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EN BANC

G.R. No. L-23920 April 25, 1968

RAMON R. DIZON, Plaintiff-Appellant, vs. LORENZO J. VALDES, VALLESON, INC., and AUGUSTO J. VALDES, Defendants-Appellees.

Jose Agbulos for plaintiff-appellant.
Felix Law Office for defendants-appellees.

SANCHEZ, J.:chanrobles virtual law library

The case before us is an incident in a suit for a sum of money (Civil Case Q-2618, Court of First Instance of Rizal, Quezon City Branch), entitled "Ramon R. Dizon, Plaintiff, vs. Lorenzo J. Valdes, Valleson, Inc., and Augusto J. Valdes, Defendants." Judgment was, on December 2, 1960, there rendered directing defendants Valleson, Inc. and Augusto J. Valdes (Lorenzo J. Valdes excluded) "to pay jointly and severally to the plaintiff the amount of P6,260.00 with interest at the rate of 12% per annum from September 1, 1954 until fully paid and to pay attorney's fees in the amount of P600.00 with costs." The counterclaim of defendants Lorenzo J. Valdes and Valleson, Inc. was dismissed.chanroblesvirtualawlibrarychanrobles virtual law library

On January 11, 1961, Valleson, Inc. filed its notice of appeal. Its appeal was perfected on February 11, 1961.chanroblesvirtualawlibrarychanrobles virtual law library

Meanwhile, on January 10, 1961, one day before Valleson's notice of appeal, plaintiff petitioned for and the trial court directed the issuance of a writ of preliminary attachment against the properties, real and personal, of defendants Augusto J. Valdes and Valleson, Inc. upon an P11,730-bond. On January 11, said bond having been filed, the corresponding writ was issued. Pursuant thereto, garnishment notices were served by the Manila Sheriff on one Restituto Sibal and the Philippine Guaranty Co.chanroblesvirtualawlibrarychanrobles virtual law library

On February 9, 1961, the judgment debtors moved to dissolve the writ of attachment, upon an P11,730-counterbond subscribed by the Capital Insurance & Surety Co., Inc. The following day, February 10, 1961, the trial court dissolved the writ.chanroblesvirtualawlibrarychanrobles virtual law library

On February 24, 1961, plaintiff registered a motion to admit its "Claim for Damages" attached thereto. Plaintiff's claim was that the dissolution of the attachment "put out of the reach of the plaintiff the properties and assets which may be held to answer for the adjudged claim"; and that, by reason thereof, "plaintiff suffered and will suffer damages in the amount of P11,730.00 plus the corresponding 12% interest thereon and attorney's fees and costs." He then prayed that "defendants and the Capital Insurance & Surety Co., Inc. be ordered to pay the plaintiff, jointly and severally, the amount of P11,730.00 plus interests, expenses, and attorney's fees."chanrobles virtual law library

On March 1, 1961, the surety, Capitol Insurance & Surety Co., Inc., opposed. Assertion was made that pursuant to the Rules of Court (then, Section 17, Rule 59; now Section 17, Rule 57), the surety on any counter-bond shall only become charged and bound to pay plaintiff upon demand, the amount due under the judgment; and that such amount may be recovered from the surety after notice and summary hearing in the same action - only if execution be returned unsatisfied in whole or in part.chanroblesvirtualawlibrarychanrobles virtual law library

On April 25, 1961, at the hearing fixed by the court, plaintiff presented evidence on the merits of its claim for damages, in the absence of defendants and surety, who made no appearance thereat.chanroblesvirtualawlibrarychanrobles virtual law library

The trial court, in its order of May 16, 1961, ruled that plaintiff's claim for damages was premature, since the main case was then still pending appeal.chanroblesvirtualawlibrarychanrobles virtual law library

Plaintiff's motion for reconsideration, filed on July 10, 1961, was thwarted by the court below on September 16, 1961.chanroblesvirtualawlibrarychanrobles virtual law library

Under the environmental facts, can plaintiff's claim for damages on defendants' counter-bond prosper? The answer must be in the negative.chanroblesvirtualawlibrarychanrobles virtual law library

