Citizen Surety Case

Citizen Surety v.
Melencio-Herrera, 38 SCRA 369 (1971)
Petitioner: Citizens’ Surety and Insurance Company, Inc.

Defendants: Hon. Judge A. Melencio-Herrera, Santiago Dacanay, and Josefina Dacanay
NAME OF THE ACTION: An action for recovery of sum of money plus interest
FACTS:
Petitioner Citizens’ Surety & Insurance Company, Inc. seeks review of an order of respondent Judge in Civil
Case No. 77134 of the Court of First Instance of Manila, Branch XVII, entitled "Citizens’ Surety & Insurance Co., Inc.
v. Santiago Dacanay and Josefina Dacanay," dismissing the complaint for lack of proper service of summons upon
defendants.
The record is to the effect that petitioner had filed its complaint in the Court below, alleging that: at the
request of defendant Santiago Dacanay, the plaintiff Surety Company had issued its Surety Bonds Nos. 4942 and
4944, the first, in favor of Gregorio Fajardo to guarantee payment of a P5,000-promissory note executed by said
Dacanay, and the second, in favor of Manufacturers Bank & Trust Co., to guarantee payment of another
promissory note in like amount; that in consideration of said bonds, Santiago and Josefina Dacanay executed
Indemnity Agreements, binding themselves jointly and severally to indemnify plaintiff for any losses, costs and
expenses which it might sustain in connection with the issuance of the bonds aforesaid, with interest at 12% per
annum; that as additional security, the Dacanays mortgaged to plaintiff a parcel of land in Baguio City, the
mortgage having been duly recorded; that the promissory notes were not paid and as a result, plaintiff Surety was
compelled to pay P5,000.00 to Gregorio Fajardo and P4,081.69 to the Manufacturers’ Bank. The Dacanays failed to
reimburse the Surety for such payments, whereupon the Surety caused the extrajudicial foreclosure of the
mortgage to pay its claim of P12,941.69 representing its payments, interest and stipulated liquidated damages. At
the foreclosure sale, the land mortgaged was sold to plaintiff surety, as highest bidder, for the sum of P2,000.00 —
leaving an unsatisfied balance of P10,491.69, that plaintiff sought to recover from defendants Dacanay, plus 10%
thereof as attorneys’ fees, and the costs.
At petitioner’s request, respondent Judge caused summons to be made by publication in the newspaper
Philippines Herald. But despite the publication and deposit of a prepaid copy of the complaint at the Manila post
office, defendants didnot appear.
Plaintiff then asked that defendants be declared in default; but instead, the Judge, by order of May 16,
1970, asked it to show cause why the action should not be dismissed, the suit being in personam and defendants
not having appeared. Then, on May 29, 1970, respondent Judge dismissed the case, despite plaintiff Surety’s
argument that the summons by publication was sufficient and valid under section 16 of Rule 14 of the Revised
Rules of Court.
RULING OF LOWER COURTS: The lower court dismissed the petition for non-appearance of the defendant
ISSUE: WON the dismissal of the case was proper
RULING:
No, the dismissal of the case due to non-appearance was not proper. The proper recourse for a creditor in
the same situation as petitioner is to locate properties, real or personal, of the resident defendant debtor with
unknown address and cause them to be attached under Rule 57, section 1(f), in which case, the attachment
converts the action into a proceeding in rem or quasi in rem and the summons by publication may then accordingly
be deemed valid and effective.
But because debtors who abscond and conceal themselves are also quite adept at concealing their
properties, the dismissal of the case below by respondent Judge should be set aside and the case held pending in
the court’s archives, until petitioner as plaintiff succeeds in determining the whereabouts of the defendants’
person or properties and causes valid summons to be served personally or by publication as the case may be. In
this manner, the tolling of the period of prescription for as long as the debtor remains in hiding would properly be
a matter of court records and he can not emerge after a sufficient lapse of time from the dismissal of the case to
profit from his own misdeed and claim prescription of his just debt.
WHEREFORE, the order of dismissal of the case issued by the Court below is hereby set aside, and in the
interest of justice, the proceedings are ordered suspended, to be held pending until the plaintiff petitioner
succeeds in ascertaining the whereabouts of the defendants and/or locating properties of the same, to enable
proper summons to be issued conformably to this Opinion. No costs.

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Citizen Surety v.

Melencio-Herrera, 38 SCRA 369 (1971)

Petitioner: Citizens’ Surety and Insurance Company, Inc.

ISSUE: WON the dismissal of the case was proper

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