1. G.R. No.

L-24508               April 25, 1969

CENTRAL SAWMILLS, INC., plaintiff-appellee,

vs.
ALTO SURETY & INSURANCE CO., ET AL., defendants,
ALTO SURETY & INSURANCE CO., defendant-appellant.

FACTS:

On August 4, 1958, the Insurance Commissioner wrote a letter addressed to Alto Surety & Insurance Co., Inc.,
disclosing that the Alto Surety & Insurance Co., Inc., had, total admitted assets of P715,689.29, as against total
liabilities of P645,096.94 and capital paid-up of P259,700.00 which was impaired in the amount of P189,097.65, The
company's net worth amounted to P70,602.35. Failure to comply with all the foregoing requirements within the time
limit set forth in this letter will compel the Insurance to suspend or revoke the certificates of authority to do insurance
business issued in favor of the company, as well as all other certificates granted to the company's officers, general
agents, and/or to recommend the prosecution of its officers.

On May 16, 1960, the Insurance Commissioner addressed another letter, quoted as follows: The examination
disclosed that the Alto Surety & Insurance Company Inc., had, a total admitted assets of P161,121.84 as against
total liabilities of P649,130.88 and total net worth or capital deficiency of P488,009.04. The capital stock paid-up of
P59,700.00 was impaired to the extent of P747,709.04, which is equal to the paid-up capital of P259,700.00 and
capital deficiency of P488,009.04. As a result, it is required that the stockholders of the Alto Surety & Insurance Co.,
Inc., put up within fifteen (15) days from receipt of this letter, the amount of P747,709.04 in order to cover the
impairment or deficit of an equal amount, and to comply immediately with all the other requirements mentioned in
the foregoing.

Plaintiff filed the present petition for receivership in view of the return of the Sheriff of Manila (Exhibit C-
Receivership) to the effect that the writ of execution marked Exhibit B-Receivership could not be satisfied for
the reasons stated therein.

It is not disputed by the appellant company that though in the years 1955 and 1956 it was in a position to pay
installments, or September 1, 1958 and thereafter, was no longer in a position to mark any payments
whatsoever.

As the issue raised in this appeal is purely a question of law; it is therefore beyond the competence of this
Court. The case was certified, as it is hereby certified, under the provisions of the Judiciary Act of 1948, as
amended, to the Honorable Supreme Court for proper disposition.

ISSUE: Whether or not, the Court has the authority to appoint a receiver of the properties of the judgment debtor
which are not involved in the action, in aid of the execution of said judgement.

HELD: It will be noted that in that case of Philippine Trust Co. vs. Santamaria, above-referred to, this Court cited
Section 483 of the Code of Civil Procedure (Act 190) in holding that "it was the duty of the court to appoint a receiver
for the F.M. Yaptico & Co., Ltd. to protect and preserve its property and assets for the use and benefit of its creditors
and, in particular, this petitioner." The section cited reads thus:

SEC. 483. Judge may Appoint Receiver and Prohibit Transfers, and so forth. — The judge may, by order,
appoint the governor, or his deputy of the proper province, or other suitable person, a receiver of the
property of the judgment debtor, and he may also, by order, forbid a transfer or other disposition of, or any
interference with, the property of the judgment debtor not exempt by law.

This section was under Chapter XX entitled "Proceedings Supplementary to the Execution". In other words, it was
part of the rules of proceeding governing aids to the execution of judgments. In the Rules of Court of 1940, the said
section had its counter-part in Section 39 of Rule 39 reading as follows:

SEC. 39. Appointment and bond of receiver. — The judge may, by order, appoint the sheriff, or other proper
officer or person, receiver of the property of the judgment debtor; and he may also, by order, forbid the
transfer or other disposition of, or any interference with, the property of the judgment debtor not exempt from
 execution. If a bonded officer be appointed receiver, he and his sureties shall be liable on his official bond as
such receiver but if another person be appointed he shall give a bond as receiver as in other cases.

Section 39 of Rule 39 of the Rules of 1940, now Section 43 of Rule 39 of the current Rules, is the provision
applicable to the receivership herein in question, the same being in aid for money, the disputed orders of the
court a quo dated October 4, 1960 and October 15, 1960 are hereby affirmed, with costs against defendant-
appellant, Alto Surety & Insurance Company, Inc.

(2) Banco Filipino vs. BSP, et.al., G.R. No. 200678, 4 June 2018.
Banco Filipino Savings and Mortgage Bank vs. Bangko Sentral ng Pilipinas (2018)
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v. BANGKO SENTRAL NG PILIPINAS
AND THE MONETARY BOARD, Respondents.

G.R. No. 200678, June 4, 2018, Third Division Decision, Justice Leonen

Mercantile Law > Banking Laws > Handling Banks in Distress > Liquidation

A closed bank under receivership can only sue or be sued through its receiver, the Philippine Deposit
Insurance Corporation (PDIC). Hence, the petition filed by the petitioner bank which has been placed under
receivership is dismissible as it did not join PDIC as a party to the case.
FACTS:

Petitioner bank has been placed under receivership when it filed a Petition for Certiorari
with the Supreme Court. Said Petition was assailed by the respondent that contended that
the same should be dismissed outright for being led without Philippine Deposit Insurance
Corporation’s authority. It asserts that petitioner was placed under receivership on March
17, 2011, and thus, petitioner’s Executive Committee would have had no authority to sign
for or on behalf of petitioner absent the authority of its receiver, Philippine Deposit
Insurance Corporation. They also point out that both the Philippine Deposit Insurance
Corporation Charter and Republic Act No. 7653 categorically state that the authority to
file suits or retain counsels for closed banks is vested in the receiver. Thus, the
verification and certification of non-forum shopping signed by petitioner’s Executive
Committee has no legal effect.

ISSUE:

Whether or not petitioner Banco Filipino, as a closed bank under receivership, could file
this Petition for Review without joining its statutory receiver, the Philippine Deposit
Insurance Corporation, as a party to the case.

RULING:

A closed bank under receivership can only sue or be sued through its receiver, the
Philippine Deposit Insurance Corporation. Under Republic Act No. 7653, when the
Monetary Board finds a bank insolvent, it may “summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the
Philippine Deposit Insurance Corporation as receiver of the banking institution.”

The relationship between the Philippine Deposit Insurance Corporation and a closed bank
is fiduciary in nature. Section 30 of Republic Act No. 7653 directs the receiver of a closed
bank to “immediately gather and take charge of all the assets and liabilities of the
institution” and “administer the same for the benefit of its creditors.” The law likewise
grants the receiver “the general powers of a receiver under the Revised Rules of Court.”
Under Rule 59, Section 6 of the Rules of Court, “a receiver shall have the power to bring
and defend, in such capacity, actions in his [or her] own name.” Thus, Republic Act No.
7653 provides that the receiver shall also “in the name of the institution, and with the
assistance of counsel as [it] may retain, institute such actions as may be necessary to
collect and recover accounts and assets of, or defend any action against, the institution.”
Considering that the receiver has the power to take charge of all the assets of the closed
bank and to institute for or defend any action against it, only the receiver, in its fiduciary
capacity, may sue and be sued on behalf of the closed bank.

When petitioner was placed under receivership, the powers of its Board of Directors and
its officers were suspended. Thus, its Board of Directors could not have validly authorized
its Executive Vice Presidents to file the suit on its behalf. The Petition, not having been
properly verified, is considered an unsigned pleading. A defect in the certification of non-
forum shopping is likewise fatal to petitioner’s cause. Considering that the Petition was
led by signatories who were not validly authorized to do so, the Petition does not produce
any legal effect. Being an unauthorized pleading, this Court never validly acquired
jurisdiction over the case. The Petition, therefore, must be dismissed.

(3) Milagros P. Enriquez vs. The Mercantile Insurance Co., Inc., G.R. 210950, 15 August 2018;

Enriquez vs. Mercantile Insurance Co., Inc. (2018)

Petitioners: MILAGROS P. ENRIQUEZ
Respondents: THE MERCANTILE INSURANCE CO., INC.
Ponente: Leonen (Third Division)
Topic: Remedial Law; Civil Law
SUMMARY: The SC ordered Enriquez to reimburse Mercantile Insurance the P600,000 paid by it
under a replevin bond filed in an earlier replevin case filed by Enriquez but which was dismissed
before trial.
DOCTRINE: Forfeiture of the replevin bond requires first, a judgment on the merits
in the defendant's favor, and second, an application by the defendant for damages.

Basic is the principle that "a contract is law between the parties" for as long as it is "not contrary
to law, morals, good customs, public order, or public policy."--- A contract of insurance is, by
default, a contract of adhesion. It is prepared by the insurance company and might contain terms
and conditions too vague for a lay person to understand; hence, they are construed liberally in
favor of the insured.

