Pioneer Insurance & Surety Corp. vs. Hontanosas

A claim for damages against an attachment bond must be prosecuted in the same court where the bond was filed and the attachment issued; a trial court has no authority to call a second pre-trial after a first one has been duly attended and issues joined; and notice of pre-trial must be served separately upon the party and its counsel, failure of which is a jurisdictional defect.

A foreign corporation filed a collection case in Manila against Rodriguez and attached his properties using a bond posted by Pioneer Insurance. The Manila CFI dismissed the case for improper venue and lifted the attachment. Rodriguez then sought damages for wrongful attachment, initially applying for it in the Manila case but later withdrawing to file a separate civil action in Cebu.

• Original Filing: Court of First Instance (CFI) of Manila (Collection case)
• Lower Court Decision: December 22, 1970 — Manila CFI dismissed the collection case for improper venue and lifted the writ of attachment.
• Separate Action: February 15, 1971 — Rodriguez filed Civil Case No. R-12069 for damages in CFI Cebu.
• Lower Court Decision (Cebu): February 29, 1972 — Cebu CFI declared defendants in default; March 9, 1972 — Rendered ex parte decision awarding damages.
• Appeal/CA Action: Petitioners filed Certiorari in the CA (CA-G.R. No. 00951-R) to nullify the default order and decision. CA denied the petition, holding appeal was an adequate remedy.
• SC Action: Petition for Review on Certiorari before the SC to reverse the CA and nullify the Cebu CFI proceedings.

• The Manila Collection Case: Allied Overseas Commercial Co. sued Rodriguez in CFI Manila for HK$418,279.60. A writ of preliminary attachment was issued based on a P450,000 bond posted by Pioneer Insurance. Rodriguez moved to dismiss for improper venue and applied for damages against the bond. CFI Manila dismissed the case and lifted the attachment, scheduling a hearing for the damages application.
• The Cebu Damages Case: Rodriguez withdrew his damages application in Manila and filed a new complaint in CFI Cebu against Pioneer and Allied for wrongful attachment.
• First Pre-trial: Conducted on May 5, 1971. Pioneer appeared. Parties agreed settlement was impossible, issues were joined, and trial on the merits was set for June 11, 1971.
• Amended Complaint and Second Pre-trial: Rodriguez amended the complaint to implead Lucman as an additional defendant (as Allied's assignee). Lucman filed an answer with a compulsory counterclaim. The Cebu CFI set a second pre-trial for February 28, 1972.
• Notice Defect: The clerk of court sent telegraphic notices for the February 28 pre-trial. However, Pioneer Insurance was not notified; only its counsel received a telegram.
• Prematurity: As of February 7, 1972 (when the pre-trial was set), plaintiffs had not yet filed their answer to the defendants' compulsory counterclaims (the "last pleading" required before pre-trial).
• Default and Ex Parte Judgment: Petitioners' counsel filed a motion for postponement (citing unjoined issues, lack of formal order, and a conflicting Manila hearing), but it was delayed in the mail. When defendants failed to appear on February 28, the court postponed the hearing to March 20 but conditionally threatened default. Upon verifying telegrams were received, the court declared defendants in default on February 29, 1972. Plaintiffs presented evidence ex parte, resulting in a decision ordering Pioneer to pay P350,000 moral damages, P50,000 exemplary damages, and P50,000 litigation expenses, and Lucman to pay P50,000 exemplary damages and P30,000 attorney's fees.

• The order of default and the resulting decision are illegal and void for multiple reasons (unauthorized second pre-trial, premature pre-trial, lack of notice to the party).
• The remedy of appeal is inadequate because petitioners were deprived of their day in court; they cannot raise defenses or present evidence for the first time on appeal.
• The CFI Cebu lacks jurisdiction over the claim for damages against the attachment bond. Under Sec. 20, Rule 57 of the Rules of Court, such claims must be prosecuted in the same court where the bond was filed and the attachment issued (CFI Manila).

