SUPREME COURT DECISIONS

PLEASE CLICK HERE FOR THE LATEST ➔ SUPREME COURT DECISIONS

FIRST DIVISION

G.R. No. L-57957 December 29, 1982

ZENITH INSURANCE CORPORATION, Petitioner, vs. HON. COURT OF APPEALS, HON. RICARDO J. FRANCISCO, as Presiding Judge of Branch VI, Court of First Instance of Rizal, PROVINCIAL SHERIFF OF RIZAL JEZZER BOTE, Deputy Sheriff of Rizal and PEDRO F. MEJORADA respondents.

Pelaez, Adriano & Gregorio Law Offices for petitioner.chanrobles virtual law library

AngeI R. Gonzales for respondents.

MELENCIO-HERRERA, J.:

The issue for resolution is the correctness of the Order for the issuance of the Alias Writ of Execution by the Court of First Instance of Rizal, Branch VI, in Civil Case No. 9490, which was affirmed by the Court of Appeals in CA-G.R. No. SP-12295, making petitioner Zenith Insurance Corporation liable for more than the amount of the bond it had issued in favor of its principal, William B. Murphy.chanroblesvirtualawlibrary chanrobles virtual law library

The controversy stemmed from the following facts:chanrobles virtual law library

On September 5, 1966, William B. Murphy filed a case for collection of a sum of money, accounting and damages, in the Court of First Instance of Rizal, Branch VI, Pasig, against private respondent Pedro Mejorada (Civil Case No. 9490). Murphy likewise prayed for a Writ of Preliminary Attachment, which the Trial Court granted upon a bond of P250,000.00 issued by petitioner Zenith Insurance Corporation in favor of Murphy.chanroblesvirtualawlibrarychanrobles virtual law library

After hearing on the merits, the Trial Court rendered its Decision, the dispositive portion of which reads:chanrobles virtual law library

WHEREFORE, judgment is hereby rendered: chanrobles virtual law library

1. Dismissing the plaintiff's Complaint dated September 3, 1966 and filed on September 5, 1966; chanrobles virtual law library

2. Declaring the Agreement dayed July 20, 1966 (Exhs. B and 30) null and void and without any legal effect whatsoever.chanroblesvirtualawlibrarychanrobles virtual law library

3. Ordering the plaintiff to pay the defendant P250,000.00 for cash advances and P146,092.48 for spare parts and materialschanrobles virtual law library

4. Ordering plaintiff to pay the defendant P330,000.00 representing unrealized profits;chanrobles virtual law library

5. Ordering plaintiff to pay defendant P20,000.00 by way of attorney's fees; and chanrobles virtual law library

6. On the action of defendant against the attachment bond ordering the plaintiff and the respondent Zenith Insurance Corporation to pay the defendant, jointly and severally against the attachment bond but not exceeding the amount secured thereby in the sum of P250,000.00, the following amounts:

a. P67,822.65 as actual damages plus interest of 6o/o per annum on the yearly premiums paid by the defendant on the two counterbounds posted, from their dates of payment until satisfied by the plaintiff and/or his surety; chanrobles virtual law library

b. Actual damages representing the simple legal interest of 6% per annum on 93,336.85, posted by the defendant in securing his initial counterbond for the same amount, from September 12, 1966 when the writ of preliminary attachment was served on the defendant's bank until January 8, 1970 when said writ was dissolved;chanrobles virtual law library

c. P30,000.00 as compensatory damages for injury to the business and goodwill of the defendant; chanrobles virtual law library

d. P66,526.00 as compensatory damages for the unrealized value(s) of the properties of the defendant which were sold in haste, or auctioned in public bidding(s) therefor; chanrobles virtual law library

e. P30,000.00 as moral damages; chanrobles virtual law library

f. P30,000.00 as exemplary or corrective damages; andchanrobles virtual law library

g. P20,000.00 as attorney's fees.chanroblesvirtualawlibrary chanrobles virtual law library

Plaintiff shall pay costs.

