G.R. No. L-16880; April 30, 1963
LUNETA MOTOR COMPANY, plaintiff-appellee, vs. ANTONIO MENENDEZ and CARLOS BARANDA, defendants, LUZON SURETY CO., INC., defendant-appellant.

FACTS

Luneta Motor Company filed an action for foreclosure of a chattel mortgage and replevin against Antonio Menendez and Carlos Baranda. To secure the car’s delivery pending trial, Luneta posted a bond. Baranda, to regain possession, filed a counterbond subscribed by Luzon Surety Co., Inc., binding itself to pay any amount awarded to Luneta. The trial court rendered judgment against Menendez and Baranda, ordering payment and the car’s delivery for sale. The decision also stated that any deficiency would be satisfied by levying on the counterbond and that Luzon Surety “shall be notified.” However, the surety was not furnished a copy of this decision. Baranda appealed to the Court of Appeals, which affirmed the decision. Again, the record does not show service of this appellate decision on the surety.
Pending the finality of the Court of Appeals decision, Luneta filed a motion in the trial court to claim damages from Luzon Surety. The trial court admitted the claim but held action in abeyance. The appellate decision became final. Subsequently, the trial court, after a hearing, issued an order holding Luzon Surety liable on the counterbond. Luzon Surety appealed this order, arguing procedural non-compliance and lack of jurisdiction.

ISSUE

Whether the trial court’s order holding Luzon Surety liable on its counterbond is valid despite Luneta Motor Company’s failure to follow the prescribed procedure for claiming damages against a surety.

RULING

No. The Supreme Court annulled the trial court’s order. The procedure for enforcing a surety’s liability on a delivery bond is governed by Section 10, Rule 62, in relation to Section 20, Rule 59 of the Rules of Court. This procedure mandates that a claim for damages against the surety must be filed before the trial or, in the court’s discretion, before the entry of final judgment. Crucially, any award against the surety must be included in the final judgment. The claimant must ensure this incorporation. Here, Luneta failed to comply. Its claim was improperly filed in the trial court while the case was pending appeal in the Court of Appeals. The trial court lost jurisdiction over the case upon appeal, except for conservatory measures, and could not validly hear the claim against the surety without express permission from the appellate court. Although the Court of Appeals later remanded the record for a hearing on the claim, this occurred after its decision on the main case had already become final and executory. Consequently, the award against Luzon Surety could not be incorporated into that final judgment. The procedural lapse was fatal. The requirement is not merely filing the claim but securing its inclusion in the final judgment. Luneta’s failure to follow the correct procedural steps rendered the subsequent order against the surety null and void.