Enriquez v. Mercantile Insurance (Case Digest. G.R. No. 210950)


FACTS: Petitioner Enriquez filed a replevin case against Asuten for the recovery of the Toyota Hi-Ace van valued at P300,000.00.[49] She applied for a bond in the amount of P600,000.00 with respondent in Asuten's favor. The Regional Trial Court approved the bond and ordered the sheriff to recover the van from Asuten and to deliver it to petitioner. While the van was in petitioner's custody, the Regional Trial Court dismissed the case without prejudice for failure to prosecute. Thus, it ordered the sheriff to restore the van to Asuten. When petitioner failed to produce the van, the Regional Trial Court directed respondent to pay Asuten the amount of the bond.

There was no trial on the merits. The Regional Trial Court's dismissal for failure to prosecute was a dismissal without prejudice to re-filing. In this particular instance, any writ of seizure, being merely ancillary to the main action, becomes functus oficio. The parties returned to the status quo as if no case for replevin had been filed. Thus, upon the dismissal of the case, it was imperative for petitioner to return the van to Asuten.

ISSUE: Petitioner Enriquez argues that she should not have been made liable for the bond despite her failure to return the van, considering that it was effective only until February 24, 2004, and that she did not renew or post another bond.

HELD: De Guia v. Alto Surety & Insurance, Co. requires that any application on the bond be made after hearing but before the entry of judgment. Otherwise, the surety can no longer be made liable under the bond.

For this reason, a surety bond remains effective until the action or proceeding is finally decided, resolved, or terminated. This condition is deemed incorporated in the contract between the applicant and the surety, regardless of whether they failed to expressly state it, as provided under the Guidelines on Corporate Surety Bonds.

This is a rare instance where the writ of seizure is dissolved due to the dismissal without prejudice, but the bond stands because the case has yet to be finally terminated by the Regional Trial Court.The peculiar circumstances in this case arose when petitioner failed to return the van to Asuten, despite the dismissal of her action. This is an instance not covered by the Rules of Court or jurisprudence. In its discretion, the Regional Trial Court proceeded to rule on the forfeiture of the bond. As a result, respondent paid Asuten twice the value of the van withheld by petitioner. Respondent, thus, seeks to recover this amount from petitioner, despite the van only being worth half the amount of the bond.

Of all the provisional remedies provided in the Rules of Court, only Rule 60, Section 2 requires that the amount of the bond be double the value of the property. The other provisional remedies provide that the amount be fixed by court or be merely equal to the value of the property.

However, there is a rationale to the requirement that the bond for a writ of seizure in a replevin be double the value of the property. The bond functions not only to indemnify the defendant in case the property is lost, but also to answer for any damages that may be awarded by the court if the judgment is rendered in defendant's favor.

Any application of the bond in a replevin case, therefore, is premised on the judgment rendered in favor of the defendant. Thus, the Rules of Court imply that there must be a prior judgment on the merits before there can be any application on the bond.

Forfeiture of the replevin bond, therefore, requires first, a judgment on the merits in the defendant's favor, and second, an application by the defendant for damages. Neither circumstance appears in this case. When petitioner failed to produce the van, equity demanded that Asuten be awarded only an amount equal to the value of the van. The Regional Trial Court would have erred in ordering the forfeiture of the entire bond in Asuten's favor, considering that there was no trial on the merits or an application by Asuten for damages. This judgment could have been reversed had petitioner appealed the Regional Trial Court's May 24, 2004 Order in Civil Case No. 10846. Unfortunately, she did not. Respondent was, thus, constrained to follow the Regional Trial Court's directive to pay Asuten the full amount of the bond.