From the said Decision, Murphy and petitioner, as surety, appealed to the Court of Appeals (CA-G.R. No. 53497-R). Pending appeal, and upon motion of respondent, judgment was partially executed in the amount of P115 ,680.55 chanrobles virtual law library

On May 22, 1979, the Court of Appeals rendered judgment affirming in toto the Decision of the Trial Court, thus:chanrobles virtual law library

WHEREFORE, the decision appealed from being in accordance with law and evidence, the same is AFFIRMED in toto subject to the partial execution in the sum of P115,680.55 earlier enforced. No costs.

Murphy moved for reconsideration. This was denied by the Court of Appeals. Murphy then appealed by way of certiorari to this Court (G.R. No. 53536). The petition was denied for late filing in this Court's Resolution of June 13, 1980.chanroblesvirtualawlibrarychanrobles virtual law library

Thereafter, private respondent proceeded against the balance of petitioner's attachment bond coverage, and collected P80,000.00 on July 24, 1980 and P54,319.45 on August 15, 1980, adding up to the full value of the bond of P250,000.00, including the amount of P115,680.55 already partially executed. Private respondent acknowledged the last payment on August 15, 1980 to be "in full satisfaction of the writ of execution issued." chanrobles virtual law library

On November 26, 1980, private respondent filed a Motion for the Issuance of an Alias Writ of Execution to enforce the judgment award. The Trial Court initially denied alias execution as against petitioner on January 26, 1981, reasoning that, in executing the judgment, only the dispositive portion is to be looked into in the absence of such ambiguity as would justify resort to the body of the Decision, and that as the judgment is clear, the liability of petitioner is confined to the amount of the bond.chanroblesvirtualawlibrary chanrobles virtual law library

Private respondent moved for reconsideration. On April 9, 1981, the Trial Court issued the questioned Order reconsidering its Order of January 26, 1981, and granting the Motion for the issuance of an Alias Writ of Execution, petitioner's liability "not (being) limited to the amount of the bond it has put up but includes all the actual and consequential damages suffered by private respondent, there having intervened malice and bad faith" on petitioner's part. Alias Writ was issued and served upon petitioner. The latter's cash deposit at the Commercial Bank and Trust Company, Escolta Branch, and at the Philippine Bank of Communications, Juan Luna Branch, were garnished.chanroblesvirtualawlibrary chanrobles virtual law library

Petitioner filed with the Court of Appeals, a Petition for "Certiorari and Prohibition with Preliminary Mandatory Injunction" (CA-G.R. No. SP-12295) imputing grave abuse of discretion to respondent Judge in the issuance of the Order of April 9, 1981 granting the Alias Writ.chanroblesvirtualawlibrary chanrobles virtual law library

On May 21, 1981, respondent Court of Appeals upheld the Alias Writ of Execution, petitioner's "solidary liability (having) been clearly pronounced by this Court in case CA-G.R. No. 53497-R" when it held that petitioner is equally liable for all the damages that resulted from the wrongful issuance of the writ (of attachment)." Petitioner moved for reconsideration arguing that liability on the attachment bond is not to be confounded with liability on the judgment, and that its liability cannot exceed the amount of the attachment bond. Reconsideration was denied for lack of merit.chanroblesvirtualawlibrary chanrobles virtual law library

Petitioner filed the present Petition stating that respondent Judge acted without or in excess of jurisdiction in issuing the Order for the issuance of the Alias Writ of Execution for the further enforcement of the judgment against petitioner; and that respondent Court of Appeals acted with grave abuse of discretion or erred in sustaining the said Order considering that:chanrobles virtual law library

1) private respondent has been paid the full value of the P250,000.00 attachment bond posted by petitioner for plaintiff, as required by the judgment and has, upon receipt of the last installment completing such payment, acknowledged the same to be "in full satisfaction of the writ of execution",chanrobles virtual law library

2) the alias writ of execution would have petitioner surety company satisfy, not the judgment with respect to the damages resuming from the wrongful issuance of the writ of attachment, but the judgment on the causes of action asserted by defendant (herein private respondent) in his counterclaims against plaintiff; chanrobles virtual law library

3) the alias writ of execution would have petitioner surety company pay more than the value of the attachment bond, in disregard of the express limitation in the judgment of its liability to the value, of the bond as well as of settled jurisprudence."

