G.R. No. L-57957 December 29, 1982
Zenith Insurance Corporation, petitioner, vs. Hon. Court of Appeals, Hon. Ricardo J. Francisco, as Presiding Judge of Branch VI, Court of First Instance of Rizal, Provincial Sheriff of Rizal Jezzar Bote, Deputy Sheriff of Rizal and Pedro F. Mejorada, respondents.

FACTS

Petitioner Zenith Insurance Corporation posted a P250,000 bond to secure a writ of preliminary attachment obtained by its principal, William Murphy, against respondent Pedro Mejorada. The trial court dismissed Murphy’s complaint and awarded damages to Mejorada. In its dispositive portion, it ordered Murphy and Zenith, “jointly and severally against the attachment bond but not exceeding the amount secured thereby in the sum of P250,000.00,” to pay specific damages to Mejorada. The Court of Appeals affirmed this decision.
Mejorada executed the judgment and collected the full P250,000 from the bond. Subsequently, he moved for an alias writ of execution to collect further amounts from Zenith beyond the bond’s face value. The trial court initially denied this but later reversed itself, issuing the alias writ upon finding that Zenith acted with malice and bad faith, making it liable for all damages, not just the bond amount. The Court of Appeals upheld this order.

ISSUE

Whether the surety’s (Zenith’s) liability for damages arising from a wrongfully issued attachment can exceed the amount stipulated in the attachment bond.

RULING

No. The Supreme Court reversed the lower courts, holding that a surety’s liability is strictly limited to the amount stipulated in the bond. The Court clarified that liability on an attachment bond is contractual and cannot be extended by implication beyond its express terms. The surety only guarantees the principal’s obligation under the bond’s specific conditions; it does not guarantee the merit of the principal’s cause of action or become liable for all costs adjudged against the principal.
The dispositive portion of the trial court’s decision explicitly limited Zenith’s liability to the bond amount of P250,000. The phrase in the Court of Appeals decision stating Zenith was “equally liable for all damages” referred only to damages resulting from the wrongful attachment, but this liability remained circumscribed by the bond’s contractual limit. Since Zenith had already paid the full P250,000, its obligation was fully extinguished. The finding of malice or bad faith does not alter this contractual limitation, as the surety’s undertaking is defined solely by the bond.