G.R. No. L-10710; May 29, 1957
LUZON SURETY COMPANY, INC., petitioner, vs. HON. JUDGE JOSE TEODORO, SR., ET AL., respondents.

FACTS

In Civil Case No. 3450 of the Negros Occidental Court of First Instance, judgment was rendered on September 5, 1955, in favor of plaintiff Ricardo Nolan against defendant Marino P. Rubin. The judgment rescinded the lease between the parties, declared plaintiff’s right to re-possess Lot No. 1500, and ordered defendant to pay P5,000.00 plus 100 cavans of palay on or before the end of March 1956. Defendant Rubin took steps for an appeal. However, before the appeal’s approval, plaintiff applied for immediate execution, which respondent judge authorized on October 13, 1955. Defendant Rubin then filed a motion to stay execution, attaching a supersedeas bond (Annex C) subscribed by Luzon Surety Co. as surety. The bond stipulated it was filed to stay execution “in order to preserve the status quo of the parties pending the appeal to the Honorable Court of Appeals” and “in consideration of such appeal,” pursuant to Section 2, Rule 39 of the Rules of Court. On October 15, 1955, during the hearing on Rubin’s motion, attorneys for both parties negotiated an agreement, which was later embodied in an amended order dated October 21, 1955. The order stated that both attorneys agreed to suspend execution until the end of March 1956 to allow defendant to harvest palay; that by March 31, 1956, defendant would pay P5,000.00 and deliver 100 cavans of palay; that the supersedeas bond “be declared cancelled”; and that defendant would withdraw his appeal. Allegedly pursuant to this understanding, Rubin did not insist on perfecting his appeal and surrendered the land on February 20, 1956, but failed to deliver the P5,000.00 and 100 cavans of palay by March 31, 1956. Consequently, plaintiff Nolan moved for execution of the supersedeas bond on April 10, 1956. Luzon Surety opposed, arguing no appeal had taken place as contemplated by the bond and that the bond had been cancelled per the October 21, 1955 order. On May 16, 1956, respondent judge ordered execution against Luzon Surety, prompting the surety to file this petition for certiorari.

ISSUE

Whether the respondent judge acted with grave abuse of discretion or in excess of jurisdiction in ordering the execution of the supersedeas bond filed by Luzon Surety Company, Inc.

RULING

Yes. The Supreme Court granted the petition, revoked the order of execution, and made the preliminary injunction permanent. The Court held that the responsibility of a surety never extends beyond the terms of its bond. The bond (Annex C) was expressly conditioned upon the appeal to the Court of Appeals and was filed pursuant to Section 2, Rule 39, which binds the surety “for the performance of the judgment or order appealed from in case it be affirmed wholly or in part.” Here, no appeal was perfected by Rubin; he desisted from appealing with Nolan’s consent. Consequently, the consideration for the surety’s promise failed, and the bond never became binding. Furthermore, even assuming the bond was binding, the surety’s liability never arose because its obligation was contingent on the judgment being affirmed, and since no appeal reached the appellate court, there was no affirmance. Additionally, the Court found that the order of October 21, 1955, by its tenor, cancelled the supersedeas bond as part of the agreement where Rubin promised to pay and deliver the palay by March 31, 1956, and to withdraw his appeal. The bond, being a written contract, could not be amended orally. Therefore, the order directing execution constituted a clear error amounting to excess of jurisdiction or grave abuse of discretion correctible by certiorari.