FACTS:
Sometime in 2003, Enriquez filed a Complaint for Replevin against Wilfred Asuten (Asuten)
before the Regional Trial Court of Angeles City, Pampanga. This Complaint, docketed as Civil
Case No. 10846, was for the recovery of her Toyota Hi-Ace van valued at P300,000.00. Asuten
allegedly refused to return her van, claiming that it was given by Enriquez's son as a
consequence of a gambling deal. Enriquez applied for a replevin bond from Mercantile
Insurance. On February 24, 2003, Mercantile Insurance issued Bond No. 138 for P600,000.00,
which had a period of one (1) year or until February 24,2004. Enriquez also executed an
indemnity agreement with Mercantile Insurance, where she agreed to indemnify the latter "for
all damages, payments, advances, losses, costs, taxes, penalties, charges, attorney's fees and
expenses of whatever kind and nature" that it would incur as surety of the replevin bond. On
May 24, 2004, the Regional Trial Court issued an Order dismissing the Complaint without
prejudice due to Enriquez's continued failure to present evidence. The Regional Trial Court
found that Enriquez surrendered the van to the Bank of the Philippine Islands, San Fernando
Branch but did not comply when ordered to return it to the sheriff within 24 hours from receipt
of the Regional Trial Court March 15, 2004 Order. She also did not comply with prior court
orders to prove payment of her premiums on the replevin bond or to post a new bond. Thus, the
Regional Trial Court declared Bond No.138 forfeited. Mercantile Insurance was given 10
days to produce the van or to show cause why judgment should not be rendered against it for the
amount of the bond. On July 12, 2004, the Regional Trial Court held a hearing on the final
forfeiture of the bond where it was found that Mercantile Insurance failed to produce the van,
and that Bond No. 138 had already expired.

In an Order issued on the same day, the Regional Trial Court directed Mercantile Insurance to
pay Asuten the amount of P600,000.00. Mercantile Insurance wrote to Enriquez requesting the
remittance of P600,000.00 to be paid on the replevin bond. Due to Enriquez's failure to remit the
amount, Mercantile Insurance paid Asuten P600,000.00 on September 3, 2004, in compliance
with the Regional Trial Court July 12, 2004 Order. It was also constrained to file a collection
suit against Enriquez with the Regional Trial Court of Manila. In its July 23, 2010 Decision, the
Regional Trial Court ruled in favor of Mercantile Insurance. CA affirmed.

ISSUES:
Whether or Not Enriquez should be made liable for the full amount of the bond paid by
Mercantile Insurance. The Mercantile Insurance Co., Inc. as surety, in relation to a previous
case for replevin filed by Enriquez.

 YES. There was no trial on the merits.

HELD:
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.
(Functus Officio is a Latin term meaning “having performed his or her office.” With regard to an
officer or official body, it means without further authority or legal competence because the duties and
functions of the original commission have been fully accomplished).
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 Enriquez to return the van to Asuten.

 Civil Case No. 10846 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 Enriquez 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, Mercantile Insurance paid Asuten twice the value of the
van withheld by Enriquez. Mercantile Insurance, thus, seeks to recover this amount from
Enriquez, despite the van only being worth half the amount of the bond.

 Forfeiture of the replevin bond 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 Enriquez 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 Enriquez appealed the Regional Trial Court's May 24, 2004 Order in
Civil Case No.10846.
Unfortunately, she did not. Mercantile Insurance was, thus, constrained to follow the Regional
Trial Court's directive to pay Asuten the full amount of the bond.

 This is a simple case for collection of a sum of money. Enriquez cannot substitute this case
for her lost appeal in Civil Case No. 10846.

 In applying for the replevin bond, Enriquez voluntarily undertook with Mercantile Insurance
an Indemnity Agreement.

 Basic is the principle that "a contract is law between the parties" for as long as it is "not
contrary to law, morals, good customs, public order, or public policy." Under their Indemnity
Agreement, Enriquez held herself liable for any payment made by Mercantile Insurance by
virtue of the replevin bond.
 Enriquez contends that the Indemnity Agreement was a contract of adhesion since
Mercantile Insurance made the extent of liability "so comprehensive and all-encompassing to
the point of being ambiguous."

 A contract of insurance is, by default, a contract of adhesion. It is prepared by the insurance

company and might contain terms and conditions too vague for a layperson to understand;
hence, they are construed liberally in favor of the insured.

 Mercantile Insurance, however, does not seek to recover an amount which exceeds the
amount of the bond or any "damages, payments, advances, losses, costs, taxes, penalties,
charges, attorney's fees and expenses of whatever kind and nature," all of which it could
have sought under the Indemnity Agreement. It only seeks to recover from Enriquez the
amount of the bond, or P600,000.00.

 Mercantile Insurance paid P600,000.00 to Asuten pursuant to a lawful order of the Regional
Trial Court in Civil Case No. 10846. If there were any errors in the judgment of the Regional
Trial Court, as discussed above, Enriquez could have appealed this. Enriquez, however,
chose to let Civil Case No. 10846 lapse into finality. This case cannot now be used as a
substitute for her lost appeal.
NOTES: Petition DENIED

THIRD DIVISION

G.R. No. 210950, August 15, 2018

MILAGROS P. ENRIQUEZ, Petitioner, v. THE MERCANTILE INSURANCE CO., INC., Respondent.

DECISION

LEONEN, J.:

A surety bond remains effective until the action or proceeding is finally decided, resolved, or
terminated, regardless of whether the applicant fails to renew the bond. The applicant will be liable to
the surety for any payment the surety makes on the bond, but only up to the amount of this bond.

This is a Petition for Review on Certiorari1 assailing the August 13, 2013 Decision2 and January 14,
2014 Resolution3 of the Court of Appeals in CA-G.R. CV No. 95955, which affirmed the Regional Trial
Court's finding that Milagros P. Enriquez (Enriquez) was liable for the full amount of the replevin bond
issued by The Mercantile Insurance Company, Inc. (Mercantile Insurance).

Sometime in 2003, Enriquez filed a Complaint for Replevin4 against Wilfred Asuten (Asuten) before
the Regional Trial Court of Angeles City, Pampanga. This Complaint, docketed as Civil Case No.
10846,5 was for the recovery of her Toyota Hi-Ace van valued at P300,000.00.6 Asuten allegedly
refused to return her van, claiming that it was given by Enriquez's son as a consequence of a
gambling deal.7

Enriquez applied for a replevin bond from Mercantile Insurance. On February 24, 2003, Mercantile
Insurance issued Bond No. 138 for P600,000.00,8 which had a period of one (1) year or until
February 24, 2004. Enriquez also executed an indemnity agreement with Mercantile Insurance, where
she agreed to indemnify the latter "for all damages, payments, advances, losses, costs, taxes,
penalties, charges, attorney's fees and expenses of whatever kind and nature"9 that it would incur as
surety of the replevin bond.10

On May 24, 2004, the Regional Trial Court issued an Order11 dismissing the Complaint without
prejudice due to Enriquez's continued failure to present evidence.

The Regional Trial Court found that Enriquez surrendered the van to the Bank of the Philippine
Islands, San Fernando Branch but did not comply when ordered to return it to the sheriff within 24
hours from receipt of the Regional Trial Court March 15, 2004 Order.12 She also did not comply with
prior court orders to prove payment of her premiums on the replevin bond or to post a new bond.
Thus, the Regional Trial Court declared Bond No. 138 forfeited. Mercantile Insurance was given 10
days to produce the van or to show cause why judgment should not be rendered against it for the
amount of the bond.13

On July 12, 2004, the Regional Trial Court held a hearing on the final forfeiture of the bond where it
was found that Mercantile Insurance failed to produce the van, and that Bond No. 138 had already
expired.14 In an Order15 issued on the same day, the Regional Trial Court directed Mercantile
Insurance to pay Asuten the amount of P600,000.00.

Mercantile Insurance wrote to Enriquez requesting the remittance of P600,000.00 to be paid on the
replevin bond.16 Due to Enriquez's failure to remit the amount, Mercantile Insurance paid Asuten
P600,000.00 on September 3, 2004, in compliance with the Regional Trial Court July 12, 2004
Order.17 It was also constrained to file a collection suit against Enriquez with the Regional Trial Court
of Manila.18

In her defense, Enriquez claimed that her daughter-in-law, Asela, filed the Complaint for Replevin in
her name and that Asela forged her signature in the indemnity agreement. She also argued that she
could not be held liable since the replevin bond had already expired.19

In its July 23, 2010 Decision,20 the Regional Trial Court ruled in favor of Mercantile Insurance. It
found that non-payment of the premiums did not cause the replevin bond to expire. Thus, Enriquez
was still liable for the reimbursement made by the surety on the bond. The Regional Trial Court
likewise pointed out that Enriquez made "conflicting claims" of having applied for the bond and then
later claiming that her daughter-in-law was the one who applied for it.21 The dispositive portion of the
Regional Trial Court July 23, 2010 Decision read:

WHEREFORE, judgment is hereby rendered in favor of plaintiff The Mercantile Insurance Co., Inc. and
against defendant Milagros P. Enriquez, as follows:

(i) Ordering defendant Milagros P. Enriquez to pay plaintiff the claim of P600,000.00 enforced under
the Indemnity Agreement plus legal interest at the rate of 12% per annum from date of judicial
demand on October 22, 2004, until fully paid;

(ii) Ordering defendant Milagros P. Enriquez to pay attorney's fees fixed in the reasonable amount of
P50,000.00;

(iii) Ordering defendant Milagros P. Enriquez to pay the costs of

SO ORDERED.22

Enriquez appealed23 with the Court of Appeals, arguing that the replevin bond had already expired;
therefore, she could not have been liable under the indemnity agreement. She also averred that even
assuming that she was still liable under the indemnity agreement, she should not pay the full amount
considering that the value of the van was only P300,000.00.24

On August 13, 2013, the Court of Appeals rendered a Decision25 affirming the Regional Trial Court's
July 23, 2010 Decision.

