448.20 from respondent
Visayan Surety and Insurance Corporation (Visayan Surety).6 In the Order,7 dated February 2, 2004,
the RTC issued a writ of preliminary attachment in favor of Win Multi-Rich.

To prevent the enforcement of the writ of preliminary attachment on its equipment and machinery,
petitioner issued Equitable PCI Bank Check No. 160149,8 dated February 16, 2004, in the amount of
P8,634,448.20 payable to the Clerk of Court of the RTC.

On February 19, 2004, petitioner filed its Omnibus Motion,9 seeking to discharge the attachment.
Petitioner also questioned the jurisdiction of the RTC due to the presence of the Arbitration Clause in
the contract. It asserted that the case should have been referred first to the Construction Industry
Arbitration Commission (CIAC) pursuant to Executive Order (E.O.) No. 1008.

The motion, however, was denied by the RTC in its Order,10 dated April 12, 2004, because the issues
of the case could be resolved after a full-blown trial.

On April 26, 2004, petitioner filed its Answer with Compulsory Counterclaim11 before the RTC. It denied
the material allegation of the complaint and sought the immediate lifting of the writ of attachment. It
also prayed that the bond filed by Win Multi-Rich to support its application for attachment be held to
satisfy petitioner’s claim for damages due to the improper issuance of such writ.

On April 29, 2004, the RTC issued another order12 directing the deposit of the garnished funds of
petitioner to the cashier of the Clerk of Court of the RTC.

Win Multi-Rich then filed a motion,13 dated April 29, 2004, to release petitioner’s cash deposit to it.
Notably, the motion was granted by the RTC in the Order,14 dated May 3, 2004. Subsequently, on May
7, 2004, Win Multi-Rich posted Surety Bond No. 1019815 issued by respondent Far Eastern Surety and
Insurance Co., Inc. (FESICO) for the amount of P9,000,000.00, to secure the withdrawal of the cash
deposited by petitioner. Thus, Win Multi-Rich was able to receive the funds of petitioner even before
the trial began.

On June 18, 2004, petitioner filed a petition for certiorari16 under Rule 65 of the 1997 Rules of Civil
Procedure before the CA. The petition sought to annul and set aside the April 12, 2004 and April 29,
2004 Orders of the RTC. Petitioner then filed its Supplemental Manifestation and Motion,17 asserting
that its cash deposit with the RTC was turned over to Win Multi-Rich.

On March 14, 2006, the CA rendered a decision,18 annulling the April 12 2004 and April 29, 2004
Orders of the RTC. It ruled, however, that the RTC had jurisdiction over the case inspite of the
arbitration clause because it was a suit for collection of sum of money. The dispositive portion of which
reads:

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The Orders dated
April 12, 2004 and April 29, 2004 of respondent judge are hereby ANNULLED and SET ASIDE.
Accordingly, the writ of preliminary injunction is hereby MADE PERMANENT.

SO ORDERED.19

Petitioner filed a motion for reconsideration arguing, among others, that the CA decision failed to state
an order to return the garnished amount of P8,634,448.20, which was taken from its bank account and
given to Win Multi-Rich. In its Resolution,20 dated October 11, 2006, the CA denied the motion.

Aggrieved, petitioner elevated the matter to the Court by way of a petition for review on certiorari under
Rule 45, docketed as G.R. No. 175048.

On February 10, 2009, in G.R. No. 175048, the Court promulgated a Decision 21 in favor of petitioner
and held: first, that Win Multi-Rich was not a real party in interest; second, that the RTC should not
have taken cognizance of the collection suit because the presence of the arbitration clause vested
jurisdiction on the CIAC over all construction disputes between petitioner and Multi-Rich;
and lastly, that Win Multi-Rich could not retain the garnished amount, as the RTC did not have
jurisdiction to issue the questioned writ of attachment and to order the release of the funds. The
dispositive portion reads:
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is hereby MODIFIED.
Civil Case No. 04-108940 is DISMISSED. Win Multi-Rich Builders, Inc. is ORDERED to return the
garnished amount of EIGHT MILLION SIX HUNDRED THIRTY FOUR THOUSAND FOUR HUNDRED
FORTY-EIGHT PESOS AND TWENTY CENTAVOS (P8,634,448.20), which was turned over by the
Regional Trial Court, to petitioner with legal interest of 12 percent (12%) per annum upon finality of
this Decision until payment.

SO ORDERED.22

Win Multi-Rich filed a motion for reconsideration but it was denied by the Court in its April 20, 2009
Resolution.23 Pursuant to an entry of judgment,24 the Court’s decision became final and executory on
June 2, 2009.

On June 26, 2009, petitioner moved for execution thereof, praying for the return of its cash deposit
and, in the event of refusal of Win Multi-Rich to comply, to hold Visayan Surety and FESICO liable
under their respective bonds.25

Win Multi-Rich, Visayan Surety and FESICO were served with copies of the motion for
execution.26 During the August 7, 2009 hearing on the motion for execution, counsels for petitioner,
Win Multi-Rich and FESICO were present.27 The hearing, however, was reset to September 16, 2009.
On the said date, Win Multi-Rich, Visayan Surety and FESICO were given fifteen (15) days to submit
their respective comments or oppositions to the motion for execution.28

On October 15, 2009, Win Multi-Rich opposed the motion for Execution29 because the cash deposit
awarded to it by the RTC had been paid to suppliers and the said amount was long overdue and
demandable.

The RTC granted the motion for execution in an Order,30 dated October 19, 2009, and issued a writ of
execution.31 Visayan Surety and FESICO separately moved for reconsideration of the RTC order.

The RTC Ruling

On January 15, 2010, the RTC issued the order,32 granting the surety respondents’ motion for
reconsideration and lifting its October 19, 2009 Order insofar as it granted the motion for execution
against Visayan Surety and FESICO. The RTC absolved the surety respondents because petitioner
did not file a motion for judgment on the attachment bond before the finality of judgment, thus, violating
the surety respondents’ right to due process. It further held that the execution against the surety
respondents would go beyond the terms of the judgment sought to be executed considering that the
Court decision pertained to Win Multi-Rich only.

Petitioner moved for reconsideration, but its motion was denied by the RTC in its May 19, 2010 Order.33

Undaunted, petitioner appealed before the CA, arguing that there was no violation of the right to due
process because the liability of the surety respondents were based on the bonds issued by them.

The CA Ruling

In the assailed decision, dated October 21, 2013, the CA found petitioner’s appeal without merit. Citing
Section 20, Rule 57 of the 1997 Rules of Civil Procedure (Section 20, Rule 57), the CA held that
petitioner failed to timely claim damages against the surety before the decision of the Court became
final and executory. It further stated that a court judgment could not bind persons who were not parties
to the action as the records showed that Visayan Surety and FESICO were neither impleaded nor
informed of the proceedings before the Court in G.R. No. 175048. It was the view of the CA that
"[h]aving failed to observe very elementary rules of procedure which are mandatory, [petitioner]
caused its own predicament."

Petitioner filed a motion for reconsideration, but it was denied by the CA in the assailed April 1, 2014
Resolution.

Hence, this present petition, anchored on the following

STATEMENT OF ISSUES

THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT OF APPEALS
SHOULD BE REVERSED AND SET ASIDE FOR BEING CONTRARY TO LAW AND
JURISPRUDENCE CONSIDERING THAT THE RIGHT TO DUE PROCESS OF THE TWO SURETY
COMPANIES WILL NOT BE VIOLATED IF EXECUTION OF THE JUDGMENT AGAINST THEM IS
ALLOWED.

II

THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT OF APPEALS
SHOULD BE REVERSED AND SET ASIDE FOR BEING CONTRARY TO LAW AND
JURISPRUDENCE CONSIDERING THAT TO ALLOW THE EXECUTION AGAINST THE TWO
SURETY COMPANIES WOULD GIVE FULL EFFECT TO THE TERMS OF THE JUDGMENT. 34

Petitioner contends that Visayan Surety and FESICO could be held liable because the Court, in G.R.
No. 175048, ruled that it cannot allow Win Multi-Rich to retain the garnished amount turned over by
the RTC, which had no jurisdiction to issue the questioned writ of attachment. Petitioner argues that if
Win Multi-Rich fails or refuses to refund or return the cash deposit, then Visayan Surety and FESICO
must be held liable under their respective bonds. Also, petitioner claims that the surety bond of
FESICO is not covered by Section 20, Rule 57 because it did not pertain to the writ of attachment
itself, but on the withdrawal of the cash deposit.

On October 3, 2014, Visayan Surety filed its Comment.35 It asserted that no application for damages
was filed before the Court in G.R. No. 175048. Thus, there was no occasion to direct the RTC to hear
and decide the claim for damages, which constituted a violation of its right to due process. Also,
Visayan Surety contended that Section 20, Rule 57 provided a mandatory rule that an application for
damages must be filed before the judgment becomes final and executory.

On October 8, 2014, FESICO filed its Comment.36 It averred that petitioner failed to comply with Section
20, Rule 57 of the Rules of Court because the hearing on the motion for execution was conducted
after the decision in G.R. No. 175048 had already become final and executory. It also stated that
petitioner failed to implead the surety respondents as parties in G.R. No. 175048.

On January 26, 2015, petitioner filed its Consolidated Reply.37 It stressed that because the highest
court of the land had directed the return of the wrongfully garnished amount to petitioner, proceedings
on the application under Section 20, Rule 57, became no longer necessary.

The Court’s Ruling

The petition is partly meritorious.

There was an application

for damages; but there
was no notice given to
Visayan Surety

By its nature, preliminary attachment, under Rule 57 of the Rules of Court, "is an ancillary remedy
applied for not for its own sake but to enable the attaching party to realize upon relief sought and
expected to be granted in the main or principal action; it is a measure auxiliary or incidental to the main
action. As such, it is available during the pendency of the action which may be resorted to by a litigant
to preserve and protect certain rights and interests therein pending rendition and for purposes of the
ultimate effects, of a final judgment in the case.38 In addition, attachment is also availed of in order to
acquire jurisdiction over the action by actual or constructive seizure of the property in those instances
where personal or substituted service of summons on the defendant cannot be effected."39

The party applying for the order of attachment must thereafter give a bond executed to the adverse
party in the amount fixed by the court in its order granting the issuance of the writ.40 The purpose of an
attachment bond is to answer for all costs and damages which the adverse party may sustain by
reason of the attachment if the court finally rules that the applicant is not entitled to the writ.41

In this case, the attachment bond was issued by Visayan Surety in order for Win Multi-Rich to secure
the issuance of the writ of attachment. Hence, any application for damages arising from the improper,
irregular or excessive attachment shall be governed by Section 20, Rule 57, which provides:

Sec. 20. Claim for damages on account of improper, irregular or excessive attachment.

