THE INSURANCE COMMISSION (IC) is seeking the repeal of a National Labor Relations Commission (NLRC) resolution requiring surety companies to immediately pay appeal bonds to the winning party of a case despite the suspicion that they are fake.
In a statement over the weekend, IC Commissioner Dennis B. Funa said it would be unfair for bonding companies to be held liable, noting the rule is susceptible to abuse and won’t address the “proliferation” of fake bonds.
“Fake bonds should not become a source of any obligation and surety companies should not be held liable for payment as solidary obligor,” Mr. Funa was quoted in the statement as saying.
“Based on the Rules of Procedure of the NLRC, the posting of fake or irregular bonds will result in the outright dismissal of the appeal. Clearly, the validity, worth, and efficacy of an appeal bond are essential to the perfection of an appeal,” said Mr. Funa.
“It necessarily follows that the execution and garnishment of properties of surety companies should likewise be premised on the validity of the bond,” he added.
Appeal bonds in labor cases are intended to assure workers that the monetary award will be given to them when they win a case. However, bonding companies are refusing to pay judgment awards, with some of these bonds said to be fake.
NLRC En Banc Resolution 5-2013, however, said that “notwithstanding refusal of a bonding/surety company to pay on the ground that the bond is spurious/fake, execution of final judgment against the surety bond shall proceed unless enjoined by a higher court.”
Mr. Funa said the NLRC Resolution would “abet falsification because it opens the floodgates to more bonds to be issued by unauthorized persons to the prejudice of surety companies who should have the right to assail it before execution.”
The Commissioner proposed to create a verification system with bonding companies “that is not violative of the rules of fair play.”
“It is our position that surety companies should first be heard and be given the right to assail the validity of a bond before an execution can proceed. Simply put, the proof that the surety bond posted is fake must first be proven by the surety company before proceeding with the execution,” said the IC chief.
Mr. Funa said even if the constitution mandates the protection of workers’ rights, it also should “not encroach on the overriding consideration of the due process.”
“Currently, the only recourse of a surety company to enjoin the enforcement of a judgment against a fake bond is by filing a separate case in the regular courts. However, even obtaining a judgment finding that the bond is fake, the surety company would be left with no recourse to recover the amount paid based on the fake bond,” he said.
“While the NLRC Resolution provides a remedy favorable to the workingmen, it does not deter the problem on the proliferation of fake bonds,” added Mr. Funa. — Elijah Joseph C. Tubayan

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