The Court of Appeals held that under the Guidelines on Corporate Surety Bonds,26 the lifetime of any
bond issued in any court proceeding shall be from court approval until the case is finally terminated.
Thus, it found that the replevin bond and indemnity agreement were still in force and effect when
Mercantile Insurance paid P600,000.00 to Asuten.27

The Court of Appeals likewise found that Enriquez was "bound by the incontestability of payments
clause" in the indemnity agreement, which stated that she would be held liable for any payment
made by the surety under the bond, regardless of the actual cost of the van.28 It held that the issue
of whether Enriquez was liable for the full amount of the replevin bond should have been raised
before the Regional Trial Court in the Complaint for Replevin, and not in her appeal.29

Enriquez moved for reconsideration30 but was denied by the Court of Appeals in its January 14, 2014
Resolution.31 Hence, this Petition32 was filed before this Court.

Petitioner argues that when respondent paid Asuten on September 3, 2004, the indemnity agreement
was no longer in force and effect since the bond expired on February 24, 2004.33 She claims that the
indemnity agreement was a contract of adhesion, and that respondent "intended the agreement to be
so comprehensive and all-encompassing to the point of being ambiguous."34

Petitioner contends that even assuming that the indemnity agreement could be enforced, she should
not have been held liable for the full amount of the bond. Citing Rule 60, Section 2 of the Rules of
Court, she argues that a judgment on replevin is only "either for the delivery of the property or for its
value in case delivery cannot be made and for such damages as either party may prove, with
costs."35

Respondent, on the other hand, contends that the present action has already prescribed, considering
that Rule 60, Section 10, in relation to Rule 57, Section 20 of the Rules of Court, mandates that any
objection on the award should be raised in the trial court where the complaint for replevin is filed. It
argues that since petitioner only raised the objection before the Court of Appeals, her action should
have been barred.36

Respondent likewise points out that the forfeiture of the bond was due to petitioner's own negligence.
It asserts that in the proceedings before the Regional Trial Court, Enriquez failed to present her
evidence, and it was only when she filed an appeal that she raised her objections.37 It argues that the
Guidelines on Corporate Surety Bonds specify that the expiry of the bond shall be after the court
proceeding is finally decided; hence, the bond was still in effect when respondent paid Asuten.38

The sole issue for this Court's resolution is whether or not petitioner Milagros P. Enriquez should be
made liable for the full amount of the bond paid by respondent The Mercantile Insurance Co., Inc. as
surety, in relation to a previous case for replevin filed by petitioner.

Replevin is an action for the recovery of personal property.39 It is both a principal remedy and a
provisional relief. When utilized as a principal remedy, the objective is to recover possession of
personal property that may have been wrongfully detained by another. When sought as a provisional
relief, it allows a plaintiff to retain the contested property during the pendency of the action.
In Tillson v. Court of Appeals:40

The term replevin is popularly understood as "the return to or recovery by a person of goods or
chattels claimed to be wrongfully taken or detained upon the person's giving security to try the
matter in court and return the goods if defeated in the action;" "the writ by or the common-law
action in which goods and chattels are replevied," i.e., taken or gotten back by a writ for replevin;"
and to replevy, means to recover possession by an action of replevin; to take possession of goods or
chattels under a replevin order. Bouvier's Law Dictionary defines replevin as "a form of action which
lies to regain the possession of personal chattels which have been taken from the plaintiff unlawfully .
. ., (or as) the writ by virtue of which the sheriff proceeds at once to take possession of the property
therein described and transfer it to the plaintiff upon his giving pledges which are satisfactory to the
sheriff to prove his title, or return the chattels taken if he fail so to do;" the same authority states
that the term, "to replevy" means "to re-deliver goods which have been distrained to the original
possessor of them, on his giving pledges in an action of replevin." The term therefore may refer
either to the action itself, for the recovery of personality, or the provisional remedy traditionally
associated with it, by which possession of the property may be obtained by the plaintiff and retained
during the pendency of the action. In this jurisdiction, the provisional remedy is identified in Rule 60
of the Rules of Court as an order for delivery of personal property.41

Similarly, in BA Finance Corporation v. Court of Appeals:42

Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may
refer either to the action itself, i.e., to regain the possession of personal chattels being wrongfully
detained from the plaintiff by another, or to the provisional remedy that would allow the plaintiff to
retain the thing during the pendency of the action and hold it pendente lite. The action is primarily
possessory in nature and generally determines nothing more than the right of possession. Replevin is
so usually described as a mixed action, being partly in rem and partly in personam-in rem insofar as
the recovery of specific property is concerned, and in personam as regards to damages involved. As
an "action in rem," the gist of the replevin action is the right of the plaintiff to obtain possession of
specific personal property by reason of his being the owner or of his having a special interest therein.
Consequently, the person in possession of the property sought to be replevied is ordinarily the proper
and only necessary party defendant, and the plaintiff is not required to so join as defendants other
persons claiming a right on the property but not in possession thereof. Rule 60 of the Rules of Court
allows an application for the immediate possession of the property but the plaintiff must show that he
has a good legal basis, i.e., a clear title thereto, for seeking such interim possession.43

As a provisional remedy, a party may apply for an order for the delivery of the property before the
commencement of the action or at any time before an answer is filed.44 Rule 60 of the Rules of Court
outlines the procedure for the application of a writ of replevin. Rule 60, Section 2 requires that the
party seeking the issuance of the writ must first file the required affidavit and a bond in an amount
that is double the value of the property:

Section 2. Affidavit and bond. — The applicant must show by his own affidavit or that of some other
person who personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to
the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention
thereof according to the best of his knowledge, information, and belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law,
or seized under a writ of execution or preliminary attachment, or otherwise placed under custodia
legis, or if so seized, that it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the
property as stated in the affidavit aforementioned, for the return of the property to the adverse party
if such return be adjudged, and for the payment to the adverse party of such sum as he may recover
from the applicant in the action.45

Once the affidavit is filed and the bond is approved by the court, the court issues an order and a writ
of seizure requiring the sheriff to take the property into his or her custody.46 If there is no further
objection to the bond filed within five (5) days from the taking of the property, the sheriff shall
deliver it to the applicant.47 The contested property remains in the applicant's custody until the court
determines, after a trial on the Issues, which among the parties has the right of possession.48

In Civil Case No. 10846, 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. In Advent Capital and Finance Corporation v. Young:50

We agree with the Court of Appeals in directing the trial court to return the seized car to Young since
this is the necessary consequence of the dismissal of the replevin case for failure to prosecute
without prejudice. Upon the dismissal of the replevin case for failure to prosecute, the writ of seizure,
which is merely ancillary in nature, became functus officio  and should have been lifted. There was no
adjudication on the merits, which means that there was no determination of the issue who has the
better right to possess the subject car. Advent ca mot therefore retain possession of the subject car
considering that it was not adjudged as the prevailing party entitled to the remedy of replevin.

Contrary to Advent's view, Olympia International Inc. v. Court of Appeals applies to this case. The
dismissal of the replevin case for failure to prosecute results in the restoration of the parties' status
prior to litigation, as if no complaint was filed at all. To let the writ of seizure stand after the dismissal
of the complaint would be adjudging Advent as the prevailing party, when precisely no decision on
the merits had been rendered. Accordingly, the parties must be reverted to their status quo
ante.  Since Young possessed the subject car before the filing of the replevin case, the same must be
returned to him, as if no complaint was filed at all.51

Petitioner 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.

De Guia v. Alto Surety & Insurance, Co.52 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:

Construing and applying these provisions of the Rules, we have held in a long line of cases that said
provisions are mandatory and require the application upon the bond against the surety or bondsmen
and the award thereof to be made after hearing and before the entry of final judgment in the case;
that if the judgment under execution contains no directive for the surety to pay, and the proper party
fails to make any claim for such directive before such judgment had become final and executory, the
surety or bondsman cannot be later made liable under the bond. The purpose of the aforementioned
rules is to avoid multiplicity of suits.53

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. Under the Guidelines on
Corporate Surety Bonds:54

VII. LIFETIME OF BONDS IN CRIMINAL AND CIVIL ACTIONS/SPECIAL PROCEEDINGS

Unless and until the Supreme Court directs otherwise,55 the lifetime or duration of the effectivity of
any bond issued in criminal and civil actions/special proceedings, or in any proceeding or incident
therein shall be from its approval by the court, until the action or proceeding is finally decided,
resolved or terminated. This condition must be incorporated in the terms and condition of the
bonding contract and shall bind the parties notwithstanding their failure to expressly state the same
in the said contract or agreement. (Emphasis supplied)

Civil Case No. 10846 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 256 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:

Provisional Remedies

Rule 57
Preliminary Attachment

....

Section 4. Condition of applicant's bond. — The party applying for the order must thereafter give a
bond executed to the adverse party in the amount fixed by the court in its order granting the
issuance of the writ, conditioned that the latter will pay all the costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the attachment, if the court shall
finally adjudge that the applicant was not entitled thereto.
....

Section 12. Discharge of attachment upon giving counter-bond. — After a writ of attachment has
been enforced, the party whose property has been attached, or the person appearing on his behalf,
may move for the discharge of the attachment wholly or in part on the security given. The court
shall, after due notice and hearing, order the discharge of the attachment if the movant makes a
cash deposit, or files a counter-bond executed to the attaching party with the clerk of the court where
the application is made, in an amount equal to that fixed by the court in the order of attachment,
exclusive of costs.  But if the attachment is sought to be discharged with respect to a particular
property, the counter-bond shall be equal to the value of that property as determined by the
court. In either case, the cash deposit or the counter-bond shall secure the payment of any judgment
that the attaching party may recover in the action. A notice of the deposit shall forthwith be served
on the attaching party. Upon the discharge of an attachment in accordance with the provisions of this
section, the property attached, or the proceeds of any sale thereof, shall be delivered to the party
making the deposit or giving the counter-bond, or to the person appearing on his behalf, the deposit
or counter-bond aforesaid standing in place of the property so released. Should such counter-bond
for any reason be found to be or become insufficient, and the party furnishing the same fail to file an
additional counter-bond, the attaching party may apply for a new order of attachment.
....

