G.R. No. 212025 July 1, 2015
EXCELLENT QUALITY APPAREL, INC., Petitioner, vs. VISAYAN SURETY & INSURANCE CORPORATION, and FAR EASTERN SURETY & INSURANCE CO., INC., Respondents.

FACTS

Petitioner Excellent Quality Apparel, Inc. entered into a construction contract with Multi-Rich Builders, which contained an arbitration clause. Win Multi-Rich Builders, Inc. (Win Multi-Rich), later incorporated, filed a collection suit against petitioner and secured a writ of preliminary attachment by posting a bond from respondent Visayan Surety. To prevent attachment of its equipment, petitioner deposited a cash amount with the court. The RTC later allowed Win Multi-Rich to withdraw this cash deposit after it posted a bond from respondent Far Eastern Surety and Insurance Co., Inc. (FESICO). Petitioner challenged the RTC’s jurisdiction, citing the arbitration clause. The Supreme Court, in G.R. No. 175048 , ultimately dismissed the collection suit for lack of jurisdiction, ordered Win Multi-Rich to return the garnished amount to petitioner, and declared the writ of attachment and release of funds void. After the decision became final, petitioner moved for execution and sought to hold the surety companies liable under their bonds when Win Multi-Rich failed to return the money. The RTC and the Court of Appeals denied execution against the sureties, ruling that petitioner failed to file a timely claim for damages against the attachment bond under Section 20, Rule 57 of the Rules of Court before the judgment became final, and that holding them liable would violate due process as they were not parties to the main case.

ISSUE

Whether the surety companies (Visayan Surety and FESICO) can be held liable under their respective bonds for the return of petitioner’s wrongfully attached and released funds, despite petitioner not filing a separate application for damages against the bond before the judgment in the main case became final and executory.

RULING

Yes. The Supreme Court granted the petition and reversed the CA decision. The Court ruled that the liability of the surety companies is a necessary consequence of the final judgment in G.R. No. 175048 , which declared the attachment wrongful and ordered the return of the funds. The separate action requirement under Section 20, Rule 57 is not an ironclad rule. A claim for damages on the bond can be pursued in the same action, especially where, as here, the application for damages is based on the very act of attachment declared invalid by the final judgment. The surety bonds are integral parts of the attachment proceedings. The surety companies’ liability is contractual and accessory to the principal obligation. Their due process rights were not violated because they were notified of the motion for execution and given opportunity to oppose it. FESICO’s bond, securing the withdrawal of the deposit, is likewise liable as its obligation is inseparable from the void attachment. The Court ordered the RTC to issue a writ of execution against Win Multi-Rich and, if it fails to satisfy the judgment, to proceed against the surety companies pursuant to their respective bonds.