• The remedy of ordinary appeal is plain, speedy, and adequate; any errors committed by the trial court can be assigned as specific errors on appeal.
• Sec. 20, Rule 57 does not apply because the principal case in Manila was dismissed for lack of jurisdiction (improper venue), meaning no claim for damages could have been presented there. Citing Moran, they argue the rule requiring claims in the same action is inapplicable when the principal case is dismissed for lack of jurisdiction.

• Procedural Issues:
  • Whether the trial court gravely abused its discretion in declaring defendants in default for failing to attend a second pre-trial.
  • Whether the pre-trial was prematurely set.
  • Whether notice of pre-trial sent only to counsel, and not to the party itself, is sufficient.
  • Whether appeal is an adequate remedy such that certiorari will not lie.
• Substantive Issues:
  • Whether the CFI Cebu has jurisdiction over a claim for damages arising from an attachment bond filed in CFI Manila.

• Procedural:
  • The SC held the default order was void. There is no authority in the Rules to call a second pre-trial after a first one has been successfully held, issues joined, and trial on the merits scheduled. A second pre-trial is impractical and useless.
  • The pre-trial was prematurely set. Pre-trial can only be directed after the last pleading is filed. Because plaintiffs had not yet answered the defendants' compulsory counterclaims, the pleadings were not closed.
  • Notice to counsel alone is insufficient; notice must be served separately upon the party and counsel. Failure to notify the party itself (Pioneer Insurance) is a jurisdictional defect.
  • The trial court gravely abused its discretion in denying the motion for postponement, which was based on meritorious grounds (unjoined issues, conflicting hearing) and delayed by postal neglect.
  • Appeal is not an adequate remedy. A party illegally declared in default cannot raise issues or defenses for the first time on appeal. Certiorari lies to prevent a failure of justice where the ordinary remedy cannot promptly relieve the petitioner from the injurious effects of a void judgment.
• Substantive:
  • The CFI Cebu lacked jurisdiction. The claim for damages against an attachment bond can only be prosecuted in the same court where the bond was filed and the attachment issued (CFI Manila). Rodriguez's argument that the Manila dismissal for improper venue exempts him fails because he actually filed an application for damages in the Manila court and was granted a hearing, thereby submitting to Manila's jurisdiction and waiving the objection.

• Claim for damages against attachment bond — Must be prosecuted in the same court where the bond was filed and the attachment issued. The application must be filed before trial or before appeal is perfected.
• Second pre-trial hearing — Unauthorized and unnecessary where a first pre-trial was duly attended, parties agreed they could not settle, and issues were joined. The rule on mandatory pre-trial was not intended as an "implacable bludgeon" but as a tool for orderly trial.
• Notice of pre-trial to parties — Must be served separately upon the party and counsel of record. Notice to counsel alone is a jurisdictional defect. Best practice is to serve notice through counsel, imposing on counsel the obligation to notify the client and ensure appearance or delivery of a written authority to compromise.
• Prematurity of pre-trial — Pre-trial can only be held after the last pleading has been filed. If the answer contains a counterclaim, the plaintiff's answer to the counterclaim is the last pleading.
• Adequacy of appeal vs. Certiorari — Certiorari lies despite the availability of appeal where the lower court acted without jurisdiction, the order is a patent nullity, or appeal is not sufficiently speedy/adequate to cure the disadvantageous position of a party illegally declared in default.

• Rule 20, Secs. 1 & 2, Rules of Court — Makes pre-trial mandatory; failure to appear at pre-trial may result in being non-suited or declared in default. Applied to show the purpose of pre-trial is to compel parties to appear for compromise, hence notice to the party is crucial, but a second pre-trial is unauthorized.
• Rule 57, Sec. 20, Rules of Court — Governs claims for damages on account of illegal attachment, requiring the claim to be filed in the same action, before trial or appeal, with notice to the attaching creditor and surety. Applied to strip CFI Cebu of jurisdiction over the claim, as the bond was filed and attachment issued in CFI Manila.