Section 14. Proceedings where property claimed by third person. — If the property attached is
claimed by any person other than the party against whom attachment had been issued or his agent,
and such person makes an affidavit of his title thereto, or right to the possession thereof, stating the
grounds of such right or title, and serves such affidavit upon the sheriff while the latter has
possession of the attached property, and a copy thereof upon the attaching party, the sheriff shall
not be bound to keep the property under attachment, unless the attaching party or his agent, on
demand of the sheriff, shall file a bond approved by the court to indemnify the third-party claimant in
a sum not less than the value of the property levied upon. In case of disagreement as to such value,
the same shall be decided by the court issuing the writ of attachment. No claim for damages for the
taking or keeping of the property may be enforced against the bond unless the action therefor is filed
within one hundred twenty (120) days from the date of the filing of the bond.
....

Rule 58
Preliminary Injunction

....

Section 4. Verified application and bond for preliminary injunction or temporary restraining order. —
A preliminary injunction or temporary restraining order may be granted only when:

....

(b) Unless exempted by the court, the applicant files with the court where the action or proceeding is
pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court,  to
the effect that the applicant will pay to such party or person all damages which he may sustain by
reason of the injunction or temporary restraining order if the court should finally decide that the
applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary
injunction shall be issued.
....

Section 6. Grounds for objection to, or for motion of dissolution of, injunction or restraining order. —
The application for injunction or restraining order may be denied, upon a showing of its insufficiency.
The injunction or restraining order may also be denied, or, if granted, may be dissolved, on other
grounds upon affidavits of the party or person enjoined, which may be opposed by the applicant also
by affidavits. It may further be denied, or, if granted, may be dissolved, if it appears after hearing
that although the applicant is entitled to the injunction or restraining order, the issuance or
continuance thereof, as the case may be, would cause irreparable damage to the party or person
enjoined while the applicant can be fully compensated for such damages as he may suffer, and the
former files a bond in an amount fixed by the court conditioned that he will pay all damages which
the applicant may suffer by the denial or the dissolution of the injunction or restraining order. If it
appears that the extent of the preliminary injunction or restraining order granted is too great, it may
be modified.
....
 Rule 59
Receivership

....

Section 2. Bond on appointment of receiver. — Before issuing the order appointing a receiver the
court shall require the applicant to file a bond executed to the party against whom the application is
presented, in an amount to be fixed by the court, to the effect that the applicant will pay such party
all damages he may sustain by reason of the appointment of such receiver in case the applicant shall
have procured such appointment without sufficient cause; and the court may, in its discretion, at any
time after the appointment, require an additional bond as further security for such damages.

Section 3. Denial of application or discharge of receiver. — The application may be denied, or the
receiver discharged, when the adverse party files a bond executed to the applicant, in an amount to
be fixed by the court,  to the effect that such party will pay the applicant all damages he may suffer
by reason of the acts, omissions, or other matters specified in the application as ground for such
appointment. The receiver may also be discharged if it is shown that his appointment was obtained
without sufficient cause.
....

Rule 60
Replevin

....

Section 7. Proceedings where property claimed by third person. — If the property taken is claimed by
any person other than the party against whom the writ of replevin had been issued or his agent, and
such person makes an affidavit of his title thereto, or right to the possession thereof, stating the
grounds therefor, and serves such affidavit upon the sheriff while the latter has possession of the
property and a copy thereof upon the applicant, the sheriff shall not be bound to keep the property
under replevin or deliver it to the applicant unless the applicant or his agent, on demand of said
sheriff, shall file a bond approved by the court to indemnify the third-party claimant in a sum not less
than the value of the property under replevin  as provided in section 2 hereof. In case of
disagreement as to such value, the court shall determine the same. No claim for damages for the
taking or keeping of the property may be enforced against the bond unless the action therefor is filed
within one hundred twenty (120) days from the date of the filing of the bond.57 (Emphasis supplied)

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. In Citibank, N.A. v. Court of Appeals:58

It should be noted that a replevin bond is intended to indemnify the defendant against any loss that
he may suffer by reason of its being compelled to surrender the possession of the disputed property
pending trial of the action. The same may also be answerable for damages if any when judgment is
rendered in favor of the defendant or the party against whom a writ of replevin was issued and such
judgment includes the return of the property to him. Thus, the requirement that the bond be double
the actual value of the properties litigated upon. Such is the case because the bond will answer for
the actual loss to the plaintiff, which corresponds to the value of the properties sought to be
recovered and for damages, if any.59

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:
 Rule 60
Replevin

....

Section 9. Judgment. — After trial of the issues, the court shall determine who has the right of
possession to and the value of the property and shall render judgment in the alternative for the
delivery thereof to the party entitled to the same, or for its value in case delivery cannot be made,
and also for such damages as either party may prove, with costs.

Section 10. Judgment to include recovery against sureties. — The amount, if any, to be awarded to
any party upon any bond filed in accordance with the provisions of this Rule, shall be claimed,
ascertained, and granted under the same procedure as prescribed in section 20 of Rule 57.

The Rules of Court likewise require that for the defendant to be granted the full amount of the bond,
he or she must first apply to the court for damages. These damages will be awarded only after a
proper hearing:

Rule 57
Preliminary Attachment

....

Section 20. Claim for damages on account of improper, irregular or excessive attachment. — An
application for damages on account of improper, irregular or excessive attachment must be filed
before the trial or before appeal is perfected or before the judgment becomes executory, with due
notice to the attaching party and his surety or sureties, setting forth the facts showing his right to
damages and the amount thereof. Such damages may be awarded only after proper hearing and shall
be included in the judgment on the main case.

If the judgment on the appellate court be favorable to the party against whom the attachment was
issued, he must claim damages sustained during the pendency of the appeal by filing an application
in the appellate court, with notice to the party in whose favor the attachment was issued or his
surety or sureties, before the judgment of the appellate court becomes executory. The appellate
court may allow the application to be heard and decided by the trial court.

Nothing herein contained shall prevent the party against whom the attachment was issued from
recovering in the same action the damages awarded to him from any property of the attaching party
not exempt from execution should the bond or deposit given by the latter be insufficient or fail to
fully satisfy the award.

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.

II

This is a simple case for collection of a sum of money. Petitioner cannot substitute this case for her
lost appeal in Civil Case No. 10846.

In applying for the replevin bond, petitioner voluntarily undertook with respondent an Indemnity
Agreement, which provided:

INDEMNIFICATION – to indemnify the SURETY for all damages, payments, advances, losses, costs,
taxes, penalties, charges, attorney's fees and expenses of whatever kind and nature that the SURETY
may at any time sustain or incur as a consequence of having become a surety upon the above-
mentioned bond, and to pay, reimburse and make good to the SURETY, its successors and assigns,
all sums or all money which it shall pay or become liable to pay by virtue of said bond even if said
payment/s or liability exceeds the amount of the bond. . . .

INCONTESTABILITY OF PAYMENTS MADE BY THE SURETY – any payment or disbursement made by

the surety on account of the above-mentioned bond, either in the belief that the SURETY was
obligated to make such payment or in the belief that said payment was necessary in order to avoid a
greater loss or obligation for which the SURETY might be liable by virtue of the . . . above-mentioned
bond, shall be final, and will not be contested by the undersigned, who jointly and severally bind
themselves to indemnify the SURETY for any of such payment or disbursement.60

Basic is the principle that "a contract is law between the parties"61 for as long as it is "not contrary to
law, morals, good customs, public order, or public policy."62 Under their Indemnity Agreement,
petitioner held herself liable for any payment made by respondent by virtue of the replevin bond.

Petitioner contends that the Indemnity Agreement was a contract of adhesion since respondent made
the extent of liability "so comprehensive and all-encompassing to the point of being ambiguous."63

A contract of insurance is, by default, a contract of adhesion. It is prepared by the insurance

company and might contain terms and conditions too vague for a layperson to understand; hence,
they are construed liberally in favor of the insured. In Verendia v. Court of Appeals:64

Basically a contract of indemnity, an insurance contract is the law between the parties. Its terms and
conditions constitute the measure of the insurer's liability and compliance therewith is a condition
precedent to the insured's right to recovery from the insurer. As it is also a contract of adhesion, an
insurance contract should be liberally construed in favor of the insured and strictly against the insurer
company which usually prepares it.65

Respondent, however, does not seek to recover an amount which exceeds the amount of the bond or
any "damages, payments, advances, losses, costs, taxes, penalties, charges, attorney's fees and
expenses of whatever kind and nature,"66 all of which it could have sought under the Indemnity
Agreement. It only seeks to recover from petitioner the amount of the bond, or P600,000.00.

Respondent paid P600,000.00 to Asuten pursuant to a lawful order of the Regional Trial Court in Civil
Case No. 10846. If there were any errors in the judgment of the Regional Trial Court, as discussed
above, petitioner could have appealed this. Petitioner, however, chose to let Civil Case No. 10846
lapse into finality. This case cannot now be used as a substitute for her lost appeal.