An application for damages on account of improper, irregular or excessive attachment must be filed
before the trial or before appeal is perfected or before the judgment becomes executory, with due
notice to the attaching party and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded only after proper hearing and shall
be included in the judgment on the main case.

If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an application
in the appellate court, with notice to the party in whose favor the attachment was issued or his surety
or sureties, before the judgment of the appellate court becomes executory. The appellate court may
allow the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching party
not exempt from execution should the bond or deposit given by the latter be insufficient or fail to fully
satisfy the award.

The history of Section 20, Rule 57 was discussed in Malayan Insurance, Inc. v. Salas.42 In that case,
the Court explained that Section 20, Rule 57 was a revised version of Section 20, Rule 59 of the 1940
Rules of Court, which, in turn, was a consolidation of Sections 170, 177, 223, 272, and 439 of the
Code of Civil Procedure regarding the damages recoverable in case of wrongful issuance of the writs
of preliminary injunction, attachment, mandamus and replevin and the appointment of a receiver.

Thus, the current provision of Section 20, Rule 57 of the 1997 Rules of Civil Procedure covers
application for damages against improper attachment, preliminary injunction, receivership, and
replevin.43 Consequently, jurisprudence concerning application for damages against preliminary
injunction, receivership and replevin bonds can be equally applied in the present case.

In a catena of cases,44 the Court has cited the requisites under Section 20, Rule 57 in order to claim
damages against the bond, as follows:

1. The application for damages must be filed in the same case where the bond was issued;

2. Such application for damages must be filed before the entry of judgment; and

3. After hearing with notice to the surety.

The first and second requisites, as stated above, relate to the application for damages against the
bond. An application for damages must be filed in the same case where the bond was issued, either
(a) before the trial or (b) before the appeal is perfected or (c) before the judgment becomes
executory.45 The usual procedure is to file an application for damages with due notice to the other party
and his sureties. The other method would be to incorporate the application in the answer with
compulsory counterclaim.46

The purpose of requiring the application for damages to be filed in the same proceeding is to avoid
the multiplicity of suit and forum shopping. It is also required to file the application against the bond
before the finality of the decision to prevent the alteration of the immutable judgment.47

In Paramount Insurance Corp. v. CA,48 the Court allowed an application for damages incorporated in
the answer with compulsory counterclaim of the defendant therein. The sureties were properly notified
of the hearing and were given their day in court.

Conversely, in the recent case of Advent Capital and Finance Corp. v. Young,49 the application for
damages against the bond was not allowed. The respondent therein filed his omnibus motion claiming
damages against surety after the dismissal order issued by the trial court had attained finality.

In the present petition, the Court holds that petitioner sufficiently incorporated an application for
damages against the wrongful attachment in its answer with compulsory counterclaim filed before the
RTC. Petitioner alleged that the issuance of the improper writ of attachment caused it actual damages
in the amount of at least P3,000,000.00. It added that the Equitable PCI Bank Check No. 160149 it
issued to the RTC Clerk of Court, to lift the improper writ of attachment, should be returned to
it.50 Evidently, these allegations constitute petitioner’s application for damages arising from the
wrongful attachment, and the said application was timely filed as it was filed before the finality of
judgment.

The next requisite that must be satisfied by petitioner to hold Visayan Surety liable would be that the
judgment against the wrongful attachment was promulgated after the hearing with notice to the surety.
Certainly, the surety must be given prior notice and an opportunity to be heard with respect to the
application for damages before the finality of the judgment. The Court rules that petitioner did not
satisfy this crucial element.

Section 20, Rule 57 specifically requires that the application for damages against the wrongful
attachment, whether filed before the trial court or appellate court, must be with due notice to the
attaching party and his surety or sureties. Such damages may be awarded only after proper hearing
and shall be included in the judgment on the main case.
Due notice to the adverse party and its surety setting forth the facts supporting the applicant's right to
damages and the amount thereof under the bond is indispensable. The surety should be given an
opportunity to be heard as to the reality or reasonableness of the damages resulting from the wrongful
issuance of the writ. In the absence of due notice to the surety, therefore, no judgment for damages
may be entered and executed against it.51

In the old case of Visayan Surety and Insurance Corp. v. Pascual,52 the application for damages was
made before the finality of judgment, but the surety was not given due notice. The Court allowed such
application under Section 20, Rule 59 of the 1940 Rules of Court because there was no rule which
stated that the failure to give to the surety due notice of the application for damages would release the
surety from the obligation of the bond.53

The case of Visayan Surety and Insurance Corp. v. Pascual, however, was abandoned in the
subsequent rulings of the Court because this was contrary to the explicit provision of Section 20, Rule
57.54

In People Surety and Insurance Co. v. CA,55 the defendant therein filed an application for damages
during the trial but the surety was not notified. The Court denied the application and stated that "it is
now well settled that a court has no jurisdiction to entertain any proceeding seeking to hold a surety
liable upon its bond, where the surety has not been given notice of the proceedings for damages
against the principal and the judgment holding the latter liable has already become final."56

In Plaridel Surety & Insurance Co. v. De Los Angeles,57 a motion for execution against the bond of the
surety was filed after the finality of judgment. The petitioner therein asserted that the motion for
execution was a sufficient notification to the surety of its application for damages. The Court ruled, that
"[t]his notification, however, which was made after almost a year after the promulgation of the judgment
by the Court of Appeals, did not cure the tardiness of the claim upon the liability of the surety, which,
by mandate of the Rules, should have been included in the judgment."58

In the present case, petitioner’s answer with compulsory counterclaim, which contained the application
for damages, was not served on Visayan Surety.59 Also, a perusal of the records60 revealed that
Visayan Surety was not furnished any copies of the pleadings, motions, processes, and judgments
concerned with the application for damages against the surety bond. Visayan Surety was only notified
of the application when the motion for execution was filed by petitioner on June 29, 2009, after the
judgment in G.R. No. 175048 had become final and executory on June 2, 2009.

Clearly, petitioner failed to comply with the requisites under Section 20, Rule 57 because Visayan
Surety was not given due notice on the application for damages before the finality of judgment. The
subsequent motion for execution, which sought to implicate Visayan Surety, cannot alter the
immutable judgment anymore.

FESICO’s bond is not

covered by Section 20,
Rule 57

While Visayan Surety could not be held liable under Section 20, Rule 57, the same cannot be said of
FESICO. In the case at bench, to forestall the enforcement of the writ of preliminary attachment,
petitioner issued Equitable PCI Bank Check No. 160149, dated February 16, 2004, in the amount of
P8,634,448.20 payable to the Clerk of Court of the RTC. Pursuant to the RTC Order, dated April 29,
2004, the garnished funds of petitioner were deposited to the cashier of the Clerk of Court of the RTC.
The procedure to discharge the writ of preliminary attachment is stated in Section 12, Rule 57, to wit:
Sec. 12. Discharge of attachment upon giving counterbond.

After a writ of attachment has been enforced, the party whose property has been attached, or the
person appearing on his behalf, may move for the discharge of the attachment wholly or in part on the
security given. The court shall, after due notice and hearing, order the discharge of the
attachment if the movant makes a cash deposit, or files a counter-bond executed to the
attaching party with the clerk of the court where the application is made, in an amount equal
to that fixed by the court in the order of attachment, exclusive of costs. But if the attachment is
sought to be discharged with respect to a particular property, the counter-bond shall be equal to the
value of that property as determined by the court. In either case, the cash deposit or the counter-bond
shall secure the payment of any judgment that the attaching party may recover in the action. A notice
of the deposit shall forthwith be served on the attaching party. Upon the discharge of an attachment
in accordance with the provisions of this section, the property attached, or the proceeds of any sale
thereof, shall be delivered to the party making the deposit or giving the counter-bond, or to the person
appearing on his behalf, the deposit or counter-bond aforesaid standing in place of the property so
released. Should such counter-bond for any reason to be found to be or become insufficient, and the
party furnishing the same fail to file an additional counter-bond, the attaching party may apply for a
new order of attachment.

[Emphasis Supplied]

Win Multi-Rich, however, took a step further and filed a motion to release petitioner’s cash deposit to
it. Immediately, the RTC granted the motion and directed Win Multi-Rich to post a bond in favor of
petitioner in the amount of P9,000,000.00 to answer for the damages which the latter may sustain
should the court decide that Win Multi-Rich was not entitled to the relief sought. Subsequently, Win
Multi-Rich filed a surety bond of FESICO before the RTC and was able to obtain the P8,634,448.20
cash deposit of petitioner, even before the trial commenced.

Strictly speaking, the surety bond of FESICO is not covered by any of the provisions in Rule 57 of the
Rules of Court because, in the first place, Win Multi-Rich should not have filed its motion to release
the cash deposit of petitioner and the RTC should not have granted the same. The release of the cash
deposit to the attaching party is anathema to the basic tenets of a preliminary attachment.

The chief purpose of the remedy of attachment is to secure a contingent lien on defendant’s
property until plaintiff can, by appropriate proceedings, obtain a judgment and have such property
applied to its satisfaction, or to make some provision for unsecured debts in cases where the means
of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly disposed of or
concealed, or otherwise placed beyond the reach of creditors.61 The garnished funds or attached
properties could only be released to the attaching party after a judgment in his favor is obtained. Under
no circumstance, whatsoever, can the garnished funds or attached properties, under the
custody of the sheriff or the clerk of court, be released to the attaching party before the
promulgation of judgment.

Cash deposits and counterbonds posted by the defendant to lift the writ of attachment is a security for
the payment of any judgment that the attaching party may obtain; they are, thus, mere replacements
of the property previously attached.62 Accordingly, the P8,634,448.20 cash deposit of petitioner, as
replacement of the properties to be attached, should never have been released to Win Multi-Rich.

Nevertheless, the Court must determine the nature of the surety bond of FESICO. The cash deposit
or the counter-bond was supposed to secure the payment of any judgment that the attaching party
may recover in the action.63 In this case, however, Win Multi-Rich was able to withdraw the cash
deposit and, in exchange, it posted a surety bond of FESICO in favor of petitioner to answer for the
damages that the latter may sustain. Corollarily, the surety bond of FESICO substituted the cash
deposit of petitioner as a security for the judgment. Thus, to claim damages from the surety bond of
FESICO, Section 17, Rule 57 could be applied. It reads:

Sec. 17. Recovery upon the counter-bond.

When the judgment has become executory, the surety or sureties on any counter-bond given pursuant
to the provisions of this Rule to secure the payment of the judgment shall become charged on such
counter-bond and bound to pay the judgment obligee upon demand the amount due under the
judgment, which amount may be recovered from such surety or sureties after notice and summary
hearing in the same action.

