G.R. Nos. L-16280 and L-16805; May 30, 1961
ANACLETA RIVERA, HERMOGENA ALZADON, MACARIA CAPUNO, ET AL., petitioners, vs. FELICIDAD TALAVERA, by herself and as guardian ad litem of the minors REMEDIOS PEÑA ET AL., DOROTEO PEÑA, by herself and as guardian ad litem of the Minors WENCESLAO ALZADON, ET AL., and COURT OF APPEALS, respondents.

FACTS

This consolidated case originated from a land recovery suit (Civil Case No. 33, Tarlac). The plaintiffs (petitioners Rivera, et al.) repeatedly obtained receivership over the disputed property, which the defendants (respondents Talavera, et al.) repeatedly dissolved by posting five separate counterbonds with various sureties between 1945 and 1950. The trial court eventually ruled for the plaintiffs, awarding damages. The defendants appealed to the Court of Appeals (CA). To retain possession pending appeal, they posted a sixth bond from Visayan Surety & Insurance Corporation. The CA affirmed the trial court’s decision but reduced the damages.
After the CA decision, the plaintiffs filed in the CA an application for damages against the Visayan Surety bond for losses during the appeal. Separately, they filed a supplemental complaint in the trial court against the sureties of the first five counterbonds. The CA, in its resolutions, initially relieved Visayan Surety but later reinstated its liability. However, it relieved the sureties on the first five bonds, citing lack of proper notice and hearing on the damages claim before the trial court’s judgment became final. The plaintiffs sought certiorari (G.R. No. L-16280) against this CA resolution. Meanwhile, the trial court proceeded with the supplemental complaint against the earlier sureties, prompting them to seek certiorari (G.R. No. L-16805) to challenge the trial court’s jurisdiction.

ISSUE

The core legal issue is whether the trial court retained jurisdiction to hear a claim for damages against the sureties on counterbonds posted to dissolve receivership after the main case had been appealed and decided by the Court of Appeals, and what the proper procedure is for enforcing such claims against sureties.

RULING

The Supreme Court ruled that the trial court acted without jurisdiction. The proper procedure for claiming damages against sureties on receivership counterbonds is governed by Section 20, Rule 59 of the Rules of Court. The Court held that an application for damages may be filed in the trial court before its judgment becomes final and executory. However, once an appeal is perfected and the case is pending in the appellate court, the application must be filed in the appellate court itself before its judgment becomes final. The appellate court then has the discretion to hear the application or refer it to the trial court for hearing and decision.
Consequently, the plaintiffs’ supplemental complaint filed directly in the trial court against the sureties of the first five bonds, without the CA’s permission or referral, was invalid. All proceedings on that complaint were vacated. The case was remanded with instructions: the supplemental complaint against the earlier sureties must be elevated to the CA for proper action with due notice, and the CA must also properly act on the application against the Visayan Surety bond. Any damages awarded would be incorporated into the final CA judgment. The Court emphasized that sureties cannot be held liable without being afforded due process, including proper notice and a hearing on the damages application filed in the correct forum at the appropriate time.