G.R. No. 84979 November 6, 1989
STRONGHOLD INSURANCE CO. INC., petitioner, vs. HON. COURT OF APPEALS, HON. CLEMENTE M. SORIANO, Presiding Judge of Branch 3, Regional Trial Court of Manila, Sheriff JAIME K. DEL ROSARIO, Deputy Sheriff of Branch 3, Regional Trial Court of Manila, and JOSE OROSA, respondents.

FACTS

FCP Credit Corporation filed a complaint for replevin against Jose Orosa to seize a motor vehicle covered by a chattel mortgage. Petitioner Stronghold Insurance Co., Inc. posted a replevin bond. The trial court eventually dismissed FCP’s complaint, declared the writ improperly issued, and awarded Orosa damages. It also ordered the return of the vehicle or its value. After the decision, Orosa filed a motion for execution pending appeal, alleging FCP was liquidating its business. The trial court granted this motion, ordering execution upon Orosa’s filing of a bond. Subsequently, the trial court issued a “supplemental decision” directly holding Stronghold liable on its replevin bond, jointly and severally with FCP, for the return of the vehicle and payment of damages up to the bond amount. Execution was levied against Stronghold’s properties. Stronghold filed a petition for certiorari with the Court of Appeals, which was dismissed. It then elevated the case to the Supreme Court.

ISSUE

The primary issue is whether the trial court acted with grave abuse of discretion in granting execution pending appeal and in issuing a supplemental decision holding the surety liable on the bond without a separate application and hearing.

RULING

The Supreme Court ruled that the trial court committed grave abuse of discretion. On execution pending appeal, the Court held that the grounds cited—the defendant’s willingness to file a bond and the plaintiff’s alleged imminent insolvency—were not “good reasons” as required by the Rules of Court. Willingness to post a bond is not a special reason justifying immediate execution; otherwise, it would become routine. The alleged insolvency of the principal debtor (FCP) is also insufficient where, as here, the obligation is solidary with a solvent surety (Stronghold). The surety’s solvency negates the risk of the judgment becoming ineffectual. Regarding the surety’s liability, the Court affirmed that a surety on a replevin bond can be held liable for damages awarded to the defendant upon the plaintiff’s failure to fulfill the judgment. However, this liability must be determined in a hearing upon application, as mandated by Section 10, Rule 60 of the Rules of Court. The trial court’s issuance of a “supplemental decision” imposing liability on Stronghold without the requisite separate application and hearing deprived the surety of due process. Consequently, the orders for execution pending appeal and the supplemental decision were annulled. The Court affirmed that the surety’s liability could be properly adjudicated, but only through the correct procedure.