From a reading of the above-quoted provision, it is evident that a surety on a counter-bond given to
secure the payment of a judgment becomes liable for the payment of the amount due upon: (1)
demand made upon the surety; and (2) notice and summary hearing on the same action.64 Noticeably,
unlike Section 20, Rule 57, which requires notice and hearing before the finality of the judgment in an
application for damages, Section 17, Rule 57 allows a party to claim damages on the surety bond after
the judgment has become executory.65

The question remains, in contrast to Section 20, why does Section 17 sanction the notice and hearing
to the surety after the finality of judgment? The answer lies in the kind of damages sought to be
enforced against the bond.

Under Section 20, Rule 57, in relation to Section 4 therein,66 the surety bond shall answer for all the
costs which may be adjudged to the adverse party and all damages which he may sustain by reason
of the attachment. In other words, the damages sought to be enforced against the surety bond
are unliquidated. Necessarily, a notice and hearing before the finality of judgment must be
undertaken to properly determine the amount of damages that was suffered by the defendant due to
the improper attachment. These damages to be imposed against the attaching party and his sureties
are different from the principal case, and must be included in the judgment.

On the other hand, under Section 17, Rule 57, in relation to Section 12 therein, the cash deposit or
the counter-bond shall secure the payment of any judgment that the attaching party may recover in
the action. Stated differently, the damages sought to be charged against the surety bond
are liquidated. The final judgment had already determined the amount to be awarded to the winning
litigant on the main action. Thus, there is nothing left to do but to execute the judgment against the
losing party, or in case of insufficiency, against its sureties.

Here, the Court is convinced that a demand against FESICO had been made, and that it was given
due notice and an opportunity to be heard on its defense. First, petitioner filed a motion for execution
1âwphi1

on June 29, 2009, a copy of which was furnished to FESICO;67 second, petitioner filed a
manifestation,68 dated July 13, 2009, that FESICO was duly served with the said motion and notified
of the hearing on August 7, 2009; third, during the August 7, 2009 hearing on the motion for execution,
the counsels for petitioner, Win Multi-Rich and FESICO were all present;69 fourth, in an Order, dated
September 16, 2009, FESICO was given fifteen (15) days to submit its comment or opposition to the
motion for execution;70 and lastly, FESICO filed its comment71 on the motion on October 1, 2009. Based
on the foregoing, the requirements under Section 17, Rule 57 have been more than satisfied.

Indeed, FESICO cannot escape liability on its surety bond issued in favor of petitioner. The purpose
of FESICO's bond was to secure the withdrawal of the cash deposit and to answer any damages that
would be inflicted against petitioner in the course of the proceedings.72 Also, the undertaking73 signed
by FESICO stated that the duration of the effectivity of the bond shall be from its approval by the court
until the action is fully decided, resolved or terminated.

FESICO cannot simply escape liability by invoking that it was not a party in G.R. No. 175048. From
the moment that FESICO issued Surety Bond No. 10198 to Win Multi-Rich and the same was posted
before the RTC, the court has acquired jurisdiction over the surety, and the provisions of Sections 12
and 17 of Rule 57 became operational. Thus, the Court holds that FESICO is solidarily liable under its
surety bond with its principal Win Multi-Rich.

On a final note, the Court reminds the bench and the bar that lawsuits, unlike duels, are not to be won
by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its
great hindrance and chief enemy, deserves scant consideration from courts. There should be no
vested rights in technicalities.74

WHEREFORE, the petition is PARTIALLY GRANTED. The October 21, 2013 Decision and the April
1, 2014 Resolution of the Court of Appeals in CA-G.R. CV No. 95421 are AFFIRMED WITH
MODIFICATION. The Regional Trial Court of Manila, Branch 32 in Civil Case No. 04-108940 is hereby
ordered to proceed with the execution against Far Eastern Surety & Insurance Co., Inc., to the extent
of the amount of the surety bond.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

LUCAS P. BERSAMIN* MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

MARVIC M.V.F. LEONEN

Associate Justice
 FIRST DIVISION

G.R. No. 84481 April 18, 1989

MINDANAO SAVINGS & LOAN ASSOCIATION, INC. (formerly Davao Savings & Loan
Association) & FRANCISCO VILLAMOR, petitioners,
vs.
HON. COURT OF APPEALS, POLY R. MERCADO, and JUAN P. MERCADO, respondents.

Villarica, Tiongco & Caboverde Law Office for petitioners.

A B C Law Offices for private respondents.

GRIÑO-AQUINO, J.:

On September 10, 1986, private respondents filed in the Regional Trial Court of Davao City, a
complaint against defendants D.S. Homes, Inc., and its directors, Laurentino G. Cuevas, Saturnino R.
Petalcorin, Engr. Uldarico D. Dumdum, Aurora P. De Leon, Ramon D. Basa, Francisco D. Villamor,
Richard F. Magallanes, Geronimo S. Palermo Felicisima V. Ramos and Eugenio M. De los Santos
(hereinafter referred to as D.S. Homes, et al.) for "Rescission of Contract and Damages" with a prayer
for the issuance of a writ of preliminary attachment, docketed as Civil Case No. 18263.

On September 28, 1986, Judge Dinopol issued an order granting ex parte the application for a writ of
preliminary attachment.

On September 22, 1986, the private respondents amended their complaint and on October 10, 1986,
filed a second amended complaint impleading as additional defendants herein petitioners Davao
Savings & Loan Association, Inc. and its president, Francisco Villamor, but dropping Eugenio M. De
los Santos.

On November 5, 1986, Judge Dinopol issued ex parte an amended order of attachment against all the
defendants named in the second amended complaint, including the petitioners but excluding Eugenio
C. de los Santos.

D. S. Homes. Inc., et al. and the Davao Savings & Loan Association (later renamed Mindanao Savings
& Loan Association, Inc. or "MSLA") and Francisco Villamor filed separate motions to quash the writ
of attachment. When their motions were denied by the Court, D.S. Homes, Inc., et al. offered a
counterbond in the amount of Pl,752,861.41 per certificate issued by the Land Bank of the Philippines,
a banking partner of petitioner MSLA The lower court accepted the Land Bank Certificate of . Deposit
for Pl,752,861.41 as counterbond and lifted the writ of preliminary attachment on June 5, 1987 (Annex
V)

On July 29, 1987, MSLA and Villamor filed in the Court of Appeals a petition for certiorari (Annex A)
to annul the order of attachment and the denial of their motion to quash the same (CA-G.R. SP No.
12467). The petitioners alleged that the trial court acted in excess of its jurisdiction in issuing the ex
parte orders of preliminary attachment and in denying their motion to quash the writ of attachment,
D.S. Homes, Inc., et al. did not join them.
On May 5, 1988, the Court of Appeals dismissed the petition for certiorari and remanded the records
of Civil Case No. 18263 to the Regional Trial Court of Davao City, Branch 13, for expeditious
proceedings. It held:

Objections against the writ may no longer be invoked once a counterbond is filed for
its lifting or dissolution.

The grounds invoked for the issuance of the writ form the core of the complaint and it
is right away obvious that a trial on the merits was necessary. The merits of a main
action are not triable in a motion to discharge an attachment otherwise an applicant
for dissolution could force a trial on the merits on his motion (4 Am. Jur., Sec. 635,
934, cited in G.G. Inc. vs. Sanchez, et al., 98 Phil. 886, 890, 891). (Annex B, p. 185,
Rollo.)

Dissatisfied, the petitioners appealed to this Court.

A careful consideration of the petition for review fails to yield any novel legal questions for this Court
to resolve.

The only requisites for the issuance of a writ of preliminary attachment under Section 3, Rule 57 of the
Rules of Court are the affidavit and bond of the applicant.

SEC. 3. Affidavit and bond required .— An order of attachment shall be granted only
when it is made to appear by the affidavit of the applicant, or of some other person
who personally knows the facts, that a sufficient cause of action exists that the case is
one of those mentioned in section 1 hereof, that there is no other sufficient security for
the claim sought to be enforced by the action, and that the amount due to the applicant,
or the value of the. property the possession of which he is entitled to recover, is as
much as the sum for which the order is granted above all legal counterclaims. The
affidavit, and the bond required by the next succeeding section must be duly filed with
the clerk or judge of the court before the order issues.

No notice to the adverse party or hearing of the application is required. As a matter of fact a hearing
would defeat the purpose of this provisional remedy. The time which such a hearing would take, could
be enough to enable the defendant to abscond or dispose of his property before a writ of attachment
issues. Nevertheless, while no hearing is required by the Rules of Court for the issuance of an
attachment (Belisle Investment & Finance Co., Inc. vs. State Investment House, Inc., 72927, June 30,
1987; Filinvest Credit Corp. vs. Relova, 11 7 SCRA 420), a motion to quash the writ may not be granted
without "reasonable notice to the applicant" and only "after hearing" (Secs. 12 and 13, Rule 57, Rules
of Court).

The Court of Appeals did not err in holding that objections to the impropriety or irregularity of the writ
of attachment "may no longer be invoked once a counterbond is filed," when the ground for the
issuance of the writ forms the core of the complaint.

Indeed, after the defendant has obtained the discharge of the writ of attachment by filing a counterbond
under Section 12, Rule 57 of the Rules of Court, he may not file another motion under Section 13,
Rule 57 to quash the writ for impropriety or irregularity in issuing it.

The reason is simple. The writ had already been quashed by filing a counterbond, hence, another
motion to quash it would be pointless. Moreover, as the Court of Appeals correctly observed, when
the ground for the issuance of the writ is also the core of the complaint, the question of whether the
plaintiff was entitled to the writ can only be determined after, not before, a full-blown trial on the merits
of the case. This accords with our ruling G.B. Inc. vs. Sanchez, 98 Phil. 886 that: "The merits of a main
action are not triable in a motion to discharge an attachment, otherwise an applicant for the dissolution
could force a trial on the merits of the case on this motion."

May the defendant, after procuring the dissolution of the attachment by filing a counterbond, ask for
the cancellation of the counterbond on the ground that the order of attachment was improperly issued?
That question was answered by this Court when it ruled in Uy Kimpang vs. Javier, 65 Phil. 170, that
"the obligors in the bond are absolutely liable for the amount of any judgment that the plaintiff may
recover in the action without reference to the question of whether the attachment was rightfully or
wrongfully issued."

The liability of the surety on the counterbond subsists until the Court shall have finally absolved the
defendant from the plaintiff s claims. Only then may the counterbond be released. The same rule
applies to the plaintiffs attachment bond. "The liability of the surety on the bond subsists because the
final reckoning is when the Court shall finally adjudge that the attaching creditor was not entitled to the
issuance of the attachment writ," (Calderon vs. Intermediate Appellate Court, 155 SCRA 531.)

WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. SP No.
12467, the petition for review is denied for lack of merit with costs against the petitioners.

SO ORDERED.

Cruz, Gancayco and Medialdea, JJ., concur.

G.R. No. L-48820 May 25, 1979

MALAYAN INSURANCE CO., INC., Petitioner, vs. HON. EMILIO V. SALAS, as Presiding Judge,
Court of First Instance of Rizal, Branch I, Pasig, Metro Manila, ROSENDO FERNANDO and JOHN
DOE, Respondents.

Angara, Abello, Concepcion, Regata & Cruz for petitioner.chanrobles virtual law library

Lazaro, Abinoja & Associates for private respondents.

AQUINO, J.:

This case is about the surety company's liability on its replevin bond which was not included in the
final judgment against the principal in the bond. It is undisputed that in 1970 Makati Motor Sales, Inc.,
as vendor mortgagee, sued Rosendo Fernando for the recovery of four diesel trucks and the
connection of the balance of his obligation plus damages (Civil Case No. 13874, Court of First Instance
of Rizal, Pasig Branch To obtain immediate possession of the trucks pending trial, Makati Motors
Sales, Inc. posted a replevin bond executed by the Malayan Insurance Co., Inc. In that bond the surety
bound itself to pay P362,775.92 "for the return of the property to the defendant, if the return thereof be
adjudged, and for the payment of such sum as may in the cause be recovered against the plaintiff ".
Pursuant to the order of the court, the sheriff seized the four trucks. Later, two of the trucks were
returned to Fernando.

After trial, or on March 2, 1973, the lower court rendered judgment ordering Makati Motor Sales, Inc.
to return to Fernando the other two trucks and to pay him for the seizure of each of them, damages in
the sum of three hundred pesos daily from September 25 and 26, 1970 (or six hundred pesos for the
two trucks from the latter date) until their return to Fernando plus P26,000 as actual and moral
damages. In turn, Fernando was ordered to pay Makati Motor Sales, Inc. the sum of P66,998.34, as
the balance of the price of the two trucks, with twelve percent interest from February 28, 1969 until
fully paid and the further sum of P15,730.20 as the cost of the repair with six percent interest from
September 11, 1970 until fully paid. Makati Motor Sales, Inc. appealed to the Court of Appeals. It
affirmed the lower court's judgment in its decision of March 1, 1977 in CA-G. R. No. 54196-R.

Meanwhile, on May 11, 1973, or before the elevation of the record to the Court of Appeals, Fernando
filed in the trial court an application for damages against the replevin bond. It was opposed by the
surety on the ground that the trial court had lost jurisdiction over the case because of the perfection of
the appeal. The trial court denied the application on June 28, 1973.
On May 27, 1974 Fernando filed in the Court of Appeals his claim for damages against the replevin
bond. He prayed that the same be included in the judgment. The surety, which was furnished with a
copy of the claim, filed an opposition to it.The Court of Appeals did not act immediately on that claim
but in its 1977 decision it observed that Fernando's motion or claim "was correct" and it ordered that
his claim against Malayan Insurance Co., Inc. "be heard before the trial court". That decision affirming
the lower court's judgment became final and executory on March 18, 1977.

On April 6, 1977, or after the remand of the record to the trial court, Fernando filed a motion to set for
hearing his application for damages against the surety on its replevin bond. The application was heard
with notice to Makati Motor Sales, Inc. and Malayan Insurance Co., Inc. Fernando submitted
documentary evidence. On December 15, 1977 Malayan Insurance Co., Inc. moved to quash the
proceeding regarding the claim for damages. It contended that the trial court has no jurisdiction to alter
or modify the final judgment of the Court of Appeals.The trial court in its order of July 14, 1978 denied
the motion to quash. It directed Malayan Insurance Co., Inc. to pay Fernando the damages which it
had adjudged against Makati Motor Sales, Inc. The surety company appealed from that order to this
Court pursuant to Republic Act No. 5440.

Section 10, Rule 60 of the Rules of Court provides that in replevin cases, as in receivership and
injunction cases, the damages "to be awarded to either party upon any bond filed by the other" "shall
be claimed, ascertained, and granted" in accordance with section 20 of Rule 57 which reads:

SEC. 20. Claim for damages on account of illegal attachment. - If the judgment on the action be in
favor of the party against whom attachment was issued, he may recover, upon the bond given or
deposit made by the attaching creditor, any damages resulting from the attachment. Such damages
may be awarded only upon application and after proper hearing, and shall be included in the final
judgment. The application must be filed before the trial or before appeal is perfected or before the
judgment becomes executory, with due notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof.

If the judgment of the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an application
with notice to the party in whose favor the attachment was issued or his surety or sureties, before the
judgment of the appellate court becomes executory. The appellate court may allow the application to
be heard and decided by the trial court.Under section 20, in order to recover damages on a replevin
bond (or on a bond for preliminary attachment, injunction or receivership) it is necessary (1) that the
defendant-claimant has secured a favorable judgment in the main action, meaning that the plaintiff
has no cause of action and was not, therefore, entitled to the provisional remedy of replevin; (2) that
the application for damages, showing claimant's right thereto and the amount thereof, be filed in the
same action before trial or before appeal is perfected or before the judgment becomes executory; (3)
that due notice be given to the other party and his surety or sureties, notice to the principal not being
sufficient and (4) that there should be a proper hearing and the award for damages should be included
in the final judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970, 974; 3 Moran's Comments on
the Rules of Court, 1970 Ed., pp. 54-56. See Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil. 699).
In this appeal, Malayan Insurance Co., Inc. contends that the trial court's judgment against it is not
warranted under section 20 of Rule 57. It assails the trial court's competence to render judgment
against the surety after the decision of the Court of Appeals against the surety's principal had become
final and executory. We hold that the trial court has jurisdiction to pass upon Fernando's application
for the recovery of damages on the surety's replevin bond. The reason is that Fernando seasonably
filed his application for damages in the Court of Appeals. It was not his fault that the damages claimed
by him against the surety were not included in the judgment of the Court of Appeals affirming the trial
court's award of damages to Fernando payable by the principal in the replevin bond. The peculiar
factual situation of this case makes it an exception to the settled rule that the surety's liability for
damages should be included in the final judgment to prevent duplicity of suits or proceedings.

As may be gathered from section 20 of Rule 57, the application for damages against the surety must
be filed (with notice to the surety) in the Court of First Instance before the trial or before appeal is
perfected or before the judgment becomes executory. If an appeal is taken, the application must be
filed in the appellate court but always before the judgment of that court becomes executory so that the
award may be included in its judgment (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976).

But it is not always mandatory that the appellate court should include in its judgment the award of
damages against the surety. Thus, it was held that where the application for damages against the
surety is seasonably made in the appellate court, "the latter must either proceed to hear and decide
the application or refer "it" to the trial court and allow it to hear and decide the same"(Rivera vs.
Talavera, 112 Phil. 209, 219). We have stated earlier that in the instant case Fernando in 1974 made
a timely claim in the Court of Appeals for an award of damages against Malayan Insurance Co., Inc.
enforceable against its replevin bond. The surety was notified of that application. It registered an
opposition to the claim. The Court of Appeals did not resolve the claim immediately but in its 1977
decision it directed the trial court to hear that claim.

Obviously, the lower court has no choice but to implement that directive which is the law of the case
(See Compagnie Franco Indochinoise vs. Deutsch, etc., 39 Phil. 474, 476).

However, the trial court's implementation of that directive was incorrect. It set the claim for hearing but
the surety assailed its jurisdiction and did not consider itself bound by the mandate of the appellate
court. The merits of the claim for damages were not threshed out at the hearing because the surety
stood pat on its contention that the trial court has no jurisdiction to allow the claim in view of the finality
of the decision of the Court of Appeals.

This Court has held that, if the surety was not given notice when the claim for damages against the
principal in the replevin bond was heard, then as a matter of procedural due process the surety is
entitled to be heard when the judgment for damages against the principal is sought to be enforced
against the surety's replevin bond. The hearing win be summary and win be limited to such new
defense, not previously set up by the principal, as the surety may allege and offer to prove. The oral
proof of damages already adduced by the claimant may be reproduced without the necessity of
retaking the testimony, but the surety should be given an opportunity to cross-examine the witness or
witnesses if it so desires." That procedure would forestall the perpetration of fraud or collusion against
the surety (Visayan Surety and Insurance Corporation vs. Pascual, 85 Phil. 779, 785-786). Inasmuch
as in this case appellant Malayan Insurance Co., Inc. was not given the summary hearing during which
it could contest the reality or reasonableness of Fernando's claim for damages, we have to set aside
the trial court's order awarding damages against it and, in the interest of justice, give it another
opportunity to be heard on the merits of Fernando's claim for damages.

Before closing, it may be useful to make a review and synthesis of the copious jurisprudence on the
surety's liability in attachment, injunction, replevin and receivership bonds. It was observed in one case
that once upon a time the rulings on that point were in a muddled state.

Section 20 of Rule 57 is a revised version of section 20, Rule 59 of the 1940 Rules of Court which
earlier section 20 is a restatement of this Court's rulings under sections 170, 177, 223, 272 and 439
of the Code of Civil Procedure regarding the damages recoverable in case of the wrongful issuance
of the writs of preliminary injunction, attachment, mandamus and replevin and the appointment of a
receiver.

Section 170 contains the provision that the damages suffered in connection with the issuance of a
preliminary injunction shall be ascertained by the court trying the action (meaning the court where the
action is pending) and shall be included in the final judgment "against the plaintiff and against the
sureties". As to damages in case of wrongful attachment, see section 439 of the Code of Civil
Procedure and Belzunce vs. Fernandez, 10 Phil. 452.chanroblesvirtualawlibrary chanrobles virtual law
librarySo, as held under the Code of Civil Procedure, if the preliminary injunction was issued by this
Court, the specification of damages should be filed in this Court. The petitioner and his bondsmen
should be served with copies of the specification (Somes vs. Crossfield, 9 Phil. 13 and Macatangay
vs. Municipality of San Juan de Bocboc, 9 Phil. 19)

On the other hand, under section 439 of the Code of Civil Procedure, the damages caused by a
wrongful attachment may be adjudicated in a summary hearing but the better practice would be to
claim the damages in the answer and to offer evidence in support thereof during the trial (Gasataya
vs. Fallon 32 Phil. 245 and Raymundo vs. Carpio, 33 Phil. 395).Note that under the second paragraph
of section 20, Rule 57 of the present Rules of Court, the damages suffered during the pendency of an
appeal in a case where the writs of attachment, injunction and replevin or an order of receivership
were issued should be claimed in the appellate court.

