Philippine British Assurance Co., Inc. vs. Intermediate Appellate Court

A counterbond issued under Section 5, Rule 57 of the Rules of Court to secure payment of “any judgment” covers both final and executory judgments and judgments pending appeal; the surety may be held liable after execution against the principal debtor is returned unsatisfied, demand is made, and a summary hearing is conducted in the same action.

Sycwin Coating & Wires, Inc. commenced a collection suit against Varian Industrial Corporation in the Regional Trial Court of Quezon City. During the pendency of the action, Sycwin succeeded in attaching some of Varian’s properties upon posting a bond. Varian then posted a counterbond of P1,400,000.00 through Philippine British Assurance Co., Inc. to obtain the release of the attached properties. The trial court rendered summary judgment in favor of Sycwin, and Varian appealed.

• Nature of the Action: Sycwin Coating & Wires, Inc. filed a complaint for collection of a sum of money against Varian Industrial Corporation before the Regional Trial Court of Quezon City.
• Attachment and Counterbond: During the pendency of the suit, Sycwin succeeded in attaching some of Varian’s properties after posting a bond. Varian then posted a counterbond in the amount of P1,400,000.00 through Philippine British Assurance Co., Inc., as surety, pursuant to Section 5, Rule 57 of the Rules of Court. The counterbond provided that in case Sycwin recovered judgment in the action, Varian would redeliver the attached property so released to the officer of the court to be applied to the payment of the judgment; in default thereof, the defendant and surety would, on demand, pay Sycwin the full value of the property released. Upon filing of the counterbond, the attached properties were released.
• Trial Court Judgment: On December 28, 1984, the trial court granted Sycwin’s motion for summary judgment. It ordered Varian to pay the principal obligation of P1,401,468.00 with 12% interest per annum from the date of default until fully paid, 5% of the principal obligation as liquidated damages, P30,000.00 as exemplary damages, 15% of the principal obligation as attorney’s fees, and costs of suit. Varian’s counterclaim was dismissed for lack of merit.
• Execution Pending Appeal and Return Unsatisfied: Varian appealed the trial court’s decision to the Intermediate Appellate Court. Sycwin filed a petition for execution pending appeal against Varian’s properties. The Intermediate Appellate Court, in a Resolution dated July 5, 1985, granted the petition and ordered the issuance of a writ of execution pending appeal. The writ of execution was subsequently returned unsatisfied because Varian failed to deliver the previously attached personal properties despite demand.
• Proceeding Against the Surety: In a petition dated August 13, 1985, filed with the Intermediate Appellate Court, Sycwin prayed that the surety, Philippine British Assurance Co., Inc., be ordered to pay the value of the counterbond. The surety filed its comment. In the Resolution of September 12, 1985, the Intermediate Appellate Court granted the petition, ordering the issuance of a writ of execution against the counterbond, thus prompting the present petition for review.

• Scope of Counterbond Liability: Petitioner Philippine British Assurance Co., Inc. argued that the counterbond posted under Rule 57 secured only the payment of a final and executory judgment; it could not be enforced against the surety on the basis of an execution pending appeal.

• Procedural Objection: Respondent Sycwin Coating & Wires, Inc. contended that the petition for certiorari should be dismissed outright because petitioner failed to file a motion for reconsideration of the Intermediate Appellate Court’s resolution, a condition sine qua non for certiorari.
• Coverage of the Counterbond: Respondent maintained that the counterbond, both by its express terms and under Section 5, Rule 57, secured the payment of “any judgment,” without distinction between final and executory judgments and judgments pending appeal. All requisites for recovery under Section 17, Rule 57 — issuance of execution against the principal and its return unsatisfied, demand upon the surety, and notice and summary hearing — had been fulfilled.

• Propriety of Certiorari without Prior Motion for Reconsideration: Whether a petition for certiorari may be entertained despite the failure to file a motion for reconsideration of the assailed Intermediate Appellate Court resolution.
• Liability on the Counterbond: Whether a counterbond to lift attachment under Rule 57 of the Rules of Court may be charged with the payment of a judgment that is on appeal and subject to execution pending appeal.