On September 16, 1981, we issued a Temporary Restraining Order enjoining enforcement of the Order dated April 9, 1981 and on November 4, 1981, we resolved to give due course and required the filing of Memoranda by the parties, which they have done.chanroblesvirtualawlibrarychanrobles virtual law library

The only issue to be determined in this Petition is whether or not respondent Court committed grave abuse of discretion in ordering the issuance of the Alias Writ of Execution making petitioner solidarily liable for all costs and damages, or, for more than the amount of its bond.chanroblesvirtualawlibrarychanrobles virtual law library

We find for petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

Paragraph " 6 " of the dispositive portion of the Trial Court's Decision, which states:chanrobles virtual law library

6. On the action of the defendant against the attachment bond, ordering the plaintiff and the respondent Zenith Insurance Corporation to pay defendant, jointly and severally against the attachment bond but not exceeding the amount secured thereby in the sum of P250,000.00 the following amounts:chanrobles virtual law library

xxx xxx xxx

is clear and correct. There is no ambiguity that would "justify resort to the entire contents of the decision in order to determine the extent of the liability of a party litigant". ¹ The liability of petitioner is expressly limited to P250,000.00, the amount of the attachment bond. "A guaranty is not presumed, it must be express and cannot extend to more than what is stipulated therein." ² chanrobles virtual law library

It is true that in CA-G.R. No. 53497-R (the appeal from the Trial Court's Decision), petitioner was pronounced "equally liable with its principal for all damages sustained resulting from the wrongful issuance of the Writ (of Preliminary Attachment)". The phrase "all damages" refers to those resulting from the undertaking itself. It does not mean that the surety is answerable for all costs and damages that may be adjudged against its principal over the above what is adjudged against it in the dispositive portion of the Decision, as it would be unreasonable to expand debtor." chanrobles virtual law library

When a surety executes a bond, it does not guarantee that the plaintiff's cause of action is meritorious, and that it will be responsible for all the costs that may be adjudicated against its principal in case the action fails. ³ The extent of a surety's liability is determined only by the clause of the contract of suretyship. ⁴ It cannot be extended by implication, beyond the terms of the contract. ⁵chanrobles virtual law library

Specifically, this Court in Rocco vs. Meads supra ruled: chanrobles virtual law library

Liability on the bond is contractual in nature, and is ordinarily restricted to the obligation expressly assumed therein. Liability on an attachment bond is created by, and rests on, its stipulations. The obligor has a right to stand on the very terms of his contract, and his liability will not be extended beyond the fair import of the words used; his liability is one not to be extended by implication, and it will not be inferred that he agreed to do more than that which is fairly expressed in the bond.

The ruling in PNB vs. Luzon Surety Co., Inc. 68 SCRA 207 (1975), which increased the surety's liability beyond the maximum of the bond by making it liable to pay interest because of its failure to pay its obligation on demand, does not apply in this case, because petitioner herein has settled its obligation, and its liability had already been fully satisfied, unlike in the cited case where the increased liability was "not because of the contract but because of the default and the necessity of judicial collection. "chanrobles virtual law library

WHEREFORE, the Petition is hereby granted. The questioned Order of April 9, 1981 of the Court of First Instance of Rizal, Branch VI, in Civil Case No. 9490, entitled William B. Murphy vs. Pedro F. Mejorada defendant, and Zenith Insurance Corporation, Surety" and the Decision of the Court of Appeals in CA-G.R. No. SP-12295, entitled "Zenith Insurance Corporation vs. Hon. Judge Ricardo Francisco, et. al., are hereby REVERSED and SET ASIDE. The "Temporary Restraining Order" heretofore issued is hereby made permanent.chanroblesvirtualawlibrary chanrobles virtual law library

No costs.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

---

Endnotes:

1 Decision, CA-G.R. No. SP-12295, p. 6.chanrobles virtual law library

2 Art. 2055, Civil Code.chanrobles virtual law library

3 Rocco vs. Meads, 96 Phil. 884 (1955).chanrobles virtual law library

4 Republic vs. Umali, 22 SCRA 922 (1968).chanrobles virtual law library

5 Magdalena Estate, Inc. vs. Rodriguez, 18 SCRA 967 (1966): Jao vs. Royal Financing Corporation, 4 SCRA 1210 (1962).