G.R. No. L-24709. October 20, 1977.
ASIAN SURETY & INSURANCE CO., INC., petitioner, vs. HON. RAMON O. NOLASCO, Presiding Judge, Branch IX, Court of First Instance of Manila, JOSE SAN AGUSTIN, Sheriff of the City of Manila, and RAMON C. DY, respondents.

FACTS

Ramon C. Dy filed a collection suit and obtained a writ of attachment against the defendants. To discharge the attachment, petitioner Asian Surety & Insurance Co., Inc. filed a counterbond, jointly and severally binding itself with the defendants in the sum of P10,500.00. The bond’s undertaking was that if the plaintiff recovered judgment, the defendants would redeliver the attached property or, in default thereof, the surety would pay the plaintiff the full value of the property released. The court subsequently rendered a final judgment ordering the defendants to pay Dy P10,000.00 plus interest and attorney’s fees.
A writ of execution was returned unsatisfied as the defendants could not be located and no leviable property was found. Dy then moved for execution against the surety’s counterbond. The respondent judge granted the motion, ordering the surety to pay the full judgment amount. Petitioner opposed, arguing its liability was limited only to the value of the specific property released, not the entire judgment debt, and that such liability could only be established after a separate hearing under the Rules.

ISSUE

Did the respondent judge act with grave abuse of discretion in holding the surety liable on its counterbond for the full monetary judgment, including interest, rather than being limited to the value of the attached property released?

RULING

No. The Supreme Court upheld the orders of the respondent judge. The legal logic is anchored on the nature and purpose of a counterbond for the discharge of an attachment under the Rules of Court. A counterbond is posted to secure the payment of any judgment the plaintiff may recover. The court reasoned that the amount of the bond itself, which was for P10,500.00, was deemed to represent the value of the attached property. Since the defendants and the surety chose to file a bond in that specific amount, they are presumed to have considered it equivalent to the property’s value. Therefore, the surety’s liability extends to the bond’s face value, which in this case covered the principal judgment of P10,000.00 and the P500.00 attorney’s fees.
Regarding interest, the Court applied settled doctrine that a surety is liable for interest on the principal obligation from the time of its default, even if this increases the total payout beyond the bond’s stated maximum. This increased liability arises not from the contract itself but from the consequences of judicial collection due to the surety’s failure to pay upon demand. Consequently, the surety was held liable for legal interest on the P10,500.00 from its receipt of the execution order, but not for costs. The respondent judge correctly applied Section 17 of Rule 57, which governs execution against a surety bond upon the principal defendants’ default, and did not commit grave abuse of discretion.