• Propriety of Certiorari without Prior Motion for Reconsideration: The general rule requiring a motion for reconsideration as a condition sine qua non for certiorari was relaxed. Special circumstances — execution had been ordered and the need for relief was extremely urgent — warranted immediate and more direct action. Accordingly, the petition was entertained.
• Liability on the Counterbond: The counterbond was issued in accordance with Section 5, Rule 57, which provides that the counterbond shall secure payment of “any judgment” the attaching creditor may recover. Section 17, Rule 57 similarly speaks of the surety becoming charged upon “the judgment” when execution is returned unsatisfied. Neither the rule nor the counterbond distinguished between a final and executory judgment and a judgment pending appeal. Applying the principle ubi lex non distinguit nec nos distinguere debemos, the phrase “any judgment” was interpreted to include a judgment for which execution pending appeal had been granted. The three requisites for recovery from the surety under Section 17, Rule 57 — (1) execution against the principal returned unsatisfied in whole or in part, (2) demand upon the surety for satisfaction of the judgment, and (3) notice and summary hearing in the same action — had been complied with. The surety was therefore liable on the counterbond for the unsatisfied judgment.

• Ubi lex non distinguit nec nos distinguere debemos — Where the law does not distinguish, courts should not distinguish. Because Rule 57 employs the general phrase “any judgment” without qualification or exception, no distinction may be drawn between a final and executory judgment and a judgment pending appeal; both fall within the coverage of a counterbond to lift attachment.
• General words in a statute must be accorded their natural and general significance — A general term should not be reduced into parts and one part distinguished from another to justify its exclusion from the operation of the law. The term “any judgment” in Rule 57 must be read broadly to include every species of judgment that the attaching creditor may recover in the action.
• Requisites for recovery against a surety on a counterbond under Rule 57, Section 17 — In order that a judgment creditor may recover from the surety on a counterbond to lift attachment, it is necessary that: (1) execution be first issued against the principal debtor and such execution be returned unsatisfied in whole or in part; (2) the creditor make a demand upon the surety for the satisfaction of the judgment; and (3) the surety be given notice and a summary hearing in the same action as to its liability under the counterbond. All three requisites were satisfied in this case.

• “The counterbond was issued in accordance with the provisions of Section 5, Rule 57 … Neither the rules nor the provisions of the counterbond limited its application to a final and executory judgment. Indeed, it is specified that it applies to the payment of any judgment that maybe recovered by plaintiff. Thus, the only logical conclusion is that an execution of any judgment including one pending appeal if returned unsatisfied maybe charged against such a counterbond.” — This passage encapsulates the ratio decidendi on the interpretation of “any judgment.”
• “It is a well recognized rule that where the law does not distinguish, courts should not distinguish. Ubi lex non distinguit nec nos distinguere debemos.”
• “Under Section 17, in order that the judgment creditor might recover from the surety on the counterbond, it is necessary (1) that the execution be first issued against the principal debtor and that such execution was returned unsatisfied in whole or in part; (2) that the creditor make a demand upon the surety for the satisfaction of the judgment, and (3) that the surety be given notice and a summary hearing in the same action as to his liability for the judgment under his counterbond.” — The Court’s definitive restatement of the three-part test for surety liability on a counterbond.

• Towers Assurance Corporation v. Ororama Supermart, 80 SCRA 262 (1977) — The three requisites for charging a surety on a counterbond under Section 17, Rule 57 were drawn from this decision and applied as controlling.
• Leelin Marketing Corp. v. C & S Agro Dev. Co., 121 SCRA 725 (1983) and Dizon v. Valdez, 23 SCRA 200 (1968) — Cited as subsequent authorities reaffirming the same requisites.
• Multiple statutory construction cases — including Colgate-Palmolive Phil., Inc. v. Gimenez, Social Security System v. City of Bacolod, and Lo Cham v. Ocampo — were relied upon for the principle that general words should be given their natural and general meaning and that courts may not introduce distinctions where the law makes none.

• Rule 57, Sections 5, 12, and 17 of the Revised Rules of Court — Sections 5 and 12 require that a counterbond be given “to secure payment to the applicant of any judgment which he may recover in the action.” The Court interpreted “any judgment” as unqualified and therefore inclusive of a judgment being executed pending appeal. Section 17 provides that if execution against the principal is returned unsatisfied, the surety on the counterbond shall become charged and bound to pay the judgment creditor the amount due, recoverable after notice and summary hearing in the same action. These provisions were applied to hold that the surety’s liability attached even before the judgment became final and executory.

Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, and Sarmiento, JJ., concurred. Feliciano, J., was on leave.