It is clear from the antecedents that any losses which petitioner has suffered were due to the
consequences of her actions, or more accurately, her inactions. Civil Case No. 10846, which she filed,
was dismissed due to her failure to prosecute. The Regional Trial Court forfeited the replevin bond
which she had filed because she refused to return the property. She is now made liable for the
replevin bond because she failed to appeal its forfeiture.

WHEREFORE, the Petition is DENIED. The August 13, 2013 Decision and January 14, 2014
Resolution of the Court of Appeals in CA-G.R. CV No. 95955 are AFFIRMED.
SO ORDERED.

Leonardo-De Castro, (Chairperson), Bersamin, A. Reyes, Jr., and Gesmundo, JJ., concur.

October 9, 2018

N O T I C E  O F  J U D G M E N T

Sirs / Mesdames:

Please take notice that on August 15, 2018 a Decision, copy attached hereto, was rendered by the
Supreme Court in the above-entitled case, the original of which was received by this Office on
October 9, 2018 at 2:33 p.m.

Very truly yours,

(SGD.) WILFREDO V. LAPITAN

Division Clerk of Court

Endnotes:

(4) BA Finance Corporation vs. Hon. Court of Appeals and Roberto M. Reyes, G.R. No. 102998, 5 July 1996;
 
G.R. No. 102998 July 5, 1996
BA FINANCE CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and ROBERTO M. REYES, respondents.

 VITUG, J.:p

The case at bar is a suit for replevin and damages. The petition for review on certiorari assails the decision of the Court of Appeals affirming that of the
Regional Trial Court of Manila, Branch
XX,2 which has disposed of its Civil Case No. 87-42270 in this wise:

WHEREFORE, the case against defendant-spouses (sic) Reynaldo Manahan is hereby dismissed
without prejudice, for failure to prosecute. Plaintiff having failed to show the liability of defendant
John Doe in the person of Roberto M. Reyes, the case against the latter should likewise be
dismissed. Moreover, plaintiff is hereby directed to return the vehicle seized by virtue of the order of
seizure issued by this Court with all its accessories to the said Roberto M. Reyes. 3

The decisions of both the appellate court and the court a quo are based on a like finding of the facts hereinafter
briefly narrated.

FACTS:
The spouses Reynaldo and Florencia Manahan executed, on 15 May 1980, a promissory note binding themselves
to pay Carmasters, Inc., the amount of P83,080.00 in thirty-six monthly installments commencing 01 July 1980. To
secure payment, the Manahan spouses executed a deed of chattel mortgage over a motor vehicle, a Ford Cortina
1.6 GL, with motor and serial number CUBFWE-801010. Carmasters later assigned the promissory note and the
chattel mortgage to petitioner BA Finance Corporation with the conformity of the Manahans. When the latter failed to
pay the due installments, petitioner sent demand letters. The demands not having been heeded, petitioner, on 02
October 1987, filed a complaint for replevin with damages against the spouses, as well as against a John Doe,
praying for the recovery of the vehicle with an alternative prayer for the payment of a sum of money should the
vehicle not be returned. Upon petitioner's motion and the filing of a bond in the amount of P169,161.00 the lower
court issued a writ of replevin. The court, however, cautioned petitioner that should summons be not served on the
defendants within thirty (30) days from the writ's issuance, the case would be dismissed to failure to prosecute. The
warning was based on what the court perceived to be the deplorable practice of some mortgagees of "freezing (the)
foreclosure or replevin cases" which they would so "conveniently utilize as a leverage for the collection of unpaid
installments on mortgaged chattels."

The service of summons upon the spouses Manahan was caused to be served by petitioner at No. 35 Lantana St.,
Cubao, Quezon City. The original of the summons had the name and the signature of private respondent Roberto M.
Reyes indicating that he received, on 14 October 1987, a copy of the summons and the complaint.  Forthwith,
9

petitioner, through its Legal Assistant, Danilo E. Solano, issued a certification to the effect that it had received from
Orson R. Santiago, the deputy sheriff of the Regional Trial Court of Manila, Branch 20, the Ford Cortina seized from
private respondent Roberto M. Reyes, the John Doe referred to in the complaint,   in Sorsogon, Sorsogon.   On 20
10 11

October 1987, the lower court came out with an order of seizure.

Alleging possession in good faith, private respondent filed, on 26 October 1987, a motion for an extension of time
within which to file his answer and/or a motion for intervention. The court granted the motion.

A few months later, or on 18 February 1988, the court issued an order which, in part, stated:

Perusal of the record shows that an order for the seizure of personal property was issued on October
20, 1987 in pursuance to a previous order of the Court dated October 13, 1987. However, to date,
there is no showing that the principal defendants were served with summons inspite of the lapse of
four (4) months.

Considering, this is a replevin case and to forestall the evils that arise from this practice, plaintiff
failing to heed the Order dated October 13, 1987, particularly second paragraph thereof, the above-
entitled case is hereby ordered DISMISSED for failure to prosecute and further ordering the plaintiff
to return the property seized with all its accessories to defendant John Doe in the person of Roberto
M. Reyes.

SO ORDERED.  12

On 26 February 1988, petitioner filed a notice of dismissal of the case "without prejudice and without pronouncement
as to costs, before service of Summons and Answer, under Section 1, Rule 17, of the Rules of Court."   It also
13

sought in another motion the withdrawal of the replevin bond. In view of the earlier dismissal of the case (for
petitioner's failure to prosecute), the court, on 02 March 1988, merely noted the notice of dismissal and denied the
motion to withdraw the replevin bond considering that the writ of replevin had meanwhile been implemented.  14

On 09 March 1988, private respondent filed a motion praying that petitioner be directed to comply with the court
order requiring petitioner to return the vehicle to him. In turn, petitioner filed, on 14 March 1988, a motion for the
reconsideration of the orders of 18 February 1988 and 02 March 1988 contending that: (a) the dismissal of the case
was tantamount to adjudication on the merits that thereby deprived it with the remedy to enforce the promissory
note, the chattel mortgage and the deed of assignment, under Section 3, Rule 117, of the Rules of Court; (b) the
order to return the vehicle to private respondent was a departure from jurisprudence recognizing the right of the
mortgagor to foreclose the property to respond to the unpaid obligation secured by the chattel mortgage, and (c)
there were no legal and factual bases for the court's view that the filing of the replevin case was "characterized (by)
evil practices." 
15
On 20 April 1988, the court granted petitioner's motion for reconsideration and accordingly recalled the order
directing the return of the vehicle to private respondent, set aside the order dismissing the case, directed petitioner
"to cause the service of summons together with a copy of the complaint on the principal defendants within five (5)
days from receipt"   thereof at petitioner's expense, and ordered private respondent to answer the complaint.
16

A few months later, or on 02 August 1988, petitioner filed a motion to declare private respondent in default. The
court granted the motion on that same day and declared private respondent "in default for his failure to file the . . .
answer within the reglementary period."  7 The court likewise granted petitioner's motion to set the case for the
1

presentation, ex parte, of evidence. Petitioner, thereupon, submitted the promissory note, the deed of chattel
mortgage, the deed of assignment, a statement of account in the name of Florencia Manahan and two demand
letters.

On 27 February 1989, the trial court rendered a decision dismissing the complaint against the Manahans for failure
of petitioner to prosecute the case against them. It also dismissed the case against private respondent for failure of
petitioner to show any legal basis for said respondent's liability. The court ratiocinated:

. . . . Roberto M. Reyes is merely ancillary debtor in this case. The defendant spouses Manahan
being the principal debtor(s) and as there is no showing that the latter has been brought before the
jurisdiction of this court, it must necessarily follow that the plaintiff has no cause of action against
said Roberto M. Reyes herein before referred to as defendant John Doe. Under the circumstances, it
is incumbent upon the plaintiff to return the seized vehicle unto the said Roberto M. Reyes.  18

In its appeal to the Court of Appeals, petitioner has asserted that a suit for replevin aimed at the foreclosure of the
chattel is an action quasi in rem which does not necessitate the presence of the principal obligors as long as the
court does not render any personal judgment against them. This argument did not persuade the appellate court, the
latter holding that —

. . . . In action quasi in rem an individual is named as defendant and the purpose of the proceeding is
to subject his interest therein to the obligation or lien burdening the property, such as proceedings
having for their sole object the sale or disposition of the property of the defendant, whether by
attachment, foreclosure, or other form of remedy (Sandejas vs. Robles, 81 Phil. 421). In the case at
bar, the court cannot render any judgment binding on the defendants spouses for having allegedly
violated the terms and conditions of the promissory note and the contract of chattel mortgage on the
ground that the court has no jurisdiction over their persons no summons having been served on
them. That judgment, it rendered, is void for having denied the defendants spouses due process of
law which contemplates notice and opportunity to be heard before judgment is rendered, affecting
one's person or property (Macabingkil vs. Yatco, 26 SCRA 150, 157).

It is next contended by appellant that as between appellant, as mortgagee, and John Doe, whose
right to possession is dubious if not totally non-existent, it is the former which has the superior right
of possession.

We cannot agree.

RULING:

It is an undisputed fact that the subject motor vehicle was taken from the possession of said Roberto
M. Reyes, a third person with respect to the contract of chattel mortgage between the appellant and
the defendants spouses Manahan.

