G.R. No. 89020 May 5, 1992
STRONGHOLD INSURANCE CO., INC., petitioner, vs. COURT OF APPEALS, respondent.

FACTS

On March 21, 1985, Leisure Club, Inc. filed a replevin case (Civil Case No. 52177) against Northern Motors Inc. to recover certain office furniture and equipment. The lower court issued a writ of replevin after Leisure Club, Inc. posted a replevin bond (SICI Bond No. 11652) in the amount of P42,000.00 issued by Stronghold Insurance Co., Inc. Northern Motors Inc. filed a counterbond but could not recover the properties as Leisure Club, Inc. disappeared. Leisure Club, Inc. was declared non-suited for failure to appear at pre-trial. Northern Motors Inc. presented evidence ex-parte, and on June 9, 1986, the lower court rendered a decision in its favor, dismissing the petition and ordering Leisure Club, Inc. to pay Northern Motors Inc. the actual value of the property (P20,900.00), exemplary damages (P10,000.00), attorney’s fees (P10,000.00), and costs. The court found Northern Motors Inc. had rightful ownership, that Leisure Club, Inc. was a sister company of the debtor Macronics Inc., and that the replevin action was a scheme to spirit away the properties. On July 3, 1986, Northern Motors Inc. filed a “Motion for Issuance of Writ of Execution Against Bond of Plaintiff’s Surety,” treated as an application for damages against the replevin bond. At the hearing, Northern Motors Inc. presented a witness whose testimony established the lease agreement, default, auction sale, and that the properties were the sole means to enforce its claim. Stronghold Insurance did not cross-examine the witness and failed to present its own evidence. On July 21, 1987, the lower court issued an order holding Stronghold liable under its surety bond for the damages awarded, up to the bond amount of P42,000.00. The Court of Appeals affirmed this order.

ISSUE

Whether the Court of Appeals erred in affirming the lower court’s order holding petitioner Stronghold Insurance Co., Inc. liable under its replevin bond for the damages (including exemplary damages and attorney’s fees) awarded to Northern Motors Inc.

RULING

The Supreme Court denied the petition, affirming the decisions of the lower courts. The Court held that all necessary conditions for proceeding against the bond were present: Leisure Club, Inc. failed to prosecute the action in bad faith and disappeared with the property; the property was not returned despite a court order; and a reasonable sum was adjudged due to respondent. The nature of the proceeding against the surety is summary, limited to new defenses not previously set up by the principal. Stronghold, having issued the bond which solidarily bound it for the prosecution of the action, the return of the property, and the payment of sums recovered against the plaintiff, could not dissociate itself from Leisure Club, Inc. The award of exemplary damages was justified under Article 2232 of the Civil Code due to Leisure Club’s wanton, fraudulent, reckless, oppressive, and malevolent breach. Attorney’s fees were warranted under Article 2208. The bond specifically assured payment of sums recovered against the plaintiff. Stronghold had the opportunity to contest the damages but failed to present evidence to the contrary.