There is an old ruling that the sureties in an injunction bond are bound by a judgment for damages
against their principal even if the sureties were not heard at the time the claim for damages was tried.
The reason for that ruling is that the sureties in an injunction bond "assume such a connection with
the suit that they are included by a judgment in it in a suit at law upon the bond, so far as the same
issues are involved; and that, upon the entry of a judgment against the principal, their liability is
absolute" (Florentino vs. Domadag, 45 O.G. 4937, 81 Phil. 882). Also, it was held that if damages
were awarded against the principal in a replevin bond without notice to the surety, that final judgment
may be enforced against the surety after it has been given an opportunity to be heard as to the reality
or reasonableness of the alleged damages. In such a case, the trial court must order the surety to
show cause why the bond should not answer for the judgment for damages. The hearing is summary
and the surety may cross-examine the witnesses presented by the defendant (Visayan Surety &
Insurance Corporation vs. Pascual, 85 Phil 779).
Insofar as those rulings in the Florentino and Visayan Surety cases allowed a claim for damages
against the surety to be ventilated in a separate proceeding or after the finality of the judgment for
damages against the principal in the bond, those rulings were jettisoned and abandoned in several
subsequent cases because they are contrary to the explicit provision of section 20 of Rule 59, now
Rule 57, that the judgment for damages against the surety should be included in the final judgment to
avoid additional proceedings (Cruz vs. Manila Surety & Fidelity Co., Inc., 92 Phil. 699; Japco vs. City
of Manila, 48 Phil. 851, 855). The damages are recoverable on the theory that an actionable wrong
was committed by the losing party. The recovery is limited to the amount of the bond (Pacis vs.
Commission on Elections, L-29026, August 22, 1969, 29 SCRA 24, 29).

The usual procedure is to file an application for damages with due notice to the other party and his
sureties. The other part may answer the application. Upon the issues thus being Joined, the matter
will be tried and determined. A court order declaring the bond confiscated without adhering to that
procedure is void ( Fabella vs. Tancinco 86 Phil. 543; Luzon Sureo Inc. Guerrero, L-20705, June 20,
1966. 17 SCRA 100).

The claim for damages against the surety should be made it notice to the surety and before the
judgment against the principal becomes executory. The liability of the surety should be included in the
final judgment. That remedy is exclusive. If riot assailed of, the surety is released (Curilan vs. Court of
Appeals, 105 Phil. 1160 and De la Rama vs. Villarosa, 118 Phil. 42-1. 430: Jesswani vs. Dialdas 91
Phil. 915: Estioco vs. Hamada, 103 Phil. 1145). Therefore, the prevailing settled rule is that a court
has no jurisdiction to entertain any proceeding seeking to hold a surety upon its bond if such surety
has not been given notice the claim for damages against the principal and the judgment holding the
latter liable has already become executor (People's Surety & Insurance Co., Inc. vs. Court of Appeals,
L-21627. June 29, 1961, 20 SCRA 481).

If the judgment awarding damages against the principal in a bond for the lifting of a preliminary
injunction had already become executory, that claim cannot be pressed against the surety by setting
it for hearing with notice to the surety. The failure to notify the surety of the claim for damages against
the principal relieves the surety from any liability on his bond (Sy vs. Ceniza, 115 Phil. 396; Pacis vs.
Commission on Elections, L-29026, August 22, 1969, 29 SCRA 24; Dee vs. Masloff, 116 Phil. 412).
To entertain the belated claim against the surety after the judgment for damages against the principal
has become executory would result in the alteration of that judgment. That should not be done (De
Guia vs. Alto Surety & Insurance Co., Inc., 117 Phil. 434; Visayan Surety & Insurance Co., Inc. vs. De
Aquino, 96 P1. 900; Port Motors, Inc. vs. Raposas and Alto Surety & Insurance Co., Inc., 100 Phil.
732; Gerardo vs. Plaridel Surety & Insurance Co., Inc., 100 Phil. 178; Luneta Motor Co. vs. Lopez,
105 Phil. 327; Curilan vs. Court of Appeals, 105 Phil. 1160; Riel vs. Lacson, 104 Phil. 1055).

Moreover, the damages claimed by the defendant should be pleaded as a compulsory counterclaim
in his answer. Hence, a separate action to claim those damages is unwarranted (Ty Tion and Yu vs.
Marsman & Co. and Alpha Insurance & Surety Co., Inc., 115 Phil. 746, 749; Medina vs. Maderera del
Norte de Catanduanes, Inc., 51 Phil. 240; Nueva-España vs. Montelibano, 58 Phil. 807; Tan Suyco
vs. Javier, 21 Phil. 82).

It may be noted that in the Visayan Surety case, 85 Phil 779, Visayan Surety & Insurance Corporation
filed a replevin bond for one Yu Sip who sued Victoria Pascual for the recovery of a truck. The trial
court found that the writ of replevin was wrongfully procured, that Victoria Pascual was the lawful
owner of the truck and that she suffered damages on account of its wrongful seizure by the sheriff at
the instance of plaintiff Yu Sip.

The trial court ordered Yu Sip to return the truck to Victoria Pascual or to pay its value of P2,300 in
case of his inability to return it and, in either case, to pay thirty pesos daily from January 6, 1947 up to
the date of the return of the truck or until its value was fully paid. The Court of Appeals affirmed that
judgment.

After the return of the record to the trial court, Victoria Pascual filed a "petition for execution of the
surety bond" wherein she prayed for a writ of execution against the surety to satisfy the judgment out
of its replevin bond. The surety opposed that petition. It contended that it was never notified by Victoria
Pascual regarding her presentation of evidence covering the damages which she had suffered. The
trial court granted the petition and ordered the issuance of a writ of execution against the surety. That
order was assailed in a certiorari in this Court. It was held that the writ of execution should be set aside
and that the surety should be given a chance to be heard in a summary proceeding. That proceeding
was conducted after the judgment against Yu Sip, the principal in the replevin bond, had become final
and executory.

What was done in the Visayan Surety case, as recounted above, was not allowed in subsequent
cases. Thus, in Manila Underwriters Insurance Co., Inc. vs. Tan, 107 Phil. 911, the trial court rendered
in 1954 a judgment dissolving the preliminary attachment and ordering the plaintiff to pay the
defendant the damages which the latter suffered by reason of the wrongful attachment. The surety in
the attachment bond was not notified of the hearing but it was furnished with a copy of the decision.
In 1957 the Court of Appeals affirmed that judgment. After it became final, the defendant filed in the
trial court against the surety a motion for execution winch the latter opposed. At the hearing of the
motion, the defendant offered to reproduce the evidence which he had presented at the trial. The offer
was accepted by the trial court. It issued the writ of execution against the surety.

It was held that, because the surety was not notified of the hearing on the damages suffered by the
defendant in the manner prescribed in section 20 of Rule 59, now Rule 57, it was not liable for damages
under its attachment bond. The surety is notified so that he may cross-examine the witnesses testifying
as to the damages and question the evidence presented by the claimant and interpose any appropriate
defense (Riel vs. Lacson, 104 Phil. 1055; Liberty Construction Supply Co. vs. Pecson, 89 Phil. 50).

So, if plaintiff's claim for damages resulting from the wrongful lifting of the writ of preliminary injunction
was awarded in the main decision without notice to the surety and the decision had become executory,
the failure to notify the surety on time relieves him from liability under the bond (Alliance Insurance &
Surety Co., Inc. vs. Piccio, 105 Phil. 1192). The surety may be held liable only if before the judgment
for damages against the principal becomes executory, an order is entered against him after a hearing
with notice to him. After the judgment becomes executory, it is too late to file such claim for damages
with notice to the surety (Abelow vs. Riva 105 Phil. 159; Visayan Surety & Insurance Corp. vs. Lacson,
96 Phil. 878).

Where the Court of Appeals dismissed a mandamus action originally filed in that court and dissolved
the preliminary injunction which it had issued and after entry of judgment was made the record was
remanded to the trial court, it was error for the Court of Appeals to allow the respondent in that case
to file a claim for damages against the principal and surety in the injunction bond. The claim should
have been filed before the judgment of dismissal became final (Luzon Surety Co. Inc. vs. Court of
Appeals, 108 Phil. 157).

Section 20 of Rule 57 contemplates one judgment for damages against the principal and the surety in
the injunction, replevin, attachment and receivership bonds. Since the judicial bondsman has no right
to demand the exhaustion of the property of the principal debtor, there is no justification for entering
separate judgments against them. The claim for damages against the surety should be made before
entry of judgment (Del Rosario vs. Nava, 95 Phil. 637).
In the Del Rosario case a judgment for damages was rendered against the principal in an attachment
bond but there was no notice to the surety of the claim for damages. That judgment became final.
After the execution against the principal was returned unsatisfied, the claimant filed a motion praying
that the surety company be required to show cause why it should not answer for the judgment against
the principal. It was held that, while the prevailing party may apply for an award of damages against
the surety even after the award has already been obtained against the principal, nevertheless, in order
that all awards for damages may be included in the final judgment, the application and notice to the
surety must be made before the judgment against the principal becomes final and executory.

In another case, it was held that as the winning party sought to hold the surety liable on its replevin
bond almost a year after the judgment of the Court of Appeals became final, the trial court erred in
enforcing its judgment against the surety. "The surety may only be held liable if, before judgment
becomes final, an order against the surety is entered after a hearing with notice to the surety". The
claim against the surety should be included in the final judgment. It is not sufficient that the surety be
afforded an opportunity to oppose the writ of execution. (Plaridel Surety & Insurance Company vs. De
los Angeles, L-25550, July 31, 1968, 24 SCRA 487). After this Court's judgment dissolving a
preliminary injunction had become final and executory, it would be too late to entertain in the trial court
the defendant's application for damages allegedly caused by the injunction (Santos vs. Moir 36 Phil.
350).

The defendant in a replevin case cannot file a separate action for damages due to the wrongful
issuance of the writ. He should have claimed the damages as a counterclaim in the original replevin
suit (Pascua vs. Sideco 24 Phil. 26, Ty Tion and Yu vs. Marsman & Co. and Alpha Ins. & Surety Co.
Inc., 115 Phil. 746). A final judgment for damages against the principal in a replevin bond cannot be
enforced against the surety company which was not notified of the claim for damages and was not
afforded a chance to be heard (People's Surety and Ins. Co., Inc. vs. Aragon, 117 Phil, 257).