The Civil Code expressly provides that every possessor has a right to be respected in his possession
(Art. 539, New Civil Code); that good faith is always presumed, and upon him who alleges bad faith
on the part of a possessor rests the burden of proof (Art. 527, ibid.); and that the possession of
movable property acquired in good faith is equivalent to a title; nevertheless, one who has lost any
movable or has been unlawfully deprived thereof, may recover it from the person in possession of
the same (Art. 559, ibid.). Thus, it has been held that a possessor in good faith is entitled to be
respected and protected in his possession as if he were the true owner thereof until a competent
court rules otherwise (Chus Hai vs. Kapunan, 104 Phil. 110; Yu, et al. vs. Hon. Honrado, etc., et al.,
 99 SCRA 237). In the case at bar, the trial court did not err in holding that the complaint does not
state any cause of action against Roberto M. Reyes, and in ordering the return of the subject chattel
to him. 
19

The appellate court, subsequently, denied petitioner's motion for reconsideration.

In the instant appeal, petitioner insists that a mortgagee can maintain an action for replevin against any possessor of
the object of a chattel mortgage even if the latter were not a party to the mortgage.

Replevin, broadly understood, is both a form of principal remedy and of a provisional relief. It may refer either to the
action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by
another, or to the provisional remedy that would allow the plaintiff to retain the thing during the pendency of the
action and hold it pendente lite.   The action is primarily possessory in nature and generally determines nothing
20

more than the right of possession. Replevin is so usually described as a mixed action, being partly in rem and
partly in personam — in rem insofar as the recovery of specific property is concerned, and in personam as regards
to damages involved. As an "action in rem," the gist of the replevin action is the right of the plaintiff to obtain
possession of specific personal property by reason of his being the owner or of his having a special interest
therein.   Consequently, the person in possession of the property sought to be replevied is ordinary the proper and
21

only necessary party defendant, and the plaintiff is not required to so join as defendants other persons claiming a
right on the property but not in possession thereof. Rule 60 of the Rules of Court allows an application for the
immediate possession of the property but the plaintiff must show that he has a good legal basis, i.e., a clear title
thereto, for seeking such interim possession.

Where the right of the plaintiff to the possession of the specific property is so conceded or evident, the action need
only be maintained against him who so possesses the property. In rem actio est per quam rem nostram quae ab alio
possidetur petimus, et semper adversus eum est qui rem possidet. In Northern Motors, Inc. vs. Herrera,   the Court
22

has said:

There can be no question that persons having a special right of property in the goods the recovery of
which is sought; such as a chattel mortgagee, may maintain an action for replevin therefor. Where
the mortgage authorizes the mortgagee to take possession of the property on default, he may
maintain an action to recover possession of the mortgaged chattels from the mortgagor or from any
person in whose hands he may find them.  23

In effect then, the mortgagee, upon the mortgagor's default, is constituted an attorney-in-fact of the
mortgagor enabling such mortgagee to act for and in behalf of the owner. Accordingly, that the defendant is
not privy to the chattel mortgage should be inconsequential. By the fact that the object of replevin is traced to
his possession, one properly can be a defendant in an action for replevin. It is here assumed that the
plaintiffs right to possess the thing is not or cannot be disputed.

In case the right of possession on the part of the plaintiff, or his authority to claim such possession or that of his
principal, is put to great doubt (a contending party might contest the legal bases for plaintiffs cause of action or an
adverse and independent claim of ownership or right of possession is raised by that party), it could become
essential to have other persons involved and accordingly impleaded for a complete determination and resolution of
the controversy. For instance, in Servicewide Specialists, Inc., vs. Court of Appeals, et al., G.R. No. 103301, 08
December 1995, this Court ruled.

While, in its present petition for review on certiorari, Servicewide has raised a number of points, the
crucial issue still remains, however, to be whether or not an action filed by the mortgagee for replevin
to effect a foreclosure of the property covered by the chattel mortgage would require that the
mortgagor be so impleaded as an indispensable party thereto.

Rule 60 of the Rules of Court allows a plaintiff, in an action for the recovery of possession of
personal property, to apply for a writ of replevin if it can be shown that he is the owner of the property
claimed . . . or is entitled to the possession thereof.' The plaintiff need not be the owner so long as he
is able to specify his right to the possession of the property and his legal basis therefor. The question
then, insofar as the matter finds relation to the instant case, is whether or not the plaintiff (herein
petitioner) who has predicated his right on being the mortgagee of a chattel mortgage should
 implead the mortgagor in his complaint that seeks to recover possession of the encumbered property
in order to effect its foreclosure.

The answer has to be in the affirmative. In a suit for replevin, a clear right of possession must be
established. A foreclosure under a chattel mortgage may properly be commenced only once there is
default on the part of the mortgagor of his obligation secured by the mortgage. The replevin in the
instant case has been sought to pave the way for the foreclosure of the object covered by the chattel
mortgage. The conditions essential for that foreclosure would be to show, firstly, the existence of the
chattel mortgage and, secondly, the default of the mortgagor. These requirements must be
established since the validity of the plaintiffs exercise of the right of foreclosure are inevitably
dependent thereon. It would thus seem, considering particularly an adverse and independent claim
of ownership by private respondent that the lower court acted improvidently when it granted the
dismissal of the complaint against Dollente, albeit on petitioner's (then plaintiff) plea, on the ground
that the "non-service of summons upon Ernesto Dollente (would) only delay the determination of the
merits of the case, to the prejudice of the parties." In Imson v. Court of Appeals, we have explained:

. . . . An indispensable party is one whose interest will be affected by the court's

action in the litigation, and without whom no final determination of the case can be
had. The party's interest in the subject matter of the suit and in the relief sought are
so inextricably intertwined with the other parties' that his legal presence as a party to
the proceeding is an absolute necessity. In his absence there cannot be a resolution
of the dispute of the parties before the court which is effective, complete, or
equitable.

Conversely, a party is not indispensable to the suit if his interest in the controversy or
subject matter is distinct and divisible from the interest of the other parties and will
not necessarily be prejudiced by a judgment which does complete justice to the
parties in court. He is not indispensable if his presence would merely permit complete
relief between him and those already parties to the action or will simply avoid multiple
litigation.

Without the presence of indispensable parties to a suit or proceeding, a judgment of a court cannot
attain real finality. (Footnotes omitted.)

A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to the possession of the property unless and until
the mortgagor defaults and the mortgagee thereupon seeks to foreclose thereon. Since the mortgagee's right of
possession is conditioned upon the actual fact of default which itself may be controverted, the inclusion of other
parties like the debtor or the mortgagor himself, may be required in order to allow a full and conclusive determination
of the case. When the mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is
not only the existence of, but also the mortgagor's default on, the chattel mortgage that, among other things, can
properly uphold the right to replevy the property. The burden to establish a valid justification for that action lies with
the plaintiff. An adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be
bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action for replevin.

The appellate court, accordingly, acted well in arriving at its now questioned judgment.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED No costs.

SO ORDERED.

and

(5) William Anghian Siy vs. Alvin Tomlin, G.R. No. 205998, 24 April 2017.

FIRST DIVISION
 April 24, 2017

G.R. No. 205998

WILLIAM ANGIDAN SIY, Petitioner

vs.
ALVIN TOMLIN, Respondent

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari  assails the October 9, 2012 Decision  and February 19, 2013 Resolution  of
1 2 3

the Court of Appeals (CA) which respectively granted the respondent's Petition for Certiorari and denied petitioner1s
Motion for Reconsideration  in CA-G.R. SP No. 124967.
4

Factual Antecedents

In July, 2011, petitioner William Anghian Siy filed before the Regional Trial Court of Quezon City (RTC) a Complaint
for Recovery of Possession with Prayer for Replevin  against Frankie Domanog Ong (Ong), Chris Centeno
5

(Centeno), John Co Chua (Chua), and herein respondent Alvin Tomlin. The case was docketed as Civil Case No. Q-
11-69644 and assigned to RTC Branch 224.

In his Complaint, petitioner alleged that he is the owner of a 2007 model Range Rover with Plate Number ZMG 272
which he purchased from alberto Lopez III (Lopez) on July 22, 2009; that in 2010, he entrusted the said vehicle to
Ong, a businessman who owned a second-hand car sales showroom ("Motortrend" in Katipunan, Quezon City), after
the latter claimed that he had a prospective buyer therefor; that Ong failed to remit the proceeds of the purported
sale nor return the vehicle; that petitioner later found out that the vehicle had been transferred to Chua; that in
December, 2010, petitioner filed a complaint before the Quezon City Police District's Anti-Carnapping Section; that
Ong, upon learning of the complaint, met with petitioner to arrange the return of the vehicle; that Ong still failed to
surrender the vehicle; that petitioner learned that the vehicle was being transferred to respondent; and that the
vehicle was later impounded and taken into custody by the PNP-Highway Patrol Group (HPG) at Camp Crame,
Quezon City after respondent attempted to process a PNP clearance of the vehicle with a view to transferring
ownership thereof. Petitioner thus prayed that a writ of replevin be issued for the return of the vehicle to him, and
that the defendants be ordered to pay him ₱100,000.00 atton1ey's fees and the costs of suit.

After hearing the application, the trial court issued a July 29, 2011 Order  decreeing as follows:
6

WHEREFORE, in view of the foregoing, and with the ADMISSION of the plaintiff's Documentary Exhibits in support
of this Application, issue a Writ of Replevin in favor of the plaintiff subject to the posting of the bond in the amount of
EIGHT MILLION PESOS (Php8,000,000.00) to be executed in favor of the defendants for the return of the said
property if such return be adjudged, and for the payment to the adverse parties of such sum as they may recover
from the applicant in this action.

