G.R. No. L-12129; September 17, 1958
VISAYAN SURETY and INSURANCE CORPORATION, petitioner, vs. CENTRAL BANK OF THE PHILIPPINES, THE HONORABLE JUDGE JUAN P. ENRIQUEZ, and THE SHERIFF OF THE CITY OF MANILA, respondents.

FACTS

1. The Bank of the Commonwealth was placed in liquidation in 1943. The Central Bank of the Philippines later became the liquidator.
2. In 1951, the Bank of the Commonwealth received a U.S. Treasury War Damage check. The Central Bank instructed other banks not to pay it.
3. The Bank of the Commonwealth filed Civil Case No. 14452 against the Central Bank, seeking to compel acceptance of the check. The court issued a preliminary injunction upon the filing of a P5,000 bond by petitioner Visayan Surety & Insurance Corporation, conditioned to answer for damages the defendants might sustain if the injunction was wrongfully issued. An additional P19,500 bond was later filed by Union Surety.
4. The Central Bank later lifted its order stopping payment of the check.
5. On July 20 and 27, 1954, the Bank of the Commonwealth moved to dismiss Civil Cases Nos. 8352 and 14452 and prayed that the injunction bond from Civil Case No. 14452 “be transferred to, and maintained in full force and effect” in the liquidation proceedings (Special Proceedings No. R-1930). The court granted these orders on August 3 and 18, 1954.
6. In November 1954, the court in the liquidation proceedings ordered the liquidator (Central Bank) to use the proceeds of the war damage check to pay claims against the Bank of the Commonwealth. The bank failed to turn over the proceeds.
7. The liquidator demanded payment from the sureties. Petitioner refused, contending it could not pay without a judgment. The liquidator moved to forfeit the bond.
8. Petitioner opposed, arguing the court had no jurisdiction to order forfeiture in the liquidation case; no bond was originally filed there; the transfer of the bond was improper and beyond the surety’s contract; and the dismissal order in Civil Case No. 14452 contained no award for damages and was final.
9. On January 13, 1956, the court granted the motion and ordered the bond forfeited in favor of the Central Bank. Petitioner’s motion for reconsideration was denied by an order dated March 19, 1956, notice of which was served on the surety company itself, not on its counsel of record.
10. The liquidator moved for execution. The Executive Judge granted the writ on January 3, 1957. Petitioner moved to vacate, which was denied.
11. Petitioner filed this petition for certiorari and prohibition, and the Supreme Court issued a preliminary injunction.

ISSUE

Whether the lower court acted without or in excess of jurisdiction or with grave abuse of discretion in issuing the orders of August 18, 1954 (transferring the injunction bond from the dismissed civil case to the liquidation proceedings) and January 13, 1956 (ordering the forfeiture of said bond), thereby holding the surety liable in a proceeding different from the one for which the bond was expressly issued.

RULING

The Supreme Court granted the petition, set aside the challenged orders, and made the preliminary injunction permanent.
1. The bond was specific and limited. The bond (V.S. & I.C. No. V-AG-51/123) was filed specifically for Civil Case No. 14452. Its sole condition was to answer for damages the defendants (Central Bank, et al.) might sustain by reason of the preliminary injunction issued in that case, should it be finally decided the plaintiff was not entitled to it.
2. The dismissal of the civil case released the surety. The civil case was dismissed upon the plaintiff’s own motion. This dissolution of the injunction, without any provision holding the surety liable, ordinarily operated to release the bond. The surety’s obligation was coterminous with the existence of the injunction in that specific case.
3. The transfer of the bond was invalid and ultra vires. The court-approved transfer of the bond to the liquidation proceedings (Special Proceedings No. R-1930) upon the principal’s motion, without the surety’s consent, was improper. It sought to convert a specific injunction bond into a general bond for the liquidation proceedings, altering the surety’s contract and binding it to a liability it never agreed to undertake. A surety cannot be held beyond the precise terms of its contract.
4. No liability for damages from the injunction was established. The order dismissing Civil Case No. 14452 did not contain any finding or award that the defendants were entitled to damages by reason of the injunction. Therefore, no liability under the very terms of the bond ever attached or was adjudicated.
5. Notice issue rendered. The Court noted that the notice of the order denying reconsideration (March 19, 1956) was improperly served on the surety company instead of its counsel of record, citing Chainani vs. Tancinco. Such service did not constitute valid notice to start the period for appeal. However, this point was rendered academic by the resolution of the main issue.
Disposition: The orders of the lower court dated August 18, 1954, and January 13, 1956, are set aside. The petition is granted, and the preliminary injunction issued by the Supreme Court is made permanent. No costs.