G.R. No. 88379 November 15, 1989
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, GATES LEARJET CORPORATION and GATES LEARJET EXPORT CORPORATION, respondents.

FACTS

Learjet Philippines, Inc. sued Gates Learjet Corporation and Gates Learjet Export Corporation. Upon Learjet Philippines’ application and the posting of an attachment bond by Philippine Charter Insurance Corporation (the surety), the trial court issued a writ of preliminary attachment, leading to the seizure of a Learjet aircraft owned by the defendants. The trial court later ruled in favor of Learjet Philippines. On appeal, the Court of Appeals reversed the trial court’s decision, dismissed the case for lack of merit, and declared the attachment wrongful. It awarded damages to Gates Learjet against Learjet Philippines. Four days after notice of this appellate judgment, the defendants filed an urgent petition with the Court of Appeals to have the awarded damages executed against the attachment bond posted by the surety. The Court of Appeals noted the application and, by resolution, referred the claim for damages against the surety to the trial court for hearing and decision pursuant to Section 20, Rule 57 of the Rules of Court.
Upon remand, the defendants filed a petition in the trial court for execution against the bond. The sheriff sought to enforce the writ against the surety. The surety moved to recall the notice, arguing no judgment against it existed and that due process required a separate hearing on its liability. The trial court agreed a hearing was necessary, issued a preliminary injunction against execution on the bond pending that hearing, and denied the surety’s motion for reconsideration. The surety then filed a petition for certiorari with the Court of Appeals, which was dismissed. The surety elevated the case to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in affirming the trial court’s order to conduct a hearing on the application for damages against the attachment bond after the appellate decision declaring the attachment wrongful had become final and executory.

RULING

The Supreme Court dismissed the petition, affirming the lower courts. The legal logic centers on the proper procedure for claiming damages arising from a wrongful attachment under Section 20, Rule 57. The rule provides that damages for wrongful attachment may be claimed by application filed with the court which granted the attachment, provided the application is made before the judgment becomes executory or, on appeal, before the judgment of the appellate court becomes executory. Here, the trial court’s initial judgment sustained the attachment, so no claim for wrongful attachment damages could arise at that stage. It was only the Court of Appeals’ decision that first declared the attachment wrongful. Consequently, the defendants’ application for damages against the bond, filed with the Court of Appeals before its judgment became executory, was perfectly timely. The appellate court acted within its discretion under Section 20 by referring the application to the trial court for hearing and decision. This referral did not violate due process; it ensured the surety would have its day in court to contest the extent of its liability on the bond. The finality of the appellate judgment on the main case did not bar a subsequent hearing to determine the surety’s separate liability on its contractual bond undertaking, as this liability is ancillary to the main action. The hearing ordered by the trial court was precisely to afford the surety the opportunity to be heard on the application, a right it was now invoking.