SO ORDERED. 7

Petitioner posted the required ₱8 million bond  which was approved by the trial court.  A Writ of Replevin  was then
8 9 10

issued.

The subject vehicle was seized by the court-appointed special sheriff who then filed the corresponding Sheriff's
Return. 11

On August 17, 2011, respondent filed an Omnibus Motion  seeking to quash the Writ of Replevin, dismiss the
12

Complaint, and turn over or return the vehicle to him. Respondent claimed that he is the lawful and registered owner
of the subject vehicle, having bought the same and caused registration thereof in his name on March 7, 2011; that
the Complaint in Civil Case No. Q-11-69644 should be dismissed for failure to pay the correct amount of docket
fees; that the Complaint is defective for failing to allege the correct and material facts as to ownership,
possession/detention by defendant, warranty against distraint/levy/seizure, and actual value of the vehicle; and that
the implementation of the writ was attended by procedural irregularities.

Particularly, respondent argued that petitioner could not prove his ownership of the vehicle as the only pieces of
evidence he presented in this regard were a manager's check and cash voucher as proof of payment, and the
affidavit of Lopez attesting to the sale between him and petitioner which are insufficient; that in fact, he is the
registered owner of the vehicle, as shown by the Official Receipt and Certificate of Registration  dated March 7,
13

2011 issued in his name by the Land Transportation Office (LTO); that it has not been shown that he wrongfully
detained the vehicle, as petitioner was never in possession thereof, since the same was already detained and
seized by the HPG at the time; that petitioner failed to allege, as required under Section 2 of Rule 60 of the 1997
Rules of Civil Procedure   (1997 Rules), that the vehicle has not been distrained or taken for a tax assessment or a
14

fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such seizure or custody; and that petitioner failed to
allege the actual market value (₱4 million) of the vehicle, and instead, he intentionally understated its value at only
₱2 million in order to avoid paying the correct docket fees.

As for the alleged procedural defects, respondent claimed that the sheriff implemented the writ against the HPG,
which is not a party to the case; that the Complaint must be dismissed for failure to pay the correct docket foes
based on the actual value of the vehicle; and that the trial court acted with undue haste in granting the writ of
replevin.

Finally, respondent argued that he is the true owner of the subject vehicle as he was able to register the transfer in
his favor and obtain a certificate of registration in his name; and that as between petitioner's documentary evidence
and his official registration documents, the latter should pre Petitioner filed his Opposition/Comment  to the omnibus
15

motion.

Ruling of the Regional Trial Court

On November 21, 2011, the trial court issued an Order  denying respondent's Omnibus Motion for lack of merit. It
16

held that respondent's remedy is not to move to quash the writ of replevin, but to post a counterbond within the
reglementary period allowed under the 1997 Rules; that for failure to post said, counterbond, respondent's prayer for
the return of the vehicle to him is premature; that the issues of ownership and insufficiency of the allegations in the
complaint are best determined during trial; and that an allegation of undervaluation of the vehicle cannot divest the
court of jurisdiction.

Respondent moved for reconsideration, but he was rebuffed just the same.

Ruling of the Court of Appeals

Respondent filed a Petition for Certiorari  before the CA docketed as CAG. R. SP No. 124967 claiming as he did in
17

his Omnibus Motion that the trial court should have dismissed Civil Case No. Q-11-69644 on account of failure to
pay the correct docket fees, defective complaint, procedural irregularities in the service of the writ of replevin, the
fact that he is the registered owner of the subject vehicle, and for the reason that the trial court irregularly took
cognizance of the case during the period for inventory of its cases. Respondent sought injunctive relief as well.

On October 9, 2012, the CA rendered the assailed Decision granting the Petition. It held that the trial court did not
acquire jurisdiction over the instant case for failure of petitioner to pay the correct docket fees, since petitioner
misdeclared the value of the subject vehicle at only ₱2 million in his Complaint, when the market value thereof was
around ₱4.5 million to ₱5 million; that this misdeclaration was undertaken with the clear intention to defraud the
government; and that petitioner failed to comply with the requirements under Section 2, Rule 60 of the 1997 Rules,
in that he gave a grossly inadequate value for the subject vehicle in the Complaint and failed to allege therein that
the vehicle has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of
execution or preliminary attachment, or otherwise placed under custodia legis.

The CA added that it was improper for the sheriff to serve a copy of the writ of replevin upon the respondent on the
day following the seizure of the subject vehicle, and not prior to the taking thereof; that the trial court is deemed to
have acted without or in excess of its jurisdiction when it seized and detained the vehicle on the basis of an
improperly served writ; and that respondent was correct in moving to quash the writ, as the proper remedy in case of
an improperly served writ of replevin is to file a motion to quash the same or a motion to vacate the order of seizure,
and not to file a counterbond as the trial court declared.

The CA thus decreed:

WHEREFORE, premises considered, the instant Petition for Certiorari is hereby GRANTED with the following
effects:

1) [T]he Order dated 21 November 2011 rendered by the Regional Trial Court of Quezon City, Bnmch 224 is
REVERSED and SET ASIDE;

2) [T]he Order dated 13 March 2012 similarly rendered by the Regional Trial Court of Quezon City, Branch
224 is REVERSED and SET ASIDE;

3) Civil Case No. Q-11-69644 pending before the Regional Trial Court of Quezon City, Branch 224 is hereby
DISMISSED for want of jurisdiction;

4) The subject Range Rover with plate number ZMG 272 should be RETURNED to the Philippine National
Police-Highway Patrol Group for its proper disposition and finally;

5) Prayer for the Issuance of Temporary Restraining Order and/or Preliminary Injunction is DENIED for being
moot and academic.

SO ORDERED. 18

Petitioner moved to reconsider, but in its assailed February 19, 2013 Resolution, the CA remained unconvinced.
Hence, the present Petition.

In a November 10, 2014 Resolution,   this Court resolved to give due course to the Petition.
19

Issues

Petitioner pleads the following assignment of errors:

I.

WHETHER XX X THE TRIAL COURT HAS ACQUIRED JURISDICTION OVER THE SUBJECT MATTER OF THE
COIV1PLAINT FOR RECOVERY OF POSSESSION WITH PRAYER FOR REPLEVIN.

II.

WHETHER XXX THE PETITIONER FAILED TO ALLEGE ALL THE MATERIAL FACTS IN THE COMPLAINT FOR
REPLEVIN AND AFFIDAVIT OF MERIT UNDER SECTIONS 2 & 4, RULE 60 OF THE REVISED RULES OF
COURT.

III.

WHETHER X X X TIIE SHERIFF PROPERLY IMPLEMENTED THE WRIT OF REPLEVIN BY SERVING THE
SAME TO ANY PERSON WHO IS IN POSSESSION OF THE PROPERTY SUBJECT THEREOF. 20

Petitioner's Arguments

Praying that the assailed CA dispositions be reversed and set aside and that, instead, Civil Case No. Q-11-69644 be
reinstated, petitioner argues that the trial court acquired jurisdiction over the replevin case considering the payment
of docket fees based on a valuation of the subject vehicle arrived at in good faith by petitioner, who in estimating the
vehicle's value took into consideration various factors such as depreciation, actual condition, year model, and other
circumstances; that the payment of an inadequate docket fee is not a ground for dismissal of a case, and the trial
court may simply allow the plaintiff to complete the payment of the correct docket fees within a reasonable
time;  and that his eventual submission to the trial court's valuation of ₱4 million and his willingness to pay the bond
21

and corresponding docket fee proves his good faith and sincerity.

On the issue relating to his supposed defective complaint on account of insufficient allegations made therein,
petitioner contends that there is nothing in the 1997 Rules which requires him to copy the requirements in Section 2
of Rule 60 and incorporate them to the letter in his complaint, as the rule merely requires an applicant in replevin to
show the circumstances in his complaint or affidavit of merit, which he claims he did.

Finally, petitioner insists that the writ of replevin was properly served upon respondent. He did not address the issue
relating to the sheriff's service of summons, the Writ of replevin, and the responding order of the trial court on the
day following the seizure and detention of the subject vehicle, arguing rather sweepingly that it is sufficient for the
sheriff to have served respondent with a copy of the writ of replevin, together with the complaint, affidavit, and bond.
He conceded that respondent was in constructive possession of the vehicle, as he was the registered owner thereof.

In his Reply,   petitioner retorts that the Petition is grounded on questions of law; that even though respondent was
22

able to register the vehicle in his name, he is nonetheless a buyer and possessor in bad faith, and thus, the transfer
of ownership over the subject vehicle in his favor is illegal; that a criminal case for estafa relative to the vehicle is
pending against Ong, Chua, and Centeno; that Lopez's purported sale to Chua was anomalous; and that respondent
should have filed a counterbond.

Respondent's Arguments

In his Comment,   respondent essentially counters that the Petition should be dismissed as it raises issues of fact;
23

that a liberal application of the rule requiring the payment of correct docket fees cannot apply to petitioner's case
since he intentionally defrauded the court in misdeclaring the value of the subject vehicle; that while they need not
be stated verbatim, the enumeration of required allegations under Section 2 of Rule 60 must still be specifically
included in a complaint for replevin or in the accompanying affidavit of merit; that petitioner failed to show that he is
the owner of the vehicle or that he is entitled to its possession, and that the vehicle is wrongfully detained by him,
and that it has not been distrained, seized or placed under custodia legis; and that he is a buyer in good faith and for
value.

Our Ruling

The Petition must be denied.

