G.R. No. L-9433; March 24, 1958
MATERIAL DISTRIBUTORS (PHIL.), INC., plaintiff-appellee, vs. MILES TIMBER AND TRANSPORT CORPORATION, PRENTICE M. MILES, HARRY LYONS, ALLISON J. GIBBS, FINLEY J. GIBBS, and MALAKAS CONSTRUCTION, INC., defendants-appellees. MILES TIMBER AND TRANSPORT CORPORATION and PRENTICE M. MILES, cross-claimants, vs. ALLISON J. GIBBS, FINLEY J. GIBBS, and MALAKAS CONSTRUCTION, INC., counter-defendants, STEWART T. TAIT, intervenor and appellee, LUZON SURETY COMPANY, INC., surety and appellant.

FACTS

Stewart T. Tait leased his property to Miles Timber and Transport Corporation (the lessee), which subleased it to Material Distributors (Phil.), Inc. (the sublessee). Due to disputes, several civil cases were filed. In one case, Prentice M. Miles was appointed as a receiver to preserve the sublessee’s properties. He incurred expenses totaling P22,627.31. Tait terminated the lease in July 1949 due to unpaid rentals (P13,500 from February to June 1949) and other unpaid obligations (realty taxes, utility bills, clearing costs, and repair costs), totaling P24,506.95 plus attorney’s fees. After Miles was discharged as receiver, the court authorized the sublessee to remove its properties upon posting a bond. On November 14, 1949, the sublessee, with Luzon Surety Company, Inc. as surety, posted a P20,000 bond. The only remaining assets of the sublessee were a cash deposit of P11,838.15 (from a tractor sale by the receiver) and this bond. The lower court rendered a decision adjudicating claims from the cash deposit and ordering the sublessee and the lessee to pay the remaining balances to Tait and Miles. Subsequently, Tait moved for judgment against the surety bond. Over the surety company’s objection, the lower court ordered the surety to deposit the P20,000 bond with the court for payment to Tait and Miles, specifying the order of payment.

ISSUE

Whether the lower court erred in rendering judgment against Luzon Surety Co., Inc. on its bond without a separate hearing to prove the conditions for liability had been met, and in holding the surety liable despite the bond’s condition being for the proper accounting of the released property.

RULING

The Supreme Court affirmed the lower court’s order. The surety was not entitled to a separate hearing on its liability because it had already been given ample opportunity to present its defenses through its written oppositions to the motions for judgment against the bond, which were duly heard by the court. The bond was given to take the place of the properties released from receivership and was expressly payable for any claims by any lien holder. The circumstances indicated the released properties were no longer available to satisfy the claims, and the surety failed to allege or prove that these properties were still available. Therefore, the surety was properly held liable on its bond.