Where an injunction was dissolved and only attorney's fees and costs were adjudged against the
principal, and the procedure for claiming damages against the surety was not followed, no recourse
could be had against the injunction bond in case the writ of execution against the principal was not
satisfied. Moreover, the attorney's fees and costs could be recovered from the principal even without
the filing of the bond (People's Surety & Insurance Co., Inc. vs. Bayona, 103 Phil. 1109). Where after
the dismissal of a petition for relief from the judgment of a municipal court, the Court of First Instance
ordered ex parte the issuance of a writ of execution against the petitioner's injunction bond, that order
is void because there was no formal claim for damages and there was no hearing with notice to the
petitioner and his surety. The court should hold a hearing. (Luzon Surety Co., Inc. vs. Guerrero, L-
20705, June 20, 1966, 17 SCRA 400

Where on June 11, 1959 an action to stop the foreclosure of a chattel mortgage was dismissed, without
prejudice, for failure to prosecute and, before that dismissal became final, the defendant did not prove
any damages resulting from the issuance of the preliminary injunction, defendant's motion of
September 7, 1959 praying that judgment be rendered against the surety's bond could no longer be
entertained. The claim for damages should have been made before entry of final judgment. It must be
duly substantiated at the proper hearing with notice to the surety (Jao and Sia vs. Royal Financing
Corporation, 114 Phil. 1152; Visayan Surety & Insurance Corp. vs. Lacson, 96 Phil. 878).

If the case wherein the injunction was issued was dismissed for failure to prosecute and no damages
were awarded to the defendant by reason of the issuance of the injunction, it was error for the trial
court to issue a writ of execution against the surety since there was no claim nor evidence of damages
suffered the defendant. The order of dismissal did not include in final of damages. (Vet Bros. and Co.,
Inc. vs. Movido 11 4 Phil, 211).
The case of Vadil vs. De Venecia, 118 Phil. 1217, involves a queer situation. Plaintiff corporation in
that case filed an action to recover a sum of money. It asked for a writ of attachment. Before any
attachment could be issued, the defendant filed a counterbond. But this bond provided that the
defendant and his sureties would pay "all damages that the defendant (sic) may suffer by reason of"
the attachment. In other words, the defendant executed a bond in favor of himself.

Judgment was rendered for the plaintiff. As the execution was returned unsatisfied, the trial court on
plaintiff's motion ordered execution against defendant's bond. It was held that the execution was
wrongfully issued.

However, where an injunction was issued in a forcible entry case but on certiorari to the Court of First
Instance, the justice of the peace court was held to be without jurisdiction to entertain the ejectment
case, that ejectment suit is not considered dismissed and it may still be regarded as pending in the
justice of the peace court for the purpose of allowing the defendant's claim for damages on the
injunction bond (Cruz vs. Manila Surety & Fidelity Co., 92 Phil. 699).

Section 10 of Rule 60 makes section 20 of Rule 57 applicable not only to the replevin bond but also
to the redelivery bond posted by the defendant for the lifting of the order of seizure. The requisites for
holding the surety liable on the replevin bond are also the requisites for holding the surety hable on
the redelivery bond. So, if the surety on the redelivery bond was not notified of the plaintiff's claim for
damages, the surety cannot be held liable on its redelivery bond for the damages adjudged against
the principal. It is necessary that the surety be notified and that its liability be included in the final
judgment against the principal (Luneta Motor Co. vs. Menendez 117 Phil. 970).

The writ of execution issued against the counterbond for the dissolution of an injunction is void if it was
issued without notice to the surety and after the judgment on the merits had become executory. The
surety's liability should have been included in the final judgment (Cajefe vs. Fernandez, 109 Phil. 743).

If the judgment awarding damages against the principals in the counterbonds filed for the lifting of the
receivership was appealed to the Court of Appeals and the plaintiff-appellee filed in the trial court (not
in the appellate court) his application for damages against the sureties in the counterbonds, the trial
court cannot hear the said application after the record is remanded to it because, by then, the decision
of the appellate court had become final and the damages to be awarded against the sureties could no
longer be included in that judgment. The application for damages against the sureties should have
been filed in the Court of Appeals (Luneta Motor Co. vs. Menendez 117 Phil. 970, 976). The procedure
in section 20 of Rule 57 should not be confounded with the procedure in section 17 of the same rule
regarding the surety's liability on the counterbond for the lifting of the preliminary attachment. Under
section 17, the surety may be held liable after notice and summary hearing conducted after the
judgment had become executory and the execution was returned unsatisfied (Towers Assurance
Corporation vs. Ororama Supermart, L-45848, November 9, 1977, 80 SCRA 262; Vanguard
Assurance Corporation vs. Court of Appeals, L-25921, May 27, 1975, 64 SCRA 148).

The case contemplated in section 17 of Rule 57 is different from the case envisaged in section 20 of
that rule (Dizon vs. Valdes, L-23920, April 25, 1968, 23 SCRA 200; Visayan Surety & Insurance Corp.
vs. De Aquino, 96 Phil. 900). Nor does section 20 of Rule 57 apply to cases where the surety bound
himself to abide by the judgment against his principal and thereby renounced his right to be sued or
cited, or where the surety guaranteed the return of certain goods and he did not raise the issue of lack
of notice, or where the sureties bound themselves to pay the plaintiff a definite amount (Aguasin vs.
Velasquez, 88 Phil. 357; Lawyers Cooperative Publishing Co. vs. Periquet, 71 Phil. 204; Mercado vs.
Macapayag and Pineda, 69 Phil. 403 cited in Alliance Insurance case, 105 Phil. 1201).

Note that a different rule also obtains with respect to the surety in the bond of an administrator or
executor The nature of a surety's obligation on an administrator's bond, which makes him privy to the
proceeding against his principal, is such that he is bound and concluded, in the absence of fraud or
collusion, by a judgment against his principal, even though the surety was not a party to the
proceedings (Laurente vs. Rizal Surety & Insurance Co., Inc., L-21250, March 31, 1966, 16 SCRA
551, citing Philippine Trust Co. vs. Luzon Surety Co., Inc., 112 Phil. 44. See Cosme de Mendoza vs.
Pacheco and Cordero, 64 Phil. 34). It should be underscored that in the instant case, although the
surety's liability was not included in the final judgment, which became executory, nevertheless, there
was a timely application for damages in the Court of Appeals which in its decision ordered the trial
court to hear defendant-appellee Fernando's claim for damages against the surety. That feature of the
case removes it from the coverage of the rule that the surety should be heard before the judgment
becomes executory and that his liability should be included in the final judgment.

WHEREFORE, we hold that the trial court has jurisdiction to comply with the directive of the Court of
Appeals but we reverse and set aside its order of July 14, 1978, requiring petitioner-appellant Malayan
Insurance Co., Inc. to pay the damages which it had adjudged against Makati Motor Sales, Inc. The
trial court is required to hold a summary hearing wherein appellant surety should be given a chance
to contest the reality or reasonableness of respondent-appellee Rosendo Fernando's claim for
damages. After such hearing, or if the surety should waive it, the trial court should render the proper
judgment. No costs.

SO ORDERED.
G.R. No. L-29723 July 14, 1988

ANTONIO ZARAGOZA, plaintiff-appellee,

vs.
MARIA ANGELA FIDELINO and/or "JOHN DOE," defendants MABINI INSURANCE & FIDELITY
CO., INC., surety-appellant.

NARVASA, J.:

Involved in this appeal is no more than the procedure to hold a surety hable upon a counter-bond posted by it for the release of an automobile
seized from a defendant in a replevin action under a writ issued by the Trial Court at the plaintiffs instance.

The suit for the replevy of the car was brought by Antonio Zaragoza in the Court of First Instance at
Quezon City 1 against Ma. Angela Fidelino and/or John Doe. His complaint alleged that the car had
been sold to Fidelino but the latter had failed to pay the price in the manner stipulated in their
agreement. The car was taken from Fidelino's possession by the sheriff on the strength of a writ of
delivery 2 but was promptly returned to her on orders of the Court when a surety bond for the car's
releases 3 was posted in her behalf "by Mabini Insurance & Fidelity Co., Inc.

The action resulted in a judgment 4 for the plaintiff the dispositive part of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay to the plaintiff the sum of P19,417.46, representing
the balance of the purchase price of the car sold including interest thereon, collection
charges, notarial fees and sheriffs fees and expenses in conn with the recovery of the
vehicle sold; to pay liquidated damage in the amount of P6,471.84 equivalent to 33 1/3
% of the balance outstanding and to pay the costs of this suit.

Within the reglementary period for taking an appeal, Zaragoza moved for the amendment of the
decision so as to include the surety, Mabini Insurance & Fidelity Co., Inc., as a party solidarily liable
with the defendant for the payment of the sums awarded in the judgment. 5 Despite having been duly
furnished with copies of the motion and the notice of hearing, neither Fidelino nor the surety company
filed any opposition to the motion, nor did either of them appear at the hearing thereof. 6 The Trial
Court deemed the motion meritorious and granted it. Its Order of April 16, 1968 7 decreed the following:

WHEREFORE, the motion is hereby granted, and the dispositive portion of the
decision in this case is hereby amended to read as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and

against the defendant, ordering defendant Maria Angela Fidelino and
her surety, the Mabini Insurance & Fidelity Co., Inc., to pay jointly and
severally to the plaintiff the sum of P19,417.46, representing the
balance of the purchase price of the car sold, including interests
thereon, collection charges, notarial fees and sheriffs fees and
expenses in connection with the recovery of the vehicle sold, liquidated
damages in the amount of P6,471.84 equivalent to 33 1/3% of the
balance outstanding and to pay the costs of this suit.

No motion for reconsideration was filed or appeal taken by the defendant Fidelino as regards either
the original or the amended decision. It was the surety which presented a motion for reconsideration,
and upon its denial, appealed to this Court. 8 It ascribes to the Court a quo, as might be expected,
reversible error in amending the judgment in the manner just described. It argues that the Lower Court
never acquired jurisdiction over it since no summons was ever served on it, its filing of a counter-bond
not being equivalent to voluntary submission to the Court's jurisdiction; Zaragoza failed to make a
proper application with notice before finality of the decision as provided by Section 20, Rule 57 of the
Rules of Court; and when the order amending the judgment was promulgated, the judgment had
already become final, the running of the period of appeal not having been suspended by Zaragoza's
motion to amend decision, 9 and so, the Court no longer had authority to amend it on April 16, 1968.

The appellant surety deposits quite correctly, that the situation at bar is governed by Section 10, Rule
60, in relation to Section 20, Rule 57, of the Rules of Court. Section 10, Rule 60, provides as follows:

SEC. 10. Judgment to include recovery against sureties. — The amount, if any, to be
awarded to either party upon any bond filed by the other in accordance with the
provisions of this rule, shag be claimed, ascertained, and granted under the same
procedure as prescribed in section 20 of Rule 57.