1. By the terms of the counter-bond itself,¹ liability thereunder attaches only "in case the plaintiff recovers judgment in the action." Indeed, by Section 12 of Rule 59 of the old Rules,² the law in force at the time the counterbond was executed, the statutory counter-bond was made "to secure the payment to the plaintiff of any judgment he may recover in the action." Complementary to this legal precept is Section 17 of the same Rule 59 of the old Rules³ - which should be deemed as read into the bond - viz:

Sec. 17. When execution returned unsatisfied, recovery had upon bond. - If the execution be returned unsatisfied in whole or in part, the surety or sureties on any bond given pursuant to the provisions of this rule to secure the payment of the judgment shall become finally charged on such bond, and bound to pay to the plaintiff 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.

Since at the time the claim for damages was registered, the case was still pending appeal, it is quite obvious that the motion for the claim for damages was premature. And the lower court thus correctly ruled out plaintiff's motion. For, Section 17 contemplates of proceedings on execution after judgment. And, it is only thereafter that liability upon the surety's bond may be determined. The key term in Section 17 is the phrase "[i]f the execution be returned unsatisfied in whole or in part." Until such proceeding shall have taken place and unless unsatisfied liability under the judgment still exists, no action upon the counter-bond may be taken against the surety.⁴chanrobles virtual law library

2. We do not follow plaintiff when he says that what controls here is Section 20 of Rule 57 (then Rule 59). By its very terms,⁵ this obviously refers to the recovery of damages by a party against whom attachment was issued. This is a remedy available to the defendants here, not the plaintiff.chanroblesvirtualawlibrarychanrobles virtual law library

It is therefore not to be doubted that, upon the applicable rules, the counter-bond does not answer for damages on account of the lifting of the attachment, but for the payment of the amount due under the judgment that may be recovered by an attaching creditor.⁶chanrobles virtual law library

3. Nor is importance to be attached to plaintiff's argument that the dissolution of the attachments put out of his reach the properties and assets answerable for his claim. The counter-bond, it should be emphasized, precisely stands "in place of the properties so released."⁷ Thus, the release of such property cannot really "prejudice the rights of the attaching party."⁸chanrobles virtual law library

We accordingly affirm the lower court's order of May 16, 1961 under review.chanroblesvirtualawlibrarychanrobles virtual law library

Costs against plaintiff-appellant. So ordered.

Reyes, J.B.L., Makalintal, Bengzon, J.P., Castro, Angeles and Fernando, JJ., concur.
Dizon and Zaldivar, JJ., took no part.

Endnotes:

¹Record on Appeal, pp. 43-47; emphasis supplied.

²Now Section 12, Rule 57.

³Substantially the same as Section 17, Rule 57 of the present Rules.

⁴See: Bautista vs. Joaquin, 46 Phil. 890.

⁵Section 20, Rule 59, reads: .chanroblesvirtualawlibrarychanrobles virtual law library

"Sec. 20. Claim for damages on plaintiff's bond on account of illegal attachment. - If the judgment on the action be in favor of the defendant, he may recover, upon the bond given by the plaintiff, 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, in the discretion of the court, before entry of the final judgment, with due notice to the plaintiff and his surety or sureties, setting forth the facts showing his right to damages and the amount thereof. Damages sustained during the pendency of an appeal may be claimed by the defendant, if the judgment of the appellate court be favorable to him, by filing an application therewith, with notice to the plaintiff and his surety or sureties, and the appellate court may allow the application to be heard and decided by the trial court."chanrobles virtual law library

⁶Anzures vs. Alto Surety & Insurance Co., Inc., 92 Phil 742, 743; Cajefe vs. Fernandez, L-15709, October 19, 1960.chanroblesvirtualawlibrarychanrobles virtual law library

⁷Section 12, Rule 59 (now Rule 57); Anzures vs. Alto Surety & Insurance Co., Inc., supra, at p. 743.

⁸Manila Mercantile Co. vs. Flores, 50 Phil. 759, 763.