"In a complaint for replevin, the claimant must convincingly show that he is either the owner or clearly entitled to the
possession of the object sought to be recovered, and that the defendant, who is in actual or legal possession
thereof, wrongfully detains the same."24 "Rule 60 x x x allows a plaintiff, in an action for the recovery of possession
of personal property, to apply for a writ of replevin if it can be shown that he is 'the owner of the property claimed ...
or is entitled to the possession thereof.’ The plaintiff need not be the owner so long as he is able to specify his right
to the possession of the property and his legal basis therefor."  25

In Filinvest Credit Corporation v. Court of Appeals,  this Court likewise held that-

26

x x x It is not only the owner who can institute a replevin suit. A person "entitled to the possession" of the property
also can, as provided in the same paragraph cited by the trial court, which reads:

Sec. 2. Affidavit and bond. - Upon applying for such order the plaintiff must show...

(a) That the plaintiff is the owner of the property claimed, particularly describing it, or is entitled to the possession
thereof; xxx

As correctly cited by respondent in his Comment: 27

x x x [A] party praying for the recovery of possession of personal property must show by his own affidavit or that of
some other person who personally knows the facts that he is the owner of the property claimed, particularly
describing it, or is entitled to the possession thereof It must be borne in mind that replevin is a possessory action the
gist of which focuses on the right of possession that, in turn, is dependent on a legal basis that, not infrequently,
looks to the ownership of the object sought to be replevied. Wrongful detention by the defendant of the properties
sought in an action for replevin must be satisfactorily established. If only a mechanistic averment thereof is offered,
the writ should not be issued. 28

Petitioner admits and claims in his pleadings that on July 22, 2009, he purchased the subject vehicle from Lopez,
who executed and signed in blank a deed of sale and sun-endered all documents of title to him;  that he did not
29

register the sale in his favor, such that the vehicle remained in the name ofLopez;  that in September, 2010, he
30

delivered the subject vehicle, together with all its documents of title and the blank deed of sale, to Ong, with the
express intention of selling the vehicle through the latter as broker/second hand car dealer; that Ong appears to
have issued in his favor two guarantee checks amounting to P4.95 million; and that these checks
bounced.  Thereafter, Ong was able to sell the vehicle using the deed of sale executed and signed in blank by
31

Lopez to Chua, who secured a certificate of registration in his name.  Chua then sold the vehicle, via a Deed of Sale
32

of Motor Vehicle dated December 7, 2010, to respondent, who caused registration of the vehicle in his name on
March 7, 2011.  Apparently, Ong did not remit Chua's payment to petitioner, prompting the latter to file formal
33

complaints/charges for 1) estafa and carna1ming on May 18, 2011 before the Office of the City Prosecutor of
Quezon City, and 2) camapping on June 15, 2011 before the PNP-HPG in Camp Crame, Quezon City against Ong
and Centeno.  It appears as well that prior to the filing of these fonnal complaints, or sometime in November, 2010,
34

petitioner appeared before the Quezon City Anti-Carnapping Unit based in Camp Karingal, Quezon City and,
claiming that the subject vehicle was cainapped, filed a "Failed to Return Vehicle" report; that on February 23, 2011,
petitioner, respondent, Ong, and Chua appeared at Can1p Karingal to shed light on the claimed camapping; that the
parties were requested to voluntarily surrender the subject vehicle, but the request proved futile; and that petitioner
was instead advised to file appropriate charges and file a complaint with the PNP-HPG in order to include the
subject vehicle in the "hold order list".

This Court is not unaware of the practice by many vehicle buyers and second-hand car traders of not transferring
registration and ownership over vehicles purchased from their original owners, and rather instructing the latter to
execute and sign in blank deeds of sale covering these vehicles, so that these buyers and dealers may freely and
readily trade or re-sell the vehicles in the second-hand car market without difficulty. This way, multiple transfers,
sales, or trades of the vehicle using these undated deeds signed in blank become possible, until the latest purchaser
decides to actually transfer the certificate of registration in his name. For many car owners-sellers, this is an easy
concession; so long as they actually receive the sale price, they will sign sale deeds in blank and surrender them to
the buyers or dealers; and for the latter, this is convenient since they can "flip'' or re-sell the vehicles to the public
many times over with ease, using these blank deeds of sale.

In many cases as well, busy vehicle owners selling their vehicles actually leave them, together with all the
documents of title, spare keys, and deeds of sale signed in blank, with second-hand car traders they know and trust,
in order for the latter to display these vehicles for actual viewing and inspection by prospective buyers at their lots,
warehouses, garages, or showrooms, and to enable the traders to facilitate sales on-the-spot, as-is-where-is,
without having to inconvenience the owners with random viewings and inspections of their vehicles. For this kind of
arrangement, an agency relationship is created between the vehicle owners, as principals, and the car traders, as
agents. The situation is akin to an owner of jewelry who sells the same through an agent, who receives the jewelry
in trust and offers it for sale to his/her regular clients; if a sale is made, the agent takes payment under the obligation
to remit the same to the jewelry owner, minus the agreed commission or other compensation.

From petitioner's own account, he constituted and appointed Ong as his agent to sell the vehicle, surrendering to the
latter the vehicle, all documents of title pertaining thereto, and a deed of sale signed in blank, with full understanding
that Ong would offer and sell the same to his clients or to the public. In return, Ong accepted the agency by his
receipt of the vehicle, the blank deed of sale, and documents of title, and when he gave bond in the form of two
guarantee checks worth ₱4.95 million. All these gave Ong the authority to act for and in behalf of petitioner. Under
the Civil Code on agency, Art. 1869. Agency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf
without authority.

Agency may be oral, unless the law requires a specific form.

Art. 1870. Acceptance by the agent may also be express or implied from his acts which carry out the agency, or
from his silence or inaction according to the circumstances. (Emphasis and underscoring supplied)
"The basis of agency is representation and the same may be constituted expressly or impliedly. In an implied
agency, the principal can be bound by the acts of the implied agent. "  The same is true with an oral agency.
35

Acting for and in petitioner's behalf by virtue of the implied or oral agency, Ong was thus able to sell the vehicle to
Chua, but he failed to remit the proceeds thereof to petitioner; his guarantee checks bounced as well. This entitled
petitioner to sue for estafa through abuse of confidence. This is exactly what petitioner did: on May 18, 2011, he filed
a complaint for estafa and carnapping against Ong before the Quezon City Prosecutor's Office.

Since Ong was able to sell the subject vehicle to Chua, petitioner thus ceased to be the owner thereof. Nor is he
entitled to the possession of the vehicle; together with his ownership, petitioner lost his right of possession over the
vehicle. His argument that respondent is a buyer in bad faith, when the latter nonetheless proceeded with the
purchase and registration of the vehicle on March 7, 2011, despite having been apprised of petitioner's earlier
November, 2010 "Failed to Return Vehicle" report filed with the PNP-HPG, is unavailing.  Petitioner had no right to
1âwphi1

file said report, as he was no longer the owner of the vehicle at the time; indeed, his right of action is only against
Ong, for collection of the proceeds of the sale.

Considering that he was no longer the owner or rightful possessor of the subject vehicle at the time he filed Civil
Case No. Q-11-69644 in July, 2011, petitioner may not seek a return of the same through replevin. Quite the
contrary, respondent, who obtained the vehicle from Chua and registered the transfer with the Land Transportation
Office, is the rightful owner thereof, and as such, he is entitled to its possession. For this reason, the CA was correct
in decreeing the dismissal of Civil Case No. Q-11-69644, although it e1red in ordering the return of the vehicle to the
PNP-HPG, which had no further right to hold the vehicle in its custody. As the registered and rightful owner of the
subject vehicle, the trial court must return the same to respondent.

Petitioner cannot be allowed to cut his losses by ostensibly securing the recovery of the subject vehicle in lieu of its
price, which Ong failed and continues to fail to remit. On the other hand, Ong's declarations contained in his
Affidavit,  to the effect that petitioner remains the owner of the vehicle, and that Chua came into illegal possession
36

and ownership of the same by unlawfully appropriating the same for himself without paying for it, are unavailing.
Faced with a possible criminal charge for estafa initiated by petitioner for failing or refusing to remit the price for the
subject vehicle, Ong's declarations are considered self-serving, that is, calculated to free himself from the criminal
charge. The premise is that by helping petitioner to actually recover his vehicle by insisting that the same was
unlawfully taken from him, instead of remitting its price to petitioner, Ong expects that he and petitioner may redeem
themselves from their bad judgment; for the petitioner, the mistake of bestowing his full faith and confidence upon
Ong, and blindly surrendering the vehicle, its documents of title, and a deed of sale executed and signed in blank, to
the latter; and for Ong, his failure to remit the proceeds of the sale to petitioner; and petitioner might then opt to
desist from pursuing the estafa and other criminal charges against him.

Having disposed of the case in the foregoing manner, there is no need to discuss the other issues raised by the
parties.

WHEREFORE, the Petition is DENIED. The October 9, 2012 Decision and February 19, 2013 Resolution of the
Court of Appeals in CA-G.R. SP No. 124967 are AFFIRMED WITH MODIFICATION, in that the subject Land Rover
Range Rover, with Plate Number ZMG 272 and particularly described in and made subject of these proceedings,
is ORDERED RETURNED to respondent Alvin Tomlin as its registered owner.

SO ORDERED.

MARIANO C. DEL CASTILLO,

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice
 ALFREDO BENJAMIN S. CAGUIOA
Associate Justice

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

MARIA LOURDES P.A. SERENO

Chief Justice