And Section 20, Rule 57 reads as follows:

SEC. 20. Claim for damages on account of illegal attachment. — If the judgment on
the action be in favor of the party against whom attachment was issued, he may
recover, upon the bond given or deposit made by the attaching creditor, any damages
resulting from the attachment. Such damages may be awarded only upon application
and after proper hearing, and shall be included in the final judgment. The application
must be filed before the trial or before appeal is perfected or before the judgment
becomes executory, with due notice to the attaching creditor and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof

xxx xxx xxx 10

It would seem at first blush that Section 20, Rule 57 above quoted is not relevant. Its title and first
sentence speak [1] of an illegal attachment, and [2] of a judgment "in favor of the party against whom
(said illegal) attachment was issued." In the case at bar, the writ of delivery was not illegal; and the
judgment was for, not against, the party in whose favor the writ of delivery was issued. In other words,
it would appear that for Section 20, Rule 57 to apply to the instant action," 11 the judgment should have
been "in favor of" defendant Fidelino (the party "against whom" the writ of delivery was issued). This
however was not the case. The judgment was in fact against, NOT in favor of Fidelino.

It thus sums indeed that the first sentence of Section 20 precludes recovery of damages by a party
against whom an attachment is issued and enforced if the judgment be adverse to him. This is not
however correct. Although a party be adjudged liable to another, ff it be established that the attachment
issued at the latter's instance was wrongful and the former had suffered injury thereby, recovery for
damages may be had by the party thus prejudiced by the wrongful attachment, even if the judgment
be adverse to him. Slight reflection will show the validity of this proposition. For it is entirely possible
for a plaintiff to have a meritorious cause of action against a defendant but have no proper ground for
a preliminary attachment. In such a case, if the plaintiff nevertheless applies for and somehow
succeeds in obtaining an attachment, but is subsequently declared by final judgment as not entitled
thereto, and the defendant shows that he has suffered damages by reason of the attachment, there
can be no gainsaying that indemnification is justly due the latter. So has this Court already had
occasion to rule, in Baron v. David, 51 Phil. 1, and Javellana v. D.O. Plaza Enterprises, 32 SCRA 26].
Be all this as it may, the second and third sentences of Section 20, Rule 57, in relation to Section 10,
Rule 60, are unquestionably relevant to the matter of the surety's liability upon a counter-bond for the
discharge of a writ of delivery in a replevin suit. 12 Under Section 10, Rule 60 (which makes reference
"to either party upon any bond filed by the other in accordance with the provisions of this rule" [60]),
the surety's liability for damages upon its counter-bond should "W claimed, ascertained, and granted
under the same procedure as prescribed in section 20 of Rule 57; 13 and andd section 20 pertinently
decrees that '(s)uch damages may be awarded only upon application and after proper hearing, and
shall be included in the final judgment .. (which means that the (application must be filed before the
trial or before appeal is perfected or before the judgment becomes executory, with due notice to the
attaching creditor and his surety or sureties, setting forth the facts showing his right to damages and
the amount thereof." Stated otherwise, to hold a surety on a counter-bond liable, what is entailed is
(1) the filing of an application therefor with the Court having jurisdiction of the action; (2) the
presentation thereof before the judgment becomes executory (or before the trial or before appeal is
perfected); (3) the statement in said application of the facts showing the applicant's right to damages
and the amount thereof, (4) the giving of due notice of the application to the attaching creditor and his
surety or sureties; and (5) the holding of a proper hearing at which the attaching creditor and the
sureties may be heard on the application. These requisites apply not only in cases of seizure or
delivery under Rule 60, but also in cases of preliminary injunctions under Rule
58, 14 and receiverships under Rule 59. 15

It should be stressed, however, that enforcement of a surety's liability on a counter-bond given for the
release of property seized under a writ of preliminary attachment is governed, not by said Section 20,
but by another specifically and specially dealing with the matter; Section 17 of Rule 57, which reads
as follows:

SEC. 17. When execution returned unsatiated, recovery had upon bond. — If the
execution be returned unsatisfied in whole or in part, the surety or sureties on any
counter-bond given pursuant to the provisions of this rule to secure the payment of the
judgment shall become charged on such counter-bond, and bound to pay to the
judgment creditor upon demand, the amount due under the judgment, which amount
may be recovered from such surety or sureties after notice and summary hearing in
the same action."

The record shows that the appellant surety company bound itself "jointly and severally" with the
defendant Fidelino "in the sum of PESOS FORTY EIGHT THOUSAND ONLY (P48,000.00), Philippine
Currency, which is double the value of the property stated in the affidavit of the plaintiff, for the delivery
thereof if such delivery is adjudged, or for the payment of such sum to him as may be recovered
against the defendant and the costs of the action. 16

This being so, the appellant surety's liability attached upon the promulgation of the verdict against
Fidelino. All that was necessary to enforce the judgment against it was, as aforestated, an application
therefor with the Court, with due notice to the surety, and a proper hearing, i.e., that it be formally
notified that it was in truth being made responsible for its co-principal's adjudicated prestation (in this
case, the payment of the balance of the purchase price of the automobile which could no longer be
found and therefore could not be ordered returned), 17 and an opportunity, at a hearing called for the
purpose, to show to the Court why it should not be adjudged so responsible. A separate action was
not necessary; it was in fact proscribed. 18 And again, the record shows substantial compliance with
these basic requirements, obviously imposed in deference to due process.

Appellant surety undoubtedly received copy of Zaragoza's Motion to Amend Decision.19 That motion
made clear its purpose—that the decision "be amended, or an appropriate order be issued, to include
.. (the surety) as a party jointly and severally liable with the defendant to the extent of the sums
awarded in the decision to be paid to plaintiff'-as well as the basis thereof-the counter-bond filed by it
by the explicit terms of which it bound itself "jointly and severally (with the defendant) .. for the payment
of such sum to him (plaintiff) as may be recovered against the defendant and the cost of the action."
The motion contained, at the foot thereof, a "notice that on Saturday, March 23, 1968, at 8:30 a.m., or
as soon thereafter as the matter may be heard, the .. (plaintiffs counsel would) submit the foregoing
motion for the consideration of the Court." And likewise indubitable is the fact that, as the Court a
quo has observed, "neither .. Fidelinos counsel nor the surety company filed any opposition to said
motion, nor did they appear in the hearing of the motion on March 23, 1968 .. (for which reason) the
motion was deemed submitted for resolution." 20 The surety's omission to appear at the hearing despite
notice of course constituted a waiver of the right to be heard on the matter.

The surety's theory that never having been served with summons, it never came under the Lower
Court's jurisdiction, is untenable. The terms of the counter-bond voluntarily filed by it in defendant's
behalf leave no doubt of its assent to be bound by the Court's adjudgment of the defendant's liability,
i.e., its acceptance of the Court's jurisdiction. For in that counterbond, it implicitly prayed for affirmative
relief; the release of the seized car, in consideration of which it explicitly bound itself solidarily with
said defendant to answer for the delivery of the car subject of the action "if such delivery is adjudged,"
i.e., commanded by the Court's judgment, or "for the payment of such sum as may be recovered
against the defendant and the costs of the action," the reference to a possible future judgment against
the defendant, and necessarily against itself, being certain and unmistakable. The filing of that bond
was clearly an act of voluntary submission to the Court's authority, which is one of the modes for the
acquisition of jurisdiction over a party.21

The same theory as that espoused by appellant surety in this case was, in substance, passed upon
and declared to be without merit in a 1962 decision of this Court, Dee v. Masloff. 22 There, a surety on
a counter-bond given to release property from receivership, also sought to avoid liability by asserting
that it was not a party to the case, had never been made a party, and had not been notified of the trial.
The Court overruled the contention, and upheld the propriety of the amendment of the judgment which
ordered the appellant surety company to pay — to the extent of its bond and jointly and severally with
defendant — the judgment obligation. The Court ruled that since such "amended judgment .. (had
been) rendered after the appellant surety company as party jointly and severally liable with the
defendant .. for the damages already awarded to the appellees, to which the appellant surety company
filed its "Opposition" and "Rejoinder" to the "Reply to Opposition filed by the appellees, without putting
in issue the reasonableness of the amount awarded for damages but confining itself to the defense in
avoidance of liability on its bond that it was not a party to the case and never made a party therein and
was not notified of the trial of the case, and that the appellees were guilty of laches, the requirement
of hearing was fully satisfied or complied with; .. (in any case,) appellant surety company never prayed
for an opportunity to present evidence in its behalf."

The appellant surety's last argument that by the time the Court amended its decision, the decision had
already become final, and therefore unalterable, is also untenable. The motion for amendment of the
decision was unquestionably in the nature of a motion for reconsideration under Section 1 (c), Rule
37 of the Rules of Court which, having been filed within "the period for perfecting an appeal," had the
effect of interrupting said period of appeal. 23

WHEREFORE, judgment is hereby rendered AFFIRMING in toto the Decision of the Court a
quo dated February 12, 1968, as amended by the Order of April 16, 1968. Costs against the appellant
surety.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. 102448 August 5, 1992

RICARDO CUARTERO, petitioner,

vs.
COURT OF APPEALS, ROBERTO EVANGELISTA and FELICIA EVANGELISTA, respondents.

Abesamis, Medialdea & Abesamis for petitioner.

Eufemio Law Offices for private respondent.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari seeking to annul the decision of the Court of Appeals
promulgated on June 27, 1991 as well as the subsequent resolution dated October 22, 1991 denying
the motion for reconsideration in CA-G.R. SP No. 23199 entitled "Spouses Roberto and Felicia
Evangelista v. Honorable Cezar C. Peralejo, Presiding Judge Regional Trial Court of Quezon City,
Branch 98, and Ricardo Cuartero," which nullified the orders of the trial court dated August 24, 1990
and October 4, 1990 and cancelled the writ of preliminary attachment issued on September 19, 1990.

Following are the series of events giving rise to the present controversy.

On August 20, 1990, petitioner Ricardo Cuartero filed a complaint before the Regional Trial Court of
Quezon City against the private respondents, Evangelista spouses, for a sum of money plus damages
with a prayer for the issuance of a writ of preliminary attachment. The complaint was docketed as Civil
Case No. Q-90-6471.

On August 24, 1990, the lower court issued an order granting ex-parte the petitioner's prayer for the
issuance of a writ of preliminary attachment.

On September 19, 1990, the writ of preliminary attachment was issued pursuant to the trial court's
order dated August 24, 1990. On the same day, the summons for the spouses Evangelista was
likewise prepared.

The following day, that is, on September 20, 1990, a copy of the writ of preliminary attachment, the
order dated August 24, 1990, the summons and the complaint were all simultaneously served upon
the private respondents at their residence. Immediately thereafter, Deputy Sheriff Ernesto L. Sula
levied, attached and pulled out the properties in compliance with the court's directive to attach all the
properties of private respondents not exempt from execution, or so much thereof as may be sufficient
to satisfy the petitioner's principal claim in the amount of P2,171,794.91.

Subsequently, the spouses Evangelista filed motion to set aside the order dated August 24, 1990 and
discharge the writ of preliminary attachment for having been irregularly and improperly issued. On
October 4, 1990, the lower court denied the motion for lack of merit.

Private respondents, then, filed a special civil action for certiorari with the Court of Appeals questioning
the orders of the lower court dated August 24, 1990 and October 4, 1990 with a prayer for a restraining
order or writ of preliminary injunction to enjoin the judge from taking further proceedings below.
In a Resolution dated October 31, 1990, the Court of Appeals resolved not to grant the prayer for
restraining order or writ of preliminary injunction, there being no clear showing that the spouses
Evangelista were entitled thereto.

On June 27, 1991, the Court of Appeals granted the petition for certiorari and rendered the questioned
decision. The motion for reconsideration filed by herein petitioner Cuartero was denied for lack of merit
in a resolution dated October 22, 1991. Hence, the present recourse to this Court.

The petitioner raises the following assignment of errors:

THE COURT OF APPEALS ERRED AND COMMITTED A GRAVE ABUSE OF

DISCRETION, AMOUNTING TO LACK OF JURISDICTION WHEN IT HELD THAT
THE REGIONAL TRIAL COURT DID NOT ACQUIRE JURISDICTION OVER
RESPONDENT SPOUSES.

II

THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF

DISCRETION WHEN IT HELD THAT THE REGIONAL TRIAL COURT COULD NOT
VALIDLY ISSUE THE SUBJECT WRIT OF PRELIMINARY ATTACHMENT WHICH IS
AN ANCILLARY REMEDY. (Rollo, p. 13)

The Court of Appeals' decision is grounded on its finding that the trial court did not acquire any
jurisdiction over the person of the defendants (private respondents herein). It declared that:

. . . the want of jurisdiction of the trial court to proceed in the main case as well as the
ancillary remedy of attachment is quite clear. It is not disputed that neither service of
summons with a copy of the complaint nor voluntary appearance of petitioners was
had in this case before the trial court issued the assailed order dated August 24, 1990,
as well as the writ of preliminary attachment dated September 19, 1990. This is
reversible error and must be corrected on certiorari. (Rollo, p. 24)

The appellate tribunal relied on the case of Sievert v. Court of Appeals, 168 SCRA 692 (1988) in
arriving at the foregoing conclusion. It stated that:

Valid service of summons and a copy of the complaint vest jurisdiction in the court over
the defendant both for the purpose of the main case and for purposes of the ancillary
remedy of attachment and a court which has not acquired jurisdiction over the person
of defendant, cannot bind the defendant whether in the main case or in any ancillary
proceeding such as attachment proceedings (Sievert v. Court of Appeals, 168 SCRA
692). (Rollo, p. 24)

The private respondents, in their comment, adopted and reiterated the aforementioned ruling of the
Court of Appeals. They added that aside from the want of jurisdiction, no proper ground also existed
for the issuance of the writ of preliminary attachment. They stress that the fraud in contracting the debt
or incurring the obligation upon which the action is brought which comprises a ground for attachment
must have already been intended at the inception of the contract. According to them, there was no
intent to defraud the petitioner when the postdated checks were issued inasmuch as the latter was
aware that the same were not yet funded and that they were issued only for purposes of creating an
evidence to prove a pre-existing obligation.

Another point which the private respondents raised in their comment is the alleged violation of their
constitutionally guaranteed right to due process when the writ was issued without notice and hearing.

In the later case of Davao Light and Power Co., Inc. v. Court of Appeals, G.R. No. 93262, November
29, 1991, we had occasion to deal with certain misconceptions which may have arisen from
our Sievert ruling. The question which was resolved in the Davao Light case is whether or not a writ
of preliminary attachment may issue ex-parte against a defendant before the court acquires
jurisdiction over the latter's person by service of summons or his voluntary submission to the court's
authority. The Court answered in the affirmative. This should have clarified the matter but apparently
another ruling is necessary.

A writ of preliminary attachment is defined as a provisional remedy issued upon order of the court
where an action is pending to be levied upon the property or properties of the defendant therein, the
same to be held thereafter by the sheriff as security for the satisfaction of whatever judgment might
be secured in said action by the attaching creditor against the defendant (Adlawan v. Tomol, 184
SCRA 31 [1990] citing Virata v. Aquino, 53 SCRA 30-31 [1973]).

Under section 3, Rule 57 of the Rules of Court, the only requisites for the issuance of the writ are the
affidavit and bond of the applicant. As has been expressly ruled in BF Homes, Inc. v. Court of Appeals,
190 SCRA 262 (1990), citing Mindanao Savings and Loan Association, Inc. v. Court of Appeals, 172
SCRA 480 (1989), no notice to the adverse party or hearing of the application is required inasmuch
as the time which the hearing will take could be enough to enable the defendant to abscond or dispose
of his property before a writ of attachment issues. In such a case, a hearing would render nugatory
the purpose of this provisional remedy. The ruling remains good law. There is, thus, no merit in the
private respondents' claim of violation of their constitutionally guaranteed right to due process.

The writ of preliminary attachment can be applied for and granted at the commencement of the action
or at any time thereafter (Section 1, Rule 57, Rules of Court). In Davao Light and Power, Co., Inc. v.
Court of Appeals, supra, the phrase "at the commencement of the action" is interpreted as referring to
the date of the filing of the complaint which is a time before summons is served on the defendant or
even before summons issues. The Court added that —

. . . after an action is properly commenced — by filing of the complaint and the payment
of all requisite docket and other fees — the plaintiff may apply and obtain a writ of
preliminary attachment upon the fulfillment of the pertinent requisites laid down by law,
and that he may do so at any time, either before or after service of summons on the
defendant. And this, indeed, has been the immemorial practice sanctioned by the
courts: for the plaintiff or other proper party to incorporate the application for
attachment in the complaint or other appropriate pleading (counter-claim, cross-claim,
third-party-claim) and for the Trial Court to issue the writ ex-parte at the
commencement of the action if it finds the application otherwise sufficient in form and
substance.

The Court also pointed out that:

. . . It is incorrect to theorize that after an action or proceeding has been commenced

and jurisdiction over the person of the plaintiff has been vested in the Court, but before
acquisition of jurisdiction over the person of the defendant (either by service of
summons or his voluntary submission to the Court's authority), nothing can be validly
 done by the plaintiff or the Court. It is wrong to assume that the validity of acts done
during the period should be dependent on, or held in suspension until, the actual
obtention of jurisdiction over the defendants person. The obtention by the court of
jurisdiction over the person of the defendant is one thing; quite another is the
acquisition of jurisdiction over the person of the plaintiff or over the subject matter or
nature of the action, or the res or object thereof.

It is clear from our pronouncements that a writ of preliminary attachment may issue even before
summons is served upon the defendant. However, we have likewise ruled that the writ cannot bind
and affect the defendant. However, we have likewise ruled that the writ cannot bind and affect the
defendant until jurisdiction over his person is eventually obtained. Therefore, it is required that when
the proper officer commences implementation of the writ of attachment, service of summons should
be simultaneously made.

It must be emphasized that the grant of the provisional remedy of attachment practically involves three
stages: first, the court issues the order granting the application; second, the writ of attachment issues
pursuant to the order granting the writ; and third, the writ is implemented. For the initial two stages, it
is not necessary that jurisdiction over the person of the defendant should first be obtained. However,
once the implementation commences, it is required that the court must have acquired jurisdiction over
the defendant for without such jurisdiction, the court has no power and authority to act in any manner
against the defendant. Any order issuing from the Court will not bind the defendant.

In Sievert v. Court of Appeals, supra, cited by the Court of Appeals in its questioned decision, the writ
of attachment issued ex-parte was struck down because when the writ of attachment was being
implemented, no jurisdiction over the person of the defendant had as yet been obtained. The court
had failed to serve the summons to the defendant.

The circumstances in Sievert are different from those in the case at bar. When the writ of attachment
was served on the spouses Evangelista, the summons and copy of the complaint were also
simultaneously served.

It is appropriate to reiterate this Court's exposition in the Davao Light and Power case cited earlier, to
wit:

. . . writs of attachment may properly issue ex-parte provided that the Court is satisfied
that the relevant requisites therefore have been fulfilled by the applicant, although it
may, in its discretion, require prior hearing on the application with notice to the
defendant, but that levy on property pursuant to the writ thus issued may not be validly
effected unless preceded, or contemporaneously accompanied by service on the
defendant of summons, a copy of the complaint (and of the appointment of guardian ad
litem, if any), the application for attachment (if not incorporated in but submitted
separately from the complaint), the order of attachment, and the plaintiff's attachment
bond.

The question as to whether a proper ground existed for the issuance of the writ is a question of fact
the determination of which can only be had in appropriate proceedings conducted for the purpose
(Peroxide Philippines Corporation V. Court of Appeals, 199 SCRA 882 [1991]). It must be noted that
the spouses Evangelista's motion to discharge the writ of preliminary attachment was denied by the
lower court for lack of merit. There is no showing that there was an abuse of discretion on the part of
the lower court in denying the motion.
Moreover, an attachment may not be dissolved by a showing of its irregular or improper issuance if it
is upon a ground which is at the same time the applicant's cause of action in the main case since an
anomalous situation would result if the issues of the main case would be ventilated and resolved in a
mere hearing of a motion (Davao Light and Power Co., Inc. v. Court of Appeals, supra, The
Consolidated Bank and Trust Corp. (Solidbank) v. Court of Appeals, 197 SCRA 663 [1991]).

In the present case, one of the allegations in petitioner's complaint below is that the defendant spouses
induced the plaintiff to grant the loan by issuing postdated checks to cover the installment payments
and a separate set of postdated cheeks for payment of the stipulated interest (Annex "B"). The issue
of fraud, then, is clearly within the competence of the lower court in the main action.

WHEREFORE, premises considered, the Court hereby GRANTS the petition. The challenged decision
of the Court of Appeals is REVERSED, and the order and writ of attachment issued by Hon. Cezar C.
Peralejo, Presiding Judge of Branch 98, Regional Trial Court of Quezon City against spouses
Evangelista are hereby REINSTATED. No pronouncement as to costs.