G.R. No. L-8040 May 28, 1955
VICENTE K. LAY, petitioner-appellant, vs. ROCES HERMANOS, INC., and THE MUNICIPAL COURT BRANCH II, OF THE CITY OF MANILA, respondents-appellees.

FACTS

The appellee, Roces Hermanos, Inc., obtained a judgment against appellant Vicente K. Lay for unpaid rentals and damages in the Municipal Court of Manila. To enforce the unsatisfied judgment, the court examined Lay and, on December 21, 1951, issued an order finding that he was receiving a salary and commission of P500 a month as Manager of the Advertising Department of the Chinese Commercial News. The order directed Lay to pay the judgment in monthly installments of P200. Lay then filed a petition for certiorari with the Court of First Instance of Manila, alleging the Municipal Court abused its discretion by not considering that his income was not fixed and was needed for his family’s support. He also applied for and obtained a writ of preliminary injunction to stop the enforcement of the Municipal Court’s order, filing an indemnity bond of P1,500 with Traders’ Insurance and Surety Co. as sureties. The Court of First Instance dismissed the certiorari petition, ruling it could not review the evidence, and sentenced Lay or his sureties to pay solidarily P1,500 as damages for the illegal issuance of the injunction. Lay appealed. While the appeal was pending, Lay was declared insolvent by the Court of First Instance, and all payments to and by him were stayed. This insolvency rendered the main issue about the Municipal Court’s order moot. The remaining issue on appeal concerned the extent of the sureties’ liability on the injunction bond.

ISSUE

Whether the sureties on the injunction bond are liable for the actual P200 monthly payments that Roces Hermanos, Inc. was prevented from collecting due to the injunction, or only for legal interest on those amounts.

RULING

The Supreme Court affirmed the judgment of the Court of First Instance. The sureties are liable for the actual damages, specifically the P200 monthly installments that the creditor was prevented from collecting due to the improperly issued injunction, up to the limit of the P1,500 bond. The Court held that Article 2209 of the New Civil Code, which provides for payment of interest as indemnity for delay in monetary obligations, is inapplicable. This rule presupposes the principal debt remains collectible after the delay, which is not the case here because the judgment became uncollectible due to the debtor’s insolvency. The injunction prevented the creditor from enforcing the judgment and receiving the monthly installments from December 1951 until the debtor’s insolvency in 1954. These installments exceeded the bond amount. Justice and equity demand that the loss be borne by those responsible for the improper injunction. Limiting recovery to interest would inadequately compensate the creditor and encourage